The State of Missouri has multiple tax credit programs to provide incentives for investments and charitable contributions. This regular column features examples of how the various Missouri state tax credit programs benefit the state and the St. Louis region.

There is an old saying in the real estate business that alleges property can be valued by three criteria, “location, location, location.” That said, Jefferson City’s historic Hotel Governor building remained empty for more than a decade despite being across the street from the majestic Governor’s Mansion and in the shadow of the Missouri State Capitol Building. The once prominent landmark that served not only as a hotel, but more importantly, as a nucleus of State political activity, was closed in 1988 and remained vacant for more than 10 years. Many worried that the building would never be renovated. Despite several attempts, the Hotel Governor remained abandoned, burdened by the great expense of suitable restoration. However, with help from the MissouriState and Federal Historic Tax Credits, an otherwise impossible renovation turned into a remarkable success.

Built in 1941, the Hotel Governor stood as one of Jefferson City’s most prominent landmarks not only because of its prime location, but also because of the six-foot sign that adorned its rooftop. The hotel was a hotbed of political activity, most of which took place in its famous bar, the Rathskeller. But like many in Jefferson City, the Hotel Governor encountered a great political constant, change. By the mid-’90s the sign atop may have said ‘Hotel Governor’ but the building said ‘Vacancy.’ Instead of hosting the Governor’s Inaugural Ball or political power lunches, the Hotel Governor’s newest guests were pigeons. It was this terrible deterioration that caught the attention of Belleville developer Bruce Cohn.

Cohn wasn’t the only developer to notice the potential in restoring the Hotel Governor, and he wasn’t the first one either. Before Cohn took on the massive job of renovating the historic hotel, other developers had tried, but none succeeded. Previous plans never got past the concept stage. It seemed that nobody could make the numbers work. But Cohn had an ace up his sleeve. He understood the power of State and Federal tax credits.

In 1997 Missouri Governor Mel Carnahan enacted legislation that created the Missouri Certified Historic Rehabilitation Tax Credit. Effective January 1, 1998, this program offered credits against Missouri State income tax for 25 percent of the qualified costs for rehabilitation of a certified historic building or any eligible building in a certified historic district. But more importantly, these credits are transferable to other Missouri tax payers. Thus, to the extent that Cohn could not use these historic tax credits against his own Missouri State income taxes, others can. By selling his excess credits through a capital account to Firstar’s Community Development Corporation, who sells them to other qualified Missouri tax payers, Cohn was able to close the gap on an otherwise impossible project. In exchange for the proceeds invested by Firstar’s Community Development Corporation, it retains a 99 percent interest in the project.

In addition to the State credits, Cohn was also able to use Federal Historic Tax Credits, which offer an additional 20 percent for rehabilitation of national historic landmarks, making the Hotel Governor one of the first Missouri projects to use both the State and Federal Historic Tax Credits. “Plain and simple, the project wouldn’t have taken place without the tax credits and the help of Firstar Bank,” Cohn says.

The Hotel Governor building is once again up and running, but not as a hotel. Instead, it houses a number of State and private offices including Mailboxes Etc., Premier Bank, the Missouri School Board’s Association, the law firm of Bartemus, Frickelton, and Presley, the Missouri Public Service Commission and others. In addition, the building boasts a new name, the Governor Office Building. But despite a new name and its revised use, the building still serves the same important function. “We look at this as a continuation of a historic corridor. It’s a significant part of the history of the city,” Cohn adds.

The renovation of the Hotel Governor building marks a turning point for Missouri developers. Historic buildings that previously were considered lost, can once again be restored to their original grandeur. The use of both State and Federal tax credits closes the financing gaps. “It makes the projects more financially feasible,” notes Kathy Bader, Chairman of Firstar’s Community Development Corp-oration.

By using both Federal and Missouri State Historic Tax Credits, the renovation of the Hotel Governor has paved the way for dynamic re-development not only in Jefferson City, but throughout Missouri.

Scott Hall is an associate of DFC Group, Inc., tax credit consultants to the Firstar Tax Credit Clearinghouse.