Officials from the Treasury's Community Development Financial Institutions (CDFI) Fund announced the recipients of the 2011 round of New Markets Tax Credits (NMTCs) at the end of February. This round, there were 314 applicants and more than $26 billion requested. However, only 70 organizations were selected and $3.6 billion awarded.
The largest single award was given to JPMorgan Chase, which received a $100 million allotment. Not far behind the banking giant is Boston-based Massachusetts Housing Investment Corp. (MHIC), which received a $95 million award toward its affordable housing and community development efforts throughout New England.
Peter Sargent, MHIC's director of capital development, says the organization already has its sights set on some deals that would deploy the new authority across the region.
“What we're doing is honing in on our pipeline and looking at which opportunities are ready to proceed,” says Sargent. “Right now, we have 10 to 12 deals we're focused on.”
According to Sargent, MHIC's main criteria when choosing a project for the funds is whether it is ready to proceed, has a community impact, and promotes job retention.
This is MHIC's second largest award in the eight rounds it has been a recipient and brings the organization's total allotment to $630 million.
One of the potential projects that could see some funding is the Ferdinand Building, a historic structure in Roxbury, Mass., in desperate need of rehab. This proposed use of credits would require substantial equity to be raised and would likely be a multi-community development entity (CDE) deal, says Sargent.
The awarding of NMTCs was also significant for San Francisco-based Low Income Investment Fund (LIIF), which received $50 million in tax credits. This was the organization's largest single award thus far and more than doubles what it received in the previous round.
LIIF COO Kimberly Latimer-Nelligan doesn't plan to waste any time putting the funds to work either.
“We had completely deployed our last award on two high-impact projects,” she says. “This time I would expect us to do four or five projects, spread across high-need areas.”
LIIF has received $169 million in NMTC authority to date and so far
has deployed $99 million of that on charter schools. But a larger award this round means that LIIF can branch out to other low-income development projects.
“We'll continue to focus on charter schools, but this time we're also looking at two expansion areas: health centers and new geographic markets,” says Latimer-Nelligan.
The organization plans to look at Colorado, Rhode Island, and Tennessee for potential sites of one or two new charter schools. At least one health center in a high-impact, high-mission area is being considered as well.
Affordable housing advocate Local Initiatives Support Corp. (LISC) was also a big winner. It was granted $85 million in NMTCs and plans to spread the award around as much as it can. According to Kevin Boes, president of New York-based LISC affiliate New Markets Support Co., the award couldn't have come soon enough.
“There are plenty of deals ready to get financed in 2012,” says Boes. “There's a huge pipeline of projects out there that are shovel-ready.”
LISC's sustainable community strategy places its offices in 30 cities and 100 neighborhoods across the United States. Boes believes the organization has a competitive advantage because of its consistent presence in the communities it pursues developments in.
“We have folks on the ground determining what each community needs down to a local level. That allows us to determine which projects we pursue based on need,” adds Boes, who shares the belief of many other CDE representatives that with all the need in urban communities the funds will go fast.
During this round of funding, the Treasury Department's CDFI Fund is encouraging tax credit recipients to begin financing healthy food initiatives. With the introduction of this new focus area, the CDFI Fund is trying to motivate CDEs to invest in projects that bring healthy food to “food deserts,” which otherwise would have no access to healthy options. The government will provide resources, assistance, and training to the entities that decide to finance these types of projects. LISC has said it plans to devote 20 percent of its award to this category.
Established by Congress in December 2000, the NMTC program permits individual and corporate taxpayers to receive a credit against federal income taxes for making equity investments in investment vehicles known as CDEs. The credit provided to the investor totals 39 percent of the cost of the investment and is claimed over a seven-year period. CDEs must apply to the Treasury's CDFI Fund to compete for this allocation authority.
One of the largest concerns lingering among award recipients this year is the future status of the NMTC program. The program has yet to be renewed for another year.
“I'm spending a lot of time on the Hill, but it's challenging to get anything done. There has been a lot of support on both sides of the aisle for the program, but some reluctance to pass anything without expense offsets,” says Boes, who has been trying to get the program extended.
“It would be hugely devastating if we can't get something done,” he adds.
