By Anthony Flint, Globe Staff
Lowell- On the banks of the Merrimack River and along the canals that once served a thriving silk and textiles industry, dilapidated mill buildings have been turned into spiffy condominiums, offices, and a National Park Service visitors center.
But for every massive factory that has been given a new life over the last quarter century, others remain crumbling and vacant, their broken windows and boarded-up facades silent testimony to how far Lowell still has to go.
Walking by one such ghostly complex near the Pawtucket Canal, Stephen B. Stowell, administrator of the Lowell Historic Board, said the remaining projects ''just need a little push.''
''Then we'd be in the home stretch in this city,'' he said.
That little push, a growing number of developers and historic preservation activists say, would be a state tax credit to spur the redevelopment of such structures.
A bill making its way through the Legislature would establish a 30 percent tax credit for developers who turn decrepit buildings that are more than 50 years old into residential or commercial space. Rhode Island used a similar credit to encourage renovation of old buildings in downtown Providence. The credit provided by the proposed state Real Estate Investment Act would be in addition to a federal tax credit that is available to developers engaged in historic rehabilitation.
But the state budget crisis has turned the tax credit into a very difficult argument to make.
Governor Mitt Romney is reserving judgment on the bill, said his spokesman, Eric Fehrnstrom. ''It sounds interesting, and we'll take a closer look at it,'' Fehrnstrom said. ''But we haven't had a chance to give it the analysis it deserves.''
The Real Estate Investment Act would cost about $13.5 million in lost tax revenue in the first year. While sponsors say that development would produce jobs and ultimately put empty buildings back on the tax rolls, tax credits ''have to be considered carefully, particularly in a tight budget context,'' Fehrnstrom said.
The idea of giving developers a break on taxes for doing work in depressed urban areas has been around for years. Developers have long taken advantage of the federal tax credit for historic rehabilitation and the creation of housing, in Lowell and elsewhere.
The bill's backers say it is time the state provided its own credit as a supplement, as several other states do. They point out that Romney renewed a tax credit for businesses making capital investments in the state just last week.
Critics, however, say that not only is the state in no position to hand out a new tax credit in the current fiscal climate, but that subsidies and tax breaks have been shown to be ineffective and wasteful.
Revitalizing cities should focus on fundamentals like public safety, education, or transportation infrastructure, said Stephen Adams, president of the Pioneer Institute, a market-oriented think tank in Boston. ''Fix the competitiveness problem, rather than paper it over with subsidies and empowerment zones: That's the standard, old-school reaction to inner-city revitalization,'' he said.
The historic tax credit could backfire by ''sending the signal that an area is not competitive on its own,'' Adams said. Ultimately, as developers use the federal credit and figure out how to get a return on their investment in major projects, the state tax credit will not be needed, he said.
The rehabilitation of mills and other historic buildings in Lowell has reached a fever pitch in recent years. The Boott Cotton Mills and Massachusetts Mills complexes on the Merrimack River are on track for completion. Another developer is gutting and renovating the former J.C. Ayer building on Market Street, hoping to sell condominiums to professionals who have been priced out of the housing market in the Boston area. A developer in recent days has begun to clean up Canal Place 3, a large mill building behind the National Park Service visitor center along the Pawtucket Canal.
But for every renovation project that moves ahead, another languishes, said Albert Rex, executive director of the Boston Preservation Alliance, which along with the group Preservation Mass is the driving force behind the proposed tax credit.
Developers interested in renovating historic buildings often face a gap of perhaps a few hundred thousand dollars in up-front investment that the tax credit would fill, Rex said. ''It turns marginal projects into economic success stories.''
The proposed tax credit would not kick in until projects were completed, putting off the fiscal impact for at least two years, backers of the bill say. Based on $45 million in annual rehabilitation work, the 30 percent credit would cost the state $13.5 million in tax revenue. But the bill's sponsors predict that it would lead to the creation of 650 jobs and ultimately $7 million in new annual tax revenue.
In the process, historic buildings and the character of the state's cities would be preserved, said Antone G. Souza, head of the Waterfront Historic Area League of New Bedford. Downtown revitalization is an alternative to suburban sprawl, he said. ''It's a wonderful spinoff.''
Romney has not come forward with the kind of conventional funding programs popular with his predecessors, notably former governor Michael S. Dukakis, to help cities revitalize. In the meantime, funding has been cut for cleaning up abandoned industrial property in cities and for sprucing up urban waterfronts. Romney administration officials say they are forced to operate under extraordinary fiscal restraints because of the $3 billion budget deficit projected for the upcoming year.
But backers of the historic rehabilitation tax credit say the proposal would provide a relatively low-cost boost for cities.
The bill is expected to be reported out by the Legislature's Taxation Committee and then must be considered by the House Ways and Means Committee because of its revenue implications.
Anthony Flint can be reached at flint@globe.com.
This story ran on page B1 of the Boston Globe on 6/30/2003.
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