Call to Order and Roll Call
The fifth meeting of the Interim Joint Committee on Local Government was held on Wednesday, November 19, 2014, at 10:00 AM, in Room 171 of the Capitol Annex. Senator Joe Bowen, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Joe Bowen, Co-Chair; Senators Ernie Harris, Christian McDaniel, Morgan McGarvey, R.J. Palmer II, Albert Robinson, Dan "Malano" Seum, and Reginald Thomas; Representatives Ron Crimm, Richard Henderson, Adam Koenig, Brian Linder, Tom McKee, Michael Meredith, Jonathan Shell, Arnold Simpson, Rita Smart, and Jim Wayne.
Guests: Michael Davis, Gary Feck, and Winnie Blythe, Department of Housing, Buildings and Construction; Craig Potts, Scot Walters, and Jen Williamson, Kentucky Heritage Council; Tyler Campbell, Kentucky League of Cities; and Jerry Deaton, Tourism, Arts, and Heritage Cabinet.
LRC Staff: Joe Pinczewski-Lee, John Ryan, and Cheryl Walters.
Approval of Minutes
Upon the motion of Representative Crimm and a second by Representative Meredith, the minutes of the October 22, 2014 meeting were approved.
Code Standards relating to Reconstruction of Historic Buildings
Acting Commissioner Gary Feck, of the Department of Housing, Buildings and Construction, told the committee that Chapter 34 of the current building codes deals with existing buildings. It is important to note that, with regard to existing buildings, Chapter 34 is set up to include provisions for existing buildings that are not on a historic registry, and provisions for historic buildings. The code makes many allowances and variables for existing buildings. Those are often times difficult to discuss in detail because the only way to truly know the impact of the code on an existing building is to sit down with the plans based upon the scope of the work and work through Chapter 34 “Existing Buildings” to see how the code impacts that structure.
With regard to historic buildings, the code does make an allowance or an exemption for historic buildings that are being returned or restored to their original design. The code does make a distinction in a historic building if there is a change of occupancy. Those changes of occupancy must comply with the provisions of the code for new construction. Relative to the energy code on an historic building or its impact on a historic building, any historic building that is listed on a state, national, or historic property register, that may be under local, state or designated or certified as a source with a national register, is exempt from compliance with the 2012 International Energy Code, which is the code that became effective for commercial construction on October 1, 2014.
As far as alternations, additions, renovations or repairs, those shall conform to the code without requiring unaltered portions of the building or existing building, from being brought up to current standards. Repairs that are associated with routine maintenance, ordinary repair, are exempt from code compliance. If someone is altering a building, relocating walls, changing windows, doors, etc., those are not necessarily exempt. If there is a change of occupancy in an historic building, that would trigger compliance with the current code for the new work. Change of occupancy as it relates to the energy code in an historic building, does not trigger compliance with the energy code; it is exempt.
Mr. Michael Davis, General Counsel for the Department of Housing, Buildings and Construction stated that the building code also provides a very complicated process of review and appeal. The statutes are set up in a way where, although the department has primary jurisdiction on a number of areas of commercial buildings, there is a certain portion of that preserved to the local level. There are local building officials who have built-in discretion to interpret the code and sometimes there are differences of opinion. That is why the building code and statutory scheme has a built in a process by which any local individual who disagrees with, or has an issue with a particular finding of a code official, may appeal that to their local appeals board, if there is one, and if they are dissatisfied with that finding, then there is a process by which they can appeal directly to the Board of Housing, Buildings and Construction for a final ruling on that code interpretation. If the local jurisdiction does not have a local board, then the statutory scheme is that they have a direct appeal to the department so the result is the same. But even when someone does not access that process, which does not happen very often, the department has always had an open door policy to anyone who wishes to contact the department for assistance in interpreting the code. Even when a local jurisdiction has primary jurisdiction, the department still has concurrent jurisdiction over that issue.
In response to a question from Senator Bowen, Mr. Davis stated that while there are few formal appeals, there is constant communication and correspondence with people so that they comply with the code. Mr. Feck added that his office regularly meets with the code users but not as much with code officials. His door is always open to people who need assistance with the code.
In response to a question from Representative McKee, Mr. Davis said that the building code’s definition of a historic building is any building listed in or eligible for listing in the national register for historic places or that is designated as historic under an appropriate state or local law. Representative McKee commented that there are a lot of vacant buildings in rural downtowns.
In response to a question from Senator Harris, Mr. Davis said that Kentucky’s building codes are based on the international building codes, which are created by a national consortium of code officials, and the international energy conservation code is created very much the same way. It is also created by the international code council, which is the basis for most of Kentucky’s other code provisions. Pursuant to federal requirements, Kentucky has adopted the energy code for commercial buildings only.
In response to a question from Representative Smart, Acting Commissioner Feck stated that there is no communication training for code enforcers regarding customer relations. Representative Smart commented that the complaints she has received are regarding the attitudes of the code enforcers in that they are not that helpful.
In response to a question from Representative Simpson, Mr. Davis stated that the Department promulgates the residential code but by statutory scheme in KRS Chapter 198B, the discretion whether or not to adopt and force a building inspection program for residential is vested with the local government. That is why there is a wide disparity across the state. Some local governments have a very complicated and sophisticated residential plan review and inspection programs, and others do not do it at all. The State has primary jurisdiction for non-residential inspections, but can agree to have local government programs inspect on its behalf. Those programs can set reasonable fees.
