Advocacy Interview
By Peggy Nolan
As if owning a B&B during a global pandemic wasn’t challenging enough, imagine owning two. And both properties are on the National Register of Historic Places. Bob Klebba and his husband, David Waugh, learned a lot as they built two flourishing businesses.
How and when did you become interested in historic preservation?
The first house I bought was built in 1894 as part of a creamery at an old railroad stop in Dane County. I worked with a contractor to remodel the house, and I enjoyed living in it. Later, David and I lived in a bungalow on the isthmus, and I enjoyed that house’s craftsmanship and living in an older property. But purchasing the old Dora and William Collins House in 2012, now Mendota Lake House, is where my interest in historic preservation really began.
Bob Klebba
David wanted to run a home-based business, and he knew the property was unoccupied after the previous B&B operators’ lease expired. Because the property belonged to the City, there was a complicated city purchase process. We knew up front we couldn’t buy the land, just the building. So the purchase price was much lower than it would be otherwise. And that began my adventure in historic preservation.
When we toured the property initially, we fell in love with the Craftsman details in the house – the mahogany trim, the quarter-sawn oak, moldings, and the leaded-glass windows. At the same time, it had been vacant for seven years, squatters had taken advantage of the lack of care, and there was some water damage. We knew the bones were good, and the layout was beautiful, and it had already been set up as a bed and breakfast. So in some ways, it was a turnkey operation. We had it up and running in five months.
What did you learn from owning the Mendota Lake House that you were able to use with the second property you bought, the Governor’s Mansion Inn?
Tenacity and political/media savviness: Because we purchased the Mendota Lake House from the City of Madison, we learned early how important paying attention to local government politics is. At the proposal selection committee, one alder discriminated against our proposal because of his homophobia. Our alder worked assiduously against us because of our work fighting the redevelopment of the Edgewater Hotel. She used an exceptional parliamentary procedure, where she introduced our competitor’s proposal as an alternate to ours, after ours had been selected. This meant that the remaining City committees and then Common Council had to vote first for the alternate and then our proposal. We engaged the radio, TV and print media to write stories about our battle with our alder, and we ultimately prevailed.
Mendota Lake House
This experience helped us with the Governor’s Mansion, which we bought from the University of Wisconsin in 2017. When the UW put out a request for bids, ours was $20,000 over the appraisal, which turned out to be the highest bid. We were asked to close in 30 days, which is not a timeline most banks can accommodate. Our neighbor and friend of historic preservation, Fred Mohs, helped with a loan until we completed the rehabilitation.
We needed quickly to develop rehabilitation plans and rezone the property for commercial use. Our experience with city government and a new, sympathetic alder helped immensely. And our demonstrated performance with the Mendota Lake House helped us find great people to work with.
Strategies for running a small inn successfully: Our vision, understanding of our clientele and knowledge of our market all allowed us to convince a banker that we know how to make this business work. We were very excited by the appeal of this new unique property, making it into a hotel and being able to keep it alive for another 50 or 100 years.
Governor’s Mansion Inn & Cafe
Renovating the Governor’s Mansion Inn was a $2M investment. Why was the purchase and renovation so much more complex than the Mendota Lake House?
The Governor’s Mansion Inn is a slightly larger property, and there had been no significant renovation to it since the 1870’s. The good news was it was structurally sound, and the rooms hadn’t been divided into apartments. So the main focus of remodeling was adding a bathroom to each guest room while complying with the covenants established by the State. These forbade additions to the property and required the State Historic Preservation Office to approve any interior changes.
Unlike the Mendota Lake House, the Governor’s Mansion needed a small amount of reconfiguration for the guest rooms, an upgrade to commercial building code, and accommodation for accessibility. We installed 9 bathrooms with all-new plumbing, sprinklers for fire protection, air conditioning and new 400 Amp 3 phase electrical service. Of course some structural issues appeared that couldn’t be ignored as well.
What people need to recognize is that when you buy a historic property, you’re making a commitment to preservation. So you’re signing up to make sure that the building is going to live beyond your use of it. And the way to make that happen is to take advantage of the state and federal historic preservation tax credits. For a commercial property, that is 40% of your qualified rehabilitation expense. In our business, about $1.6M of our investment qualified for tax credits resulting in $640K in credits. Without these credits, the rehabilitation of the Governor’s Mansion would have been unfeasible.
On a residential historic building in Wisconsin, there is a 25% state tax credit. Some expenses (landscaping, outdoor lighting, furniture) don’t count, but many do – such as a new boiler, air conditioning, rewiring the house, new bathrooms, repairs to structural defects, etc. If your state tax credits exceed your tax liability, you can resell them for about $.90 on the dollar.
Where can people who want to own a historic property get help and advice?
There are professionals who advise how to use historic preservation tax credits. The State Historic Preservation Office at the Wisconsin Historical Society can help with the forms needed for the application. The State Department of Revenue was very helpful with understanding and selling the state tax credits as well.
*Photos courtesy of Bob Klebba