New Markets Tax Credit Coalition Blog
FOR IMMEDIATE RELEASE
March 4, 2015 – Contact Bob Rapoza, (202) 393-5225
Bipartisan Legislation Introduced to Leverage Private Investment in Economically Distressed Communities, Expand Businesses and Create Jobs
Washington, D.C. – Senators Roy Blunt (R-MO) and Chuck Schumer (D-NY) circulated a Dear Colleague today, asking their colleagues to cosponsor new legislation they are leading in the Senate that would make the New Markets Tax Credit (NMTC) permanent. New Markets Tax Credit Extension Act of 2015 (S. 591) would ensure that economically distressed rural and urban communities have access to financing to grow their economies and create jobs. This bill follows the introduction of companion legislation in the House (H.R. 855) and a call for permanency in the 2016 President’s Budget.
“The broad level of bipartisan support for the New Markets Tax Credit is a direct result of the effectiveness of the Credit in addressing the needs of small town, farming communities and urban neighborhoods left outside the economic mainstream,” said Bob Rapoza, spokesperson for the NMTC Coalition. “The fact is that the NMTC fosters public-private partnerships, grows local economies, resulting in nearly 750,000 jobs in communities that need it the most.”
The NMTC began as bipartisan collaboration between Democratic President Bill Clinton and Republican Speaker of the House Dennis Hastert to attract private capital investment in low income communities and continues to garner support from lawmakers on both sides of the aisle. Since it was implemented, the NMTC has secured $31 billion in direct NMTC investments to businesses in low-income areas and leveraged a total of $63 billion.
- NMTC investments have generated over 744,000 jobs, at a cost of less than $20,000 per job.
- Between 2003 and 2012, more than 1,200 NMTC projects involved community amenities like healthcare facilities, schools, nonprofit service providers, and daycare centers.