But local developers weren’t exactly rushing to meet with Panno and are leery of the strings attached to his checkbook.

Such is the stigma attached to historic tax credits, which are praised by preservationists who credit them for saving landmarks such as the Skirvin hotel and Gold Dome, and dismissed by developers like Paul Coury, who say they are too complicated and time-consuming to incorporate into a project such as the Colcord Hotel.

Historic tax credits, offered for years on the federal level and introduced by the state two years ago, can be used by partners in a development to offset renovation costs, or sold by the developers to a company like Sherwin Williams. As with other tax credits offered for job creation or opening a business in an impoverished area, the credits are payable regardless of income level or tax rate.

For Sherwin Williams, with stores and sales in Oklahoma and throughout the United States, the tax credits can be bought at a discount and used to offset both federal and state taxes.

Panno was introduced to Oklahoma City in February 2005, when his company was asked by local preservationist Marva Ellard to buy tax credits from developers of the Sieber Hotel in MidTown.

Funding source

“It’s another source of money for the developer,” Panno said. “Instead of having to go to a bank to borrow money, I’m willing to give someone like Marva something for a $2 million tax credit.”

But Panno adds Ellard’s embrace of tax credits may be an exception, and her partner Robert Magrini’s discomfort is more typical among developers looking to rehabilitate older properties.

“It scared me to death,” said Magrini, who is himself an attorney. “The whole program was foreign to me. But Marva on the other hand had researched it and knew the ins and outs of it as well as anybody I ever talked to. And the support by Sherwin Williams is really the only thing making it even possible to do this project.”

Catalyst city

Panno admits the number of large companies like his actively pursuing tax credit investments is relatively few, and his counterparts could probably “fit into a minivan.”

Panno didn’t know anything about historic tax credits when he joined Sherwin Williams in December 1996. At the time Sherwin Williams had completed one successful tax credit project in Cleveland, its home since 1866.

“Cleveland, Ohio, was one of the catalyst cities for tax credits,” Panno said. “We started because we were approached by a local developer.”

Panno slowly gained experience, and increased his company’s participation in tax credits, by first investing in other hometown projects. Over the next few years, Sherwin Williams began partnering in other prominent restorations, ranging from the conversion of a Gimbles Department Store in Pittsburgh, Pa., into the North American headquarters for H.J. Heinz to renovation of a Revolutionary War era inn in Wilmington, Del., into senior housing.

Panno worked closely with Sen. Hillary Clinton, D-New York, on the purchase of up to $4.8 million in tax credits to help restore the Proctor’s Theatre in Schenectady.

To date, Sherwin Williams has invested more than $200 million in 100 projects. The Sieber is one of the company’s latest projects, and Panno said he’s in talks with more local developers to infuse even more cash into the local economy.

“Just being here for a few hours, I know we’ll be doing other things,” Panno said. “We’ll probably be dumping a lot of money into Oklahoma City.”

Recent development

For Paul Coury, the opportunity to reap millions through tax credits expired when the 96-year-old Colcord was cleared for occupancy and reopened as a boutique hotel in October. Unlike other developers who are simply unfamiliar with the program, Coury was well versed in the process from his 1999 renovation of a burned out building in Tulsa into the Ambassador Hotel.

“It’s a very onerous process and it adds to architectural costs,” Coury said. “What you do is you end up doing things that would have added another eight to ten months to the project.”

To qualify for federal and/or state historic tax credits, Coury would have been required to submit his renovation plans for approval by the National Park Service and the Oklahoma Historic Preservation Office. He could have chosen to pursue tax credits even after construction started — so long as the building hadn’t received a certificate of occupancy.

“It’s always challenging to have someone tell you what to do,” Coury said. “And with the Ambassador, there was only so much value for investors. They had limits on how to use the credits.”

Ellard said she had no such qualms when she first sought out Panno at a conference in New Orleans. She had learned about how the tax credits could help save an old building while working with other local preservationists to save local landmarks like the Gold Dome at NW 23 and Classen. She partnered up with Todd Scott, a former assistant city planner and Main Street program architect who had direct experience in the program.

“I knew enough to be dangerous,” Ellard joked. “But we were familiar with the state’s historic preservation office and we saw them as allies.”

Catherine Montgomery, a tax incentives specialist with the Oklahoma State Historic Preservation Office, said she met with Coury and his architects before they started renovation of the Colcord and thought it could have been a likely candidate for tax credits.

“Sometimes people just don’t know the details involved with tax credits,” Montgomery said. “Or they see it as an arduous process and they have a perception they are going to be told what to do and they don’t want that restriction.”

John Weeman, developer of the Skirvin Hilton, said tax credits issued to partner and operator Marcus Hotels and Resorts were critical to financing of the $56.3 million restoration of the 95-year-old downtown Oklahoma City hotel.

“It depends on whether your commitment is to restoring or rehabbing,” Weeman said. “Our intent was to restore as much as possible. When the fabric was restorable, we wanted to bring it back. But that carries a big premium, and that’s why the tax credit is available. The reason people say they don’t want to do them is they don’t want to spend the dollars necessary to restore an asset.”

Understanding credits

For Weeman, the tax credits required working closely with Montgomery on restoration of the exterior of the first two floors, which had been covered with stucco for 40 years. They painstakingly restored tile mosaic floors in the ground floor dining room, a wood parquet floor and ornate ceiling in the top-floor Venetian Room.

Weeman estimates he could have built a new Hilton downtown at $200,000 a room compared to about $250,000 a room for the Skirvin.

“The tax credits close that gap, and it results in a building that is far superior to what we could build today,” Weeman said.

Montgomery thinks the arrival of Sherwin Williams may boost local preservation for years.

“This is a company that teams up on projects,” Montgomery said. “And in Oklahoma, it’s hard to find that expertise. On the east coast where there are a lot more of these projects, there are tax attorneys that can put these deals together.”

Panno, who had no experience with preservation or historic buildings prior to working with Sherwin Williams, can’t imagine returning to ordinary tax law again. He estimates the company will invest $50 million on tax credit projects in 2007.

“I understand now why people care about these old buildings,” Panno said. “With the Sieber, the key to our participation was Marva’s desire. The developer is the strongest part of the deal for me. The building is important, but I need to have someone like her who really cares about it.”

They absolutely need to be made non-transferable. If the entity has to use them or lose them. The article mentioned the insurance industry buys up a lot of these and they aren’t used for the purpose intended.