To the business community it’s a mixed blessing 10/29/2006 by Richard Thomas

"I don’t see why preservation in this town is such a bad word,” said chairwoman Kathy Laakso of the city of Superior’s Historic Preservation Advisory Committee, rebuking city council members at their Sept. 19 meeting.

The subject was the downtown Palace Theatre, closed since 1982 and facing demolition.

Thomas Misco, an engineer who has revived several classic theaters in Wisconsin, had presented his proposal to save the Palace, but met only skepticism.

“Your being incredibly naïve with this building,” scolded councilor Kevin Norbie, his questions laced with sarcastic laughter.

Misco eventually walked out, saying, “I don’t want to take up your time or mine or have a debate that seems to be predestined. So I think at this time I will respectfully withdraw my proposal.”

Several other councilors and Mayor David Ross continued their heated opposition, but became visibly embattled and defensive themselves, enduring an hour of testimony from infuriated residents who had packed the room in support of Misco’s proposal.

“I’m really disappointed to say I’m even a member of this city,” said one angry resident. “I’m ready to sell my house and move out tomorrow.”

The council granted a salvage contract and the Palace seems doomed. But the evening showed historic preservation — once the lonely cause of yuppies and aesthetes and scorned by business pragmatists and public officials — has gone mainstream.

Saving what’s left

An architectural legacy remains from the region’s rapid growth in wealth and population from 1880 to 1920. “We have an incredible eclectic resource of historic buildings,” said Robert Hewitt, chairman of the Duluth Heritage Preservation Commission. Most people don’t realize what’s here at their doorstep. Little by little they’re realizing it.”

Many of the buildings remain because the population peaked nearly 100 years ago and development pressure has been relatively weak. Even so, much great architecture was demolished or remodeled during the era of urban renewal in the 1960s and 1970s. The battle is on to save what’s left.

Preservation “is not a priority and there’s a lot of opposition from the political and business communities,” said Hugh Reitan, president of the Duluth Preservation Alliance.

“Rather than thinking of historic preservation as an esoteric exercise that can be a barrier to development, Duluth will want to embrace the practice of adaptive use as the way to differentiate the city from competing locations,” states a 2005 report by the National Trust for Historic Preservation.

Commercial historic districts were established in the 1980s and 1990s in Hibbing, Virginia, Cook, Morse Township, and Bayfield. Duluth attained its first commercial historic district on May 31 when the National Park Service designated a large portion of downtown as a National Register Historic District Owners of qualifying building within a district can apply for a 20 percent tax credit on restoration projects.

The National Trust Preservation Development Initiative also proposed a second, two-block historic district bounded by Superior and Michigan streets and by Second and Fourth avenues west. But it was opposed by the Building Owners and Managers Association (BOMA), according to member Steven LaFlamme, also president of Oneida Realty. Oneida owns and manages several buildings in that proposed second district, including the Alworth/Lonsdale, Medical Arts, 312, Sellwood, and Crescent buildings.

LaFlamme said the problem was that the state requires an owner to file an Environmental Assessment Worksheet (EAW) before demolishing a building in a historic district. “It can handcuff a building owner,” he said. “We might wake up and find we have a piece of property we cannot make a deal on— we lost control.”

That’s the problem facing A & L Partnership, which wants to tear down two buildings within the new historic district that was approved.

Duluth Historic District Renaissance Project

A & L presented its latest plan for an $18.5 million housing, office, and retail project before the Duluth Charrette Stewardship Group on Sept. 19, the day that apparently doomed the Palace in Superior.(The charrette group is the legacy of a public design workshop series presented by a team from the Miami University School of Architecture last summer in Duluth to guide development. It was funded by the Knight Foundation.)

The A & L project would restore two historic buildings between Lake and East First avenues on the lower side of Superior Street. But two others, collectively known as the Costello building, at 22-24 E. Superior St., are slated for demolition.

The first half of the Costello was built in 1883, designed by St. Paul architect George Wirth as a hardware store. The second half was built several years later. Duluth architect Oliver Traphagen, Wirth’s apprentice and eventual business partner, designed it though it is essentially a copy of the first building.

