Maine’s tax credit for restoring historic buildings has boosted the state’s economy and has more than paid for itself, according to a study of the program released this week.

The tax credit program has generated $525 million in construction investment since it was launched in 2008, says the report, commissioned by Maine Preservation, Coastal Enterprises Inc., Greater Portland Landmarks, GrowSmart Maine and the Maine Real Estate and Development Association. The loss of tax revenue to the state, estimated at $115 million, has been more than offset by the boost in local property tax revenues, as well as income and sales taxes, the report concludes.

Construction alone has generated between 200 and 700 full-time-equivalent jobs each year for the past decade, according to the report.

The analysis was performed by economists Chuck Lawton and Frank O’Hara. Both have long records of studying Maine’s economy and have done previous studies of the state’s historic rehabilitation tax credit.

The report says the tax credit has provided financing to help rehabilitate 3.6 million square feet of commercial or residential space and also preserved nearly 2,000 housing units, 1,300 of which are considered to be affordably priced for middle-income residents.

In addition to the investment generated by the credits and jobs created by the construction work, the report says nearly 700 full-time, year-round jobs have been created by the businesses occupying commercial space created by the rehabilitation projects or in building maintenance, generating another $13 million a year in economic impact.

Officials said about $115 million in tax credits have been provided or are committed to be provided under the rehabilitation program since 2008. In recent years, they said, the program has been providing about $15 million a year in tax credits, but the estimates of increased property, income and sales taxes attributable to the projects is running at about $19 million a year.

The credit is intended to encourage the rehabilitation and reuse of historic structures in Maine. It has been used throughout the state, from small structures in rural areas to huge former mill buildings in Maine towns and cities.

A building owner or developer working on a qualified structure can take a tax credit of up to 25 percent of the cost of restoring a building for reuse. The credit can be expanded to 34 percent of the cost of a building used for housing. The credit for both categories is limited to $5 million a year for four years.

To be eligible for the state tax credit, a structure needs to pass a review of its historic nature by the Maine Historic Preservation Commission and the National Park Service and receive a federal tax credit of up to 20 percent of the cost of rehabilitation. The ability to use both state and federal tax credits makes the program even more attractive to developers, supporters of the program say.

The rehabilitation also needs to be completed within two to five years.

The tax credit was expanded in 2008, and in the following decade, there were 106 projects completed under the program. Another 59 projects are currently in various stages of approval, officials with Maine Preservation said.

A unique feature of the program is that the developers have to spend the money before they can exercise the tax credit, said Greg Paxton, executive director of Maine Preservation. He also noted that the review of each project involves two state and two federal agencies, so the scrutiny is intense.

Paxton said his organization and its partners started working on the report last year, when the Maine Legislature was weighing an extension to the program.

The tax credit had been set to expire in 2023, but the Legislature last year extended it to at least 2025, said Elizabeth Frazier, a lobbyist and lawyer. Frazier said it will probably come up for a routine review by state officials in the next year or two, and she said the fact that it now brings in more in taxes than it costs shows its effectiveness.

Paxton said the program also was reviewed in 2008, when it was beefed up, and backers issued a report in 2011, when lawmakers extended it to 2023. In addition, the Legislature reviewed all state tax incentive programs in 2015, he said, although it’s not clear if lawmakers looked closely at the tax credit at that time.

Paxton said the report is also timely because it will bring renewed attention to the construction industry in Maine as it faces a new challenge with the coronavirus pandemic.

He said the tax credit helped finance renovation projects in 2008, when the Great Recession hit the construction industry hard, and it might be in a position to repeat that boost this year and the next.

“It really helped carry the construction industry (in 2008), and here we are again,” Paxton said.

Some examples of projects that used the state tax credits include The Sisters of Mercy Motherhouse in Portland, a $15.6 million project that was redeveloped into 88 apartments for seniors; the American Woolen Co. Foxcroft Mill in Dover-Foxcroft, in which a former mill complex was rehabilitated and converted into a $10.7 million mixed-use development of apartments, a restaurant, a boutique hotel, retail space and studio space for artists; and the Cony Flatiron Building in Augusta, a $10 million project that converted a former high school into senior housing.

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