Revolving Funds: Historic Preservation Gets a New Tool

Over the past seventy-five years, the Pennsylvania Historical and Museum Commission has preserved Pennsylvania’s historic heritage through its sixty historic sites and museums. Across the Commonwealth, hundreds of other historic properties have also been maintained as house museums or community centers by local governments, historical societies and preservation organiza­tions.

With the growing public interest in protecting even more of Pennsylvania’s varied historic resources, there has been a cor­responding increase in the realization that this kind of public acquisition and maintenance is only one type of preservation roof available. In recent years, there has been some success in attracting private investment to the preservation of historic resources as well. Through federal tax incentives for the rehabilitation of certified historic buildings, many once threatened sites have been “preserved” by the workings of the marketplace. Nevertheless, due in part to the decrease in public funding and a variety of other reasons, there will always be a certain number of historic properties which do not justify acquisition by public agencies and which will not be suitably developed without some intervention by preservationists.

To fill this need, the Preservation Fund of Pennsylvania, Inc. was established in September 1982 to utilize, on a statewide basis, an innovative new preservation technique – the historic preservation revolving fund. The purpose of the fund is to acquire historic properties, market them to a broad audience and later resell them, with preservation restrictions, to buyers who agree to restore and protect them. In this manner, properties will not sit underused or idle but will be suitably rehabilitated and placed back on the tax rolls. The local community will be enhanced by the reuse of eyesores and white elephants, and the Commonwealth’s interest in protecting its heritage will be advanced.

The result of a joint initiative by the PHMC and the Governor’s Office, the Preservation Fund of Pennsylvania, Inc. is a pri­vate, non-profit corporation which is closely linked to Commission programs through its articles of incorporation. The fund also has, as ex officio members on its board of directors, the chairman of the PHMC, the chairman of the Historic Preservation Board and the executive director of the Commission. The other twelve members of the board, each with strong business and community services skills, have been appointed by the Commission and Governor Thornburgh and represent a diversified geographic back­ground. With $140,000 in start-up funding from the legislature and an additional $44,000 grant from the Commission’s Federal Historic Preservation Program, the Fund is currently hiring staff and will soon begin operation.

While Pennsylvania has just joined the ranks of North Carolina and Indiana as one of the few states with a statewide preserva­tion revolving fund, such funds have been in use on the local level for many years. Many of these local funds are part of preserva­tion programs which go beyond acquisition and resale to include preservation loans and actual rehabilitation work. The first re­volving fund in Pennsylvania and one of the first in the nation was established in Pittsburgh in 1966 by Arthur P. Ziegler, Jr., president of the Pittsburgh History & Landmarks Foundation. In the following article, Mr. Ziegler outlines some of the basic prin­ciples of a local revolving fund and analyzes its role in the neighborhood preservation movement in Pittsburgh.

Brenda Barrett – Director, Bureau/or Historic Preservation – PHMC

During the past fifteen years, the Pittsburgh History & Landmarks Foundation (PHLF) has successfully used revolving funds to initiate neighborhood conservation projects throughout the city and to re­store certain key properties in Allegheny County. The preservation of archi­tectural character through acquisition, resale and restoration can result in the revitalization of the economic and human qualities of an area. Although revolving funds are not meant to be financially profitable, their success can be measured by the number of buildings protected and the assurance that historic and aesthetic qualities will survive the threat of speculative development or economic and physical decay.

The initial size of a revolving fund de­pends upon the type of project for which it is intended. While the money to buy one building can be the essential be­ginning, the ultimate goal of many preservation projects utilizing revolving funds is the protection of larger areas, before buildings in those areas are indi­vidually threatened. The fund usually consists of cash, equities, lines of credit, or a combination of these, and is re­plenished by interest on loans and by re­turns from sales or rentals. Because re­habilitation expenses and other adminis­trative costs are charged against the fund, it usually revolves downward. Hence, fund-raising techniques are im­portant not only for the fund’s initial es­tablishment but also for its subsidiza­tion after a number of properties have been revolved. Generally, money from a revolving fund is earmarked for a spe­cific area where preservation policies and methods have been defined. In this way potential donors will know how their money is to be used and as the area being restored improves, the visible re­sults will encourage further support.

Sources of funding vary, depending to a great extent upon where they are to be invested. Nevertheless, there are cer­tain sources which are always appro­priate. A capital fund drive, for exam­ple, with clearly defined goals and which emphasizes the benefit of tax de­ductible contributions is one option. Loans from banks and lending institu­tions in the area represent another pos­sibility and serve as an important demonstration of local support and con­fidence. The positive effects of the proj­ect on the community and the non-prof­it status of the preservation organiza­tion establishing the revolving fund fre­quently aid in negotiating favorable terms for such loans. Another impor­tant source of financial assistance is the National Preservation Revolving Fund of the National Trust for Historic Pres­ervation, an organization chartered by Congress in 1966. Through loans and grants from its Preservation Fund, the Trust has encouraged the development of local revolving funds for preserva­tion projects across the country.

