Abstract. This paper analyzes a specific municipal tax credit program that has been passed by the City of Winnipeg, Manitoba, Canada. The program allows 50% of the net private investment in eligible conservation work on a historic building to be designated as a credit against future municipal tax liabilities (property, business and amusement) on the structure and land on which it is situated. The credit is non-refundable and expires after 10 years. This article reviews the economic logic underlying the program from the point of view of an investor. Two approaches are considered, one where the increased expenditure increases the quantity of service flow, the other where it results in an increase in the quality of service flow. It is shown how the investor’s expected tax liability effects the amount of expenditure undertaken. Specifically, the proposal introduces a nonlinear subsidy schedule which limits the total amount of the investor’s tax liability that can be subsidized over the 10 year period. It is demonstrated that the program is quite general and could be used by local governments to encourage spending in other areas, for example, energy conservation or general housing renewal.