A & L has filed an EAW with the city planning department, which accepts public comment until Oct. 25. A 5 p.m. public hearing will take place on that date in city council chambers. The public can read the EAW at the Duluth Public Library’s reference section and on the planning commission Web site (www.ci.duluth.mn.us/city/planning/plncom/index.htm).

At the Sept. 19 charrette meeting, A & L spokesman Joel Kozlak said the Costello buildings were “too big for retail, too small for offices.” Demolition also will allow for more parking and green space, he said. Charrette team members noted the new plan is an improvement over A & L’s first one, which proposed tearing down all four historic buildings leaving only the facades and the first 20 feet of the buildings back from the street. “We’re losing something, but we’re gaining something,” said charrette group member Pam Kramer, president of Local Initiatives Support Group (LISC) in Duluth.

The panel suggested A & L consult with the Knight Project at the University of Miami to ensure the project design is consistent with charrette principles.

In contrast to the friendly reception from the charrette team, A & L’s modified proposal was sharply criticized at a Sept. 26 meeting of the city’s preservation commission.

A frustrated Robert Bruce, city planning director, tried to convince the commission that economic benefits should override preservation concerns. “They (A & L) are willing to be a pioneer and roll the dice and invest in residential property,” he said.

But commission members challenged A & L’s description of the Costello Building on the EAW as “substandard” and questioned whether A & L will stand by its offer to keep the two other historic structures, the Wieland and Hayes buildings. Commission member Carolyn Sundquist pointed out that A & L has no financial incentive to do so — the project does not qualify for the historic tax credit since it involves demolishing a historic building.

Kozlak said the company instead will apply for New Market Tax Credits, worth up to $3 million, for projects in underserved and low-income areas. Census Tract 19, in which the project is located, is a qualifying area, Kozlak said.

“Without the tax credits this could not happen,” Kozlak said. But he added the company must have the deal closed and ready for construction by Dec. 31. “Without that, the New Market Tax Credits will fade away,” he said.

The tax credits are distributed by privately managed investment institutions such as banks and nonprofit organizations. After the deadline, the vendor A & L is working with likely will allocate the tax credits elsewhere, Kozlak said.

A & L also intends to apply for $1.5 million in tax increment financing (TIF) from the city, Kozlak said. Sundquist urges the city not approve TIF or any other subsidies unless the developer agrees to save all four historic buildings.

“They own it. They can develop it however they want,” said Russell Stewart, city councilor for the downtown district, of the A & L project. “But if they ask for TIF there has to be clear public benefit.” He doubts the city can afford to grant a TIF “given the state of city finances.”

In 2004 the city gave A & L two properties. One was the Bridgeman-Russell building at 10-16 W. First St., which the city had purchased for $330,000. The other was a vacant lot at 12-22 E. Superior St., former site of Strand Theater. The Strand property’s 2002 fair market value was $108,675, but the city sold it to A & L for one dollar.

The conditions attached to the transfers were that the sites be turned into market-rate housing and the city approves the designs. The Strand property will be part of A & L’s proposed project.

A & L already has claimed the first tax credit in the new district with the Bridgeman-Russell, which is near completion and is leasing apartments there.

“Our track record on preservation is second to none,” Kozlak said, citing several other A & L downtown renovations, including the Phoenix Building, Minnesota National Bank and Duluth Athletic Club, and Superior City Center.

A & L also has been the bogeyman to local preservationists: In 2000-01 it razed several buildings along the north side of Superior Street between Lake Avenue and First Avenue East to build the Technology Village.

Seeking historic tax credits

Through the historic tax credit program it administers, the National Park Service approved 1,200 historic projects across the nation in 2004, spurring $3.9 billion in private investments.

But area building owners have largely ignored the federal tax credit program, authorized in 1976. Fewer than a dozen Duluth building owners have participated.

“In other communities that do it all the time it’s a no-brainer,” said Carolyn Sundquist, Duluth Heritage Preservation Commission member.

“Duluth has a steep learning curve.”

The Tax Reform Act of 1986 reduced the historic tax credit from 25 to 20 percent and put notoriously restrictive and confusing rules on individuals. As a result, use of the credits nationwide dropped off sharply. But they regained popularity as states filled in the gap with their own historic tax credits. Minnesota has not.

