About $2 million in New Markets Tax Credit equity will fund solar panels and a woodbased heating system at the Yukon-Koyukuk Elder Assisted Living Facility.
GALENA, ALASKA—New Markets Tax Credits (NMTCs) are helping make an assisted-living facility possible in this remote area.
Five Alaska Native tribes joined forces to develop the
Yukon-Koyukuk Elder Assisted Living Facility (YKEALF), a move that
allows seniors to remain in their community. The next nearest
facility is an airplane ride away.
The team used a $2 million NMTC investment to fund critical
solar panels and a wood-based heating system at the $7.8 million
facility. The tax credits will also help the project purchase
medical supplies and equipment.
Travois New Markets, which received a $30 million NMTC
allocation in 2007 and an $80 million allocation in 2009 from the
federal Community Development Financial Institutions Fund , and
investor U.S. Bancorp Community Development Corp. provided the NMTC
financing.
“The theme that runs through this is
sustainability,” says Phil Glynn, vice president of
economic development at Travois. First, the development features
environmentally sustainable products and technology. Second, those
features make the project financially feasible for the long term.
And, finally, the development helps sustain the
area's families by allowing relatives to stay
close together and elders connected to their community and
culture.
In an area like this, high energy costs can kill a project,
Glynn says. The solar panels and woodburning boiler system make
sense in an area that has abundant wood and 24 hours of light in
the summer.
By keeping energy costs low, the project is financially
healthier, and rents can be kept lower for residents. The recently
opened facility serves up to 11 elders and is also a community
center.
Individually, the tribes did not have the resources to develop a
project like this. However, working closely with Alaska Growth
Capital, they were able to piece together the deal, including
obtaining grant funds. They were then able to use the grants to
leverage the NMTC piece into a long-term, lowinterest loan (1.3
percent interest rate for 30 years), Glynn says.
Glynn says the structure developed by YKEALF, Alaska Growth
Capital, and Travois fits perfectly into
Travois' traditional deal structure.
“Our company routinely uses soft debt sources
together with tax credits—both NMTC and
low-income housing tax credits— to finance
housing for native people.
We believe deals structured this way have the lowest possible
risk and highest possible community impact of any tax credit deals
in America."
How NMTCs work
The NMTC program attracts investment capital to low-income
communities by permitting individual and corporate investors to
receive a tax credit against their federal income tax return in
exchange for making equity investments in community development
entities (CDEs). The credit totals 39 percent of the original
investment amount and is claimed over a period of seven years.
The CDEs then use the proceeds from the sale of these credits to
make loans or investments with belowmarket terms to businesses
operating in low-income communities. The loans have often been
structured to have a longer period of payment or as subordinated
debt to help make the deals work. CDEs have a mandate to provide
their capital on more favorable terms to projects of higher risk
and with more flexible features than the typical market will
allow.
Travois New Markets, which is a CDE, has focused on deploying
its NMTC allocations in Native American communities, including
three projects in Alaska.