Grams from private foundations are an additional source of funding, though applications are generally more success­ful when made to local foundations, for they generally support projects geared toward local public benefit. As might be expected, this means that these organi­zations are most likely to support preservation projects in urban areas, where the offices of most foundations are us­ually located.

Once the revolving fund is established and property is acquired, important steps can then be taken to ensure ics pro­tection. Ownership allows the preserva­tion organization to attach legal restric­tions to the property deed in the form of easements and restrictive covenants to protect the property in perpetuity. (An easement is a right acquired by the prop­erty owner which restricts the changes which can be made to a building by future owners. A restrictive covenant is an agreement on the part of the proper­ty owner not to make certain changes to the structure.) An easement on the facade of a building, for example, will protect its architectural character with­out restricting the property’s use in a way which might make it less saleable.

One of the greatest advantages of a revolving-fund project is that any hold­ing purchased through the fund remains a working piece of property within the real estate market. Also, when the preservation organization utilizing the fund initiates rehabilitation in an area, it often stimulates additional private investment and restoration efforts. This benefits not only the appearance of the neighborhood but the local tax base as well.

On the other hand, when an area is greatly improved by restoration efforts a problem involving the possible dis­placement of long-time residents of the neighborhood can also arise. The deter­ioration of buildings, particularly in in­ner cities, often results when low-in­come.residents are unable to invest large sums of money in the maintenance of their properties. These areas are often in architecturally significant districts which are in need and are deserving of restoration. The goals of any preserva­tion project should be carefully defined when it begins, and thought must be given to what effect, in human terms, the improvement of property and the re­sulting increased property values and taxes will have on the neighborhood.

It is possible, however, to preserve the architectural character of a locale while improving the living conditions of resi­dents without forcing them to move. In Pittsburgh, preservation projects have been aimed at the revitalization of neighborhoods without the displace­ment of residents, regardless of their in­come level.

Pittsburgh, in fact, is a good place to see neighborhood preservation projects at work. The techniques being applied in that city may be as diverse as the architecture and human qualities of the neighborhoods being preserved, but all the projects have had one thing in common – financing from a revolving fund.

The Pittsburgh Restoration Fund, established in 1966 with a grant of $100,000 from the Sarah Scaife Founda­tion, is the revolving fund of the Pitts­burgh History & Landmarks Founda­tion (PHLF). Since its creation, it has been augmented by grants from over ten local foundations and by contributions from countless individuals which have brought its assets to over $800,000. In all cases, however, grants have been made specifically in support of PHLF programs in three districts – the Mexi­can War Streets, Manchester and Bir­mingham. The principle behind these PHLF neighborhood preservation pro­grams is to demonstrate to residents that the existing architecture can, in itself, provide the basis and means of renewal. PHLF first identifies the strengths in a deteriorating neighborhood and then utilizes those strengths in an effort to overcome weaknesses; it attempts to de­fine qualities which can be developed in ways which will bolster morale and compensate for other deficiencies.

The Birmingham program, as an example, was begun in 1967 when PHLF studies recognized that the neigh­borhoods in Pittsburgh’s South Side, which represent the city’s rich ethnic culture, contained some of Pittsburgh’s most architecturally valuable property. The area enjoys a prime location, along the Monongahela River and on its spec­tacular bordering hill, with easy access to downtown Pittsburgh. The architec­ture there represents typical nineteenth­-century residential and commercial structures which are rich in architectural detail.

Alarmed by the initial blight and the vast amount of poorly designed re­modeling which had taken place in the South Side, the Foundation developed the “Birmingham Self-Help Com­munity Restoration Program” in con­junction with the South Side Chamber of Commerce and the South Side Com­munity Council. initially, attention was focused on one particularly deteriorated residential block. In order to demon­strate the effectiveness of the fund, the Foundation began by restoring five houses along that block, houses which they now rent to low-income residents of the area. In this way, Birmingham served as an important example of how preservation efforts by a private organi­zation in a residential area could lead to the essential commitment on the part of the people who live there to continue those revitalization efforts.

It was determined that further restoration of the area, including an eighteen-block commercial district with small storefronts, would secure for Birmingham a future otherwise unobtainable. Accordingly, a plan was sub­mitted to and accepted by the Depart­ment of City Planning, with which the PHLF staff has worked closely to ob­tain public improvements. Revolving fund monies were first used to purchase and restore a typical commercial struc­ture on Carson Street, the main shop­ping district. Rentals from this property are now being returned to the revolving fund, and the investment will be recov­ered within seven years. This single structure served as yet another example. Since then, the Birmingham Corpora­tion, a private organization, has been formed to restore commercial property, resulting in the renovation of many more storefronts.