For those new to the process it can be grueling and expensive. “It’s not really worth it for a project under a million dollars,” said Deyona Kirk, former director of the Women’s Community Development Organization. Last year she oversaw the restoration of Alicia’s Place, at 315 N. Second Ave. W., a former convent condemned by the city, now providing rental apartments for homeless women.

She said the organization spent tens of thousands of dollars just for the legal paperwork and documentation. Beyond that was the extra expense imposed by the historic guidelines. For that the project was awarded $117,000 in federal tax credits. “We ended up with a beautiful project, and it was a learning experience, but I wouldn’t do it again,” she said.

Chad Scott went through similar frustration after he and fellow investors bought the Carnegie Building, at 101 W. Second St. in Duluth, in 2001. They spent a year attending seminars and filling out paperwork for historic tax credits only to find, in their case, the credits could be used only to offset passive income from investment — rather than from a business they were actively managing.

A popular way around that provision for owners is to syndicate, or sell the tax credits on the open market, then use the proceeds to help finance construction. But Scott said his owner group couldn’t find a buyer for less than $200,000 worth of credits. That required a renovation project of at least $1 million.

“They won’t say it’s just for rich people, but you can’t use it unless you’re rich,” Scott said.

Still several smaller Duluth restoration projects, including the Carnegie when it was still owned by the Duluth Public Library in 1984, have received the tax credits. Nationwide 65 percent of the historic tax credit projects in 2004 were for restorations for less than $1 million.

Architectural firms often will accept the tax credits as part of their fees, thus saving their clients the trouble, said Mark Buechel, historical architect for the Minnesota Historical Society.

To qualify for a historic tax credit the building must be an income-producing business rather than a private home. Buechel said that’s problematic since 70 percent of historic structures in the country are owner-occupied. The building also must be on the National Register of Historic Buildings, or in a qualifying historic district.

Owners sometimes apply for historic status and the tax credit at the same time. The U.S. Department of Interior must approve the technical details of the rehabilitation work.

Syndicating the credits on the open market usually nets 80 percent of the tax credit value, though Kirk said the Alicia’s Place project received less.

Wisconsin has an additional historic tax credit that owners can claim on top of the federal credit. A Minnesota tax credit has failed to win support from the Minnesota Legislature for seven years and preservationists continue to lobby for the measure, hoping to get more support for it, said Michael Koop, Minnesota Historical Society historic preservation program specialist.

Historic restoration expertise is in short supply

One problem with historic restoration in the region is a shortage of contractors skilled in building techniques of the past.

“Lot of people in trades today are not really interested in old buildings,” said architect Robert Hewitt, also chairman of the Duluth Heritage Preservation Commission. “How many people know about terra cotta in today’s construction industry? Those that do are in high demand.”

One restorer in high demand is Richard Coulter, owner of RW Co., a plaster and decoration restoration business in Ironwood, MI. He is working on two projects in Duluth, Gloria Dei Lutheran Church at 219 N. Sixth Ave. E. — which is getting a makeover for its 100th anniversary — and the Carnegie Building at 101 W. Second St.

Old buildings have to be refurbished using the old processes, he said, “the way they did it a couple hundred years ago.”

Coulter learned many of the old techniques through his family as its eighth generation in the construction trade, and still uses some of the old tools. He also apprenticed with Hungarian and Irish plasterers.

While his two sons also are involved in the restoration business, it’s difficult to attract and retain skilled help, he said. “It’s hard to find young people with an interest in it,” Coulter said.

“The techniques are fairly easy to learn,” said Michelle LeBeau, president of Women in Construction Co., which restored Alicia’s Place.

“It was hard to find local expertise. We had to find state and national sources,” she said.

Women in Construction hosted historic restoration classes for contractors and homeowners in Duluth in 2005 and 2006. The Midwest Preservation Institute, which conducted the classes, sponsors further restoration courses at Anoka-Ramsey Community College.

“If you apply new methods to old buildings, it really doesn’t work,” Hewitt said. Newer energy conservation rules require vapor barriers.

But old structures, built when energy conservation was not of primary concern, were designed to breathe. Vapor barriers trap in moisture and accelerate a building’s decay, he said.