In response to a question from Representative Shell, Mr. Davis said that federal mandates provide that the consequences to states for not adopting energy codes is the withholding of certain percentages of federal assistance. Representative Shell encouraged either this committee or another committee to look into certain codes that Kentucky has been federally mandated to adopt that would not be the best practice for Kentucky’s industries and businesses.
Senator Bowen commented that compliance to the international code is troubling to him and does not think it is good public policy. He could not imagine the U.S. giving that much credence to an international code when the U.S. knows how to set its own codes and standards. The public and Kentucky’s legislature certainly do not want undesirable policies inserted into the codes. Senator Bowen stressed to the members how important administrative regulations were and that they have the force of law. Administrative regulations can be very onerous so members need to remember to be very vigilant about scrutinizing all of them.
Mr. Craig Potts, Executive Director of the Kentucky Heritage Council and State Historic Preservation Officer, told the committee that the council is an agency of the Tourism, Arts, and Heritage Cabinet and was born out of the National Historic Preservation Act in 1966. The council was created to focus on preserving Kentucky’s unique heritage and encourage the use of Kentucky’s historic building stock in economic redevelopment strategies.
The council has four primary programs: (1) site identification, which includes the National Register of Historic Places and Kentucky historic resources inventory; (2) site protection/Section 106, which includes archaeology and cultural history; (3) site development, which includes rehabilitation tax credit programs and project review in conjunction with national park service; and (4) main street program.
The National Register is the nation’s official list of resources deemed worthy of preservation, which recognizes sites, buildings, structures and objects significant in American history, architecture, archaeology, engineering and culture. Kentucky is ranked fourth in number of listings on the National Register of Historic Places.
Regarding the difference between local historic district designation and national register district designation, the Kentucky Heritage Council plays a primary role in the process required to list a historic district on the national register. Local historic districts vary across the Commonwealth and they depend on the local governments’ decision-making regarding what area they want to include within that overlay, what kinds of restrictions they want to include and what kind of process they want to put into place. The council does not play a role in the day to day review and enforcement of historic district ordinances at the local level.
The Federal Historic Preservation Tax Credit program was enacted in 1976 to preserve historic buildings, stimulate private investment, create jobs, revitalize communities, and incentivize retention of historic fabric. The program has leveraged over $69 billion in private investment to preserve and reuse over 39,600 historic properties since 1976. In FY 2013 alone, Kentucky had 23 projects successfully completed that earned a 20 percent federal tax credit with investments totaling $28,117,278, and ranked 12th in the number of successfully completed projects.
The Kentucky Historic Preservation Tax Credit program, enacted in 2005, is a sister program that is intended to further incentivize the use of the federal credit. The program is unique in that it is applicable to homeowner projects, which the federal tax credit does not allow. The program is also made available to non-profit entities that want to do rehabilitation work on historic properties. The credit is capped at a total of $5 million for the program, not the project. The council uses an egalitarian approach to the program. Projects are not ranked, and every project that qualifies gets some of the tax credit. The amount of the credit is pro-rated and no project gets a full tax credit. Every project gets only a portion of the $5 million available. In ten years, Kentucky’s program has pre-approved 832 applications representing about $422 million in projected investment and has leveraged over $323 million in private investment to preserve and reuse over 524 historic properties.
Representative Crimm commented that in 1998, Governor Paul Patton asked him if he would work with Lt. Governor Henry on a project to offer restoration incentives to rehabilitate old hotels. Twenty-nine hotels were identified from one end of the state to the other. That project offered tax credits to anyone who was going to restore one of the old hotels throughout the state.
In response to a question from Representative Wayne, Ms. Jen Williamson, Staff Architect for the Kentucky Heritage Council, said that she did not have information regarding the economic fiscal impact of the state $5 million tax credit, but the state had given $24 million in credits since the beginning of the program. Mr. Scot Walters, Site Development Program Manager, said the council has not been able to conduct a study on that but hoped to do so in the future. Representative Wayne encouraged the council to work with economic departments at the state universities or someone to get that done because it would help to push this program more.
In response to another question from Representative Wayne, Mr. Walters said that 38 states offer tax credits. Some states have open ended credits and many are more fortified that Kentucky’s.
In response to another question from Representative Wayne, Mr. Potts said that the tax credit is refundable.
Representative Simpson noted the importance of having research available to defend the program; and in response to a question from Representative Simpson, Mr. Potts stated that the $5 million tax credit is being totally utilized.
In response to a question from Representative McKee, Ms. Williamson stated that Kentucky’s tax credit was refundable, and that if the project credit exceeds a person’s total tax obligation, that the remainder of the credit would be returned to the person. The federal credit can be carried forward for up to 19 years.
In response to a question from Senator Bowen, Mr. Potts said that if it is the case of dealing at the local level with an historic district ordinance, then it is hard to tear down an historic building. If it is the case of dealing with the national register designation, which is honorary and gives some protection from federal projects, but it does not provide any protection or take away any private property rights, the building can be listed one day and demolished the next.
Senator Bowen encouraged Mr. Potts to formulate a report to present to the committee at a future time.
There being no further business, the meeting was adjourned at 11:35 a.m.