The Mexican War Streets, another once prosperous residential neighbor­hood located on Pittsburgh’s North Side near cultural centers, parks and shopping areas, had declined signifi­cantly by the mid-1960s. The area, hav­ing been laid out in 1848, contains beautiful architectural examples of the Greek Revival, Italianate, French Sec­ond Empire and Victorian styles. In an effort to encourage residents of the area to remain and to attract new residents, PHLF utilized the revolving fund con­cept to initiate a restoration program.

The Foundation’s approach for turn­ing the neighborhood around included buying houses in the poorest condition and rehabilitating them for middle-, moderate- and low-income residents to provide good housing and some eco­nomic vitality. Long-time property owners were encouraged to take a fresh look at their neighborhood and to invest in it by restoring the facades of their properties. A coalition of young, old, well-to-do, poor, black and white was built around the cause of preserving and restoring the area’s unique architecture.

Since that time, the Mexican War Streets has been the most successful of Pittsburgh’s neighborhood restoration projects. The expenditure by PHLF of $500,000 from the revolving fund has generated the investment of over six times that amount by members and residents. This is urban renewal­ – through renewal, not removal. The pro­gram was implemented in contradiction to the area’s 1964 master plan, which called for the complete demolition of all structures in the neighborhood. The preservation plan has saved the tax­payers $30 to $40 million through PHLF’s investment and, more impor­tantly, a neighborhood bas been saved.

The formation of the Mexican War Streets Neighborhood Association, which now continues restoration efforts independent of PHLF, is a symbol of the success which the Foundation has had in initiating projects and setting an example for people to follow and to continue. The neighborhood and its association, representing members from widely diverse backgrounds, can be called a true urban experiment.

Even before the Birmingham or Mexi­can War Streets programs, however, the Pittsburgh History & Landmarks Foun­dation experienced its first success. The Foundation was originally established to initiate restoration efforts in Manchester, a black ghetto on Pittsburgh’s North Side. The outstanding Victorian architecture of the neighborhood, which had been developed between 1870 and 1900, clearly warranted and required preservation. The brick row houses, built by well-to-do merchants and professionals, represent an important part of Pittsburgh’s history.

From the outset, the restoration in the neighborhood was to be accomplished only with techniques available to resi­dents, and only if those residents wanted preservation at all. Based on that principle, a program was begun which has lasted fifteen years. Although the Department of City Planning helped with an early architectural study, four years passed before the city would de­clare its full support for preservation. The residents of Manchester supported the concept from the beginning and PHLF, using its revolving fund, began with the restoration of houses on Liver­pool Street.

The combination of outstanding architecture, the commitment of the neighborhood’s residents and the ef­forts of PHLF have now led to the development of a building program by the city which uses Community Devel­opment funds to support renewal through preservation. The Urban Rede­velopment Authority and the Depart­ment of Housing and Urban Develop­ment are now working with the citizens of Manchester and PHLF in a program to provide exterior restoration, as well as loans and grants to make interior re­pairs. Authority for the implementation of the program has been transferred gradually to the community organiza­tion in Manchester. That group is now producing a high volume of restored houses, more than in other neighbor­hoods suffering similar deterioration in the city. The methods of financing which have been developed and the cooperation demonstrated between government, residents and preservation­ists should serve as an example for ef­forts to save similar neighborhoods in cities throughout the state and nation.

The objective of the preservation movement to save buildings can only be successful if it can be proven that historic buildings can be used. A building can only be used if it is physi­cally maintained and if its taxes and utilities can be paid; that in turn can only be done if the use justifies the investment. The building must be feasible, and will be feasible if enough energy and imagination are applied. When restoration proves that not only individual structures but neighborhoods and commercial districts can be re­vitalized, the success of the preservation movement will be assured. It is only when preservation supports the com­munity that the essential recognition, re­spect and participation of the people who use the buildings will develop.

Preservation organizations can set examples which encourage private investment and government support. The essential financial tool, the re­volving fund, which has been used suc­cessfully in Pittsburgh, can be applied to preservation projects in all communities.

Arthur P. Ziegler, Jr., president of the Pittsburgh History & Landmarks Foun­dation and a member of the Pennsylva­nia Historical and Museum Commis­sion, is actively involved in the field of historic preservation. A graduate of the University of Pittsburgh, the author has published numerous articles on preser­vation and revolving funds. For more detailed information on the establish­ment and use of such funds, see his Revolving Funds for Historical Preser­vation: A Manual of Practice and His­torical Preservation in Inner City Ar­eas: A Manual of Practice.