Local building inspectors can make exceptions to the codes for historic

buildings. The exceptions likely will become mandatory in the next Minnesota legislative session, said Mark Buechel, historical architect for the Minnesota Historical Society.

Later this month Neighborhood Housing Services in Duluth expects to release a how-to manual on CDROM for historic restoration for structures ranging from bungalows to Victorian mansions, as a companion to its Preservation Loan Fund.

On the preservation front

Other area historic preservation efforts are underway. Among them:

• Former St. Louis County downtown jail is part of the historic district that includes Duluth’s Civic Center, but the county plans to tear it down in 2008. “She’s served the county well for 70 years, but it’s time,” said Tony Mancuso, director of county property management.

The massive building is currently used for records and storage but those operations will be moved out by July 2007. Mancuso plans to salvage parts of the jail to build a sally port, a secure place to transfer prisoners from vehicles into the courthouse.

Mancuso said the county ordered six different reuse studies since moving the jail to a new lockup on Haines Road in 1995. “We’ve looked at it from different angles and it always comes back as cost prohibitive,” he said.

The roof leaks, the stairwells and elevator no longer meet code, ceilings are too low to install new ventilation, and jail cells can’t be converted to larger rooms, since the steel bars hold up the building.

Most of those issues would be moot if the building were used just for storage, said Michael Koop, historic preservation program specialist for the Minnesota Historical Society. “People are not looking creatively enough at it. It’d be short-sighted to say, ‘we just don’t have any use for it.’”

The jail is a local landmark and on the National Register of Historic Places, so the county will have to clear obstacles to demolition. The Duluth Heritage Preservation Commission would review the proposed demolition and make a recommendation to city council. If the city grants a demolition permit, an Environmental Assessment Worksheet would have to be filed, allowing more time for public comment.

• Duluth Armory, the massive building in the 1400 block of London Road, where Buddy Holly once performed, is owned by a nonprofit that hopes to turn it into a mixed-use performing arts center with condos and retail shops. The group has issued a request for proposals and received interest from several developers, according to Duluth architect Robert Hewitt. Web site: www.armorycenter.org

• The Lyric Center for the Arts, a 1912 opera house in downtown Virginia, seemed destined to become a parking lot in 1998. Then a nonprofit group, Laurentian Arts and Culture Alliance, purchased it and raised funds though a combination of block grants, foundation grants, individual donations and fundraising events. “We’re chipping away it in small stages,” said board member Tiffany Anderson, who has a day job as Eveleth Economic Development Authority coordinator.

The roof was replaced in 2001, but currently the building houses only a small performing space. The goal is to create a multi-purpose facility for theater, lectures, exhibits, classes, meetings, and a ballroom.

Hammel, Green and Abrahamson, the Twin Cities architectural firm that also helped restore the Pantages and Orpheum theaters in Minneapolis, is creating the design.

Web site: www.lyriccenter.org

• When the city of Superior announced it would tear down the long vacant and vandalized Carnegie Library on Hammond Avenue after a succession of unsuccessful developer-owners, a citizen group bought the building in March 2006. Friends of Carnegie Library is a limited liability company (LLC) in which people can buy shares. So far the group has raised $75,000 with 70 members.

“We couldn’t have gotten funds as a nonprofit. There wasn’t enough time, there was a raze order,” said Robert Swanson, a founding member.

A handful of volunteers are working at the site, repairing the roof and windows, maintaining the grounds, and lighting the building at night.

Their plan is to stabilize the building, resell it and divide the proceeds among investors.

Swanson hopes the buyer will be “someone with vision, a track record, and the wherewithal” to put it to good use, and keep it accessible to the public, perhaps as a restaurant.

Web site: www.superiormemories.com/ superiorcarnegielibrary/index.html

Historic preservation resources

For futher information go to:

National Register of Historic Places

www.cr.nps.gov/nr/index.htm

National Park Service Technical Preservation Services

www.cr.nps.gov/hps/tps

Minnesota Historical Society

www.mnhs.org/shpo

Wisconsin Historical Society

www.wisconsinhistory.org

2005 Duluth charrette report

www.lisc.org/duluth/about_us/

charrette_8730.shtml

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