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Building Cost Comparison: Historical Tax Credit vs. New Construction For the construction companies there is often an issue raised of whether or not to start a new construction or to renovate some historically existing building. This issue has many variables that need to be figured out in order for the correct solution to be found. There usually is a special team of researchers who analyse the situation before the project and than give their critical opinion as of what to do more convenient. Pharmaceutical manufacturer Whitehall-Robins decision to consolidate its research and development activities at an existing facility in Richmond, Va. , resulted in a $ 75 million project requiring its building team to devise a meticulous phasing plan that enabled the company to maintain its on-site R&D operations during the 20 -month project. The project involved demolition of three buildings constructed from 1967 to 1984, the construction of three new buildings, including a central utilities plant that is not attached to the main facility, and the remodeling of two existing buildings.
It encompassed 148, 000 square feet of new construction and 132, 000 square feet of renovation. The building team was led by Philadelphia-based A/E Ewing Cole Cherry Both (ECCB) and Parsippany, N. J. -based construction manager Sordoni Skanska Construction Co. Both firms were hired at the outset of the project, and had contracts with Wyeth-Ayerst Global Engineering Services, the engineering management arm of American Home Products, parent company of Whitehall-Robins. Thus they came to the issue of whether or not to have new construction or to renovate the existing historical building. The renovation took more of the concern because of some special discounts provided by the government in the situation of the renovation of historical building. (Wright) This incentive is useful for developers who plan to make substantial improvements to existing historic structures or build new buildings in the Uptown district.
Local property taxes are abated for a period of five years if certified historic structures are rehabilitated according to local design guidelines. New buildings must be compatible with existing historic structures in Buttes National Historic Landmark District. The assessed value of the current structure or vacant property is established for the current year. Taxes on the property are frozen at the established level during the construction period while improvements are made.
Taxes on the improvement are phased in over a five-year period at 20 -percent increments. (Sparks) A 20 percent tax credit is available to developers who rehabilitate certified historic structures. Certified historic structures are those listed in the National Register of Historic Places or are a contributing element in a National Register District. The credit allows a maximum of 20 percent deduction from the developers federal tax liability. The actual amount of the credit is determined by multiplying the total cost of rehabilitation by 20 percent. To qualify for the tax credit, the developers building rehabilitation must be approved by the National Park Service (NPS), the U. S.
Department of the Interior, and Montana's State Historic Preservation Office (SHPO). In general, the NPS is looking for compatible uses that will enhance and preserve the historic structure. The rehabilitation must conform to architectural design guidelines that preserve the historical integrity of the certified structure. By following the guidelines and working closely with the SHPO and the NPS throughout design and construction, this substantial credit can be procured. (Sparks) Here are some particular discounts available in the renovation process. One of the most important parts of a construction is the facades. Reimbursement grants for up to 30 percent are available for the total cost of improving building facades, including windows.
This type of grant does not include roofing or interior improvements, but does include exterior signage. If the developer takes advantage of the Federal Tax Credit, this grant is increased up to 50 percent. The renovation of roofs also have some significant taxation privileges. Reimbursement grants for up to 30 percent are available for the total cost of repairing or replacing a roof. If the developer takes advantage of the Federal Tax Credit, this grant is increased up to 50 percent. (Sparks) Providing interim facilities that enabled Whitehall-Robins to continue R&D operations during the project was no small task.
It entailed moving some employees to nearby office buildings, adapting spaces in existing buildings for temporary use by others, and even providing a double-wide trailer for food service when it was necessary to close the cafeteria. We were gutting floors above and below where researchers were working, and literally demolishing buildings around them, said Bob Mullen, project executive with construction manager Sordoni Skanska Construction Co. (Wright) One of the new buildings is the 68, 000 -sq. -ft. Good Manufacturing Practices (GMP) building, an intermediate-scale facility in which clinical samples of pharmaceuticals under development are produced under conditions specified by the U. S. Food and Drug Administration. Before it will grant approval for a new product, the FDA requires it to be manufactured according to the agency's regulations at a minimum of 10 percent of its projected production scale.
The new facility combines pharmaceutical formulation operations, which were previously located in Hammonton, N. J. , with analysis operations, which remain in Richmond. The design for the fast-track project was not completed under a traditional four-phase format (programming, schematics, design development and construction documents), said Don Jones, project designer with ECCB. In fact, he added, Very few of our clients these days want it done that way. (Frable, Jr. ) The design process was compressed into just two phases. In the preliminary phase, preliminary engineering provided a super schematic, and pricing and programs were established. The second, or detailed engineering, phase then begins at 50 percent design development and continued through construction documents.
In collaboration with ECCB and Wyeth-Ayerst, Sordoni established dates for preliminary engineering and construction bid packages to be completed. (Wright) Project planning included evaluation of options for exterior wall materials for the new construction. A neighborhood covenant required that the exterior be substantially of brick construction, to blend with existing buildings. Precast concrete was specified after a review of options for combining brick with other materials. This approach helped to update the appearance created by the buff-colored brick exterior of the original buildings. Value engineering was incorporated into the ongoing design process.
A lot of people think that you stop everything, value-engineer the job for a week in a hotel room and then change everything at hourly costs to the project, Jones observed. Thats not how we did it. (Wright) Thus the scheduling was revised. A major scheduling revision occurred when it became evident that occupancy dates could not be met unless the interior fitful phase was divided into subleases. Team members collaborated to devise such a plan, which provided a more precise forecast of the amount of work that would need to be accomplished on particular dates. If we hadnt worked as a team - if any one of us had made that decision in a vacuum - it may not have done us much good in terms of keeping construction on schedule, said Mullen. Renovation of three laboratory floors in successive steps, rather than concurrently, enabled work on the remaining two floors to be planned more intelligently on the basis of as-built conditions revealed when interior demolition began in earnest. (Frable, Jr. ) To give project team members greater ownership of the job, Daniel Augustin, project manager with Wyeth-Ayerst Global Engineering services, broke the work into individual components - the central utilities building, the GMP Building and the laboratories.
Work for each component was orchestrated by a team with budget and schedule responsibilities. Team members were assigned to specific components of the project, rather than on the basis of their discipline. This arrangement gave team members a more interdisciplinary focus. In one instance, for example, a mechanical engineer handled administrative details for a furniture package because it was an element of a building to which he was assigned. (Frable, Jr. ) Although the project was infused with elements of partnering, this concept was not formally implemented. The informal way that partnering was achieved was the most effective way, Jones said.
Team interaction was facilitated by the fact that ECCB and Sordoni had previously worked together to deliver a Whitehall-Robins toxicology facility in Crazy, N. Y. The Richmond project brought together a number of the same people. Working with individuals who are already acquainted doesnt mean you dont get into scrapes, but it enables you to take everything that happens in context, Jones observed. (Frable, Jr. ) Bibliography: Gordon Wright, A complex formula. (careful planning allows ongoing research during construction project), from Constructions, issue June, 1999.
Joe Stephenson, Pro Con Construction managing Wentworth-Douglass Hospitals renovation and expansion project. (Construction in Focus). December 2002. Will Finley, First Quarter Total Construction Surpasses. (year 2000 vs. 1999), from business wire, 2000. Foster Frable, Jr. , It cant cost that much more: avoid extra charges when you make construction changes. (Equipment & Facilities). (planning for restaurant construction, US), from Eastern Economist, March 3, 2003. Craig Sparks, Tax Reductions in Constructions, From Wired, issue 16, 2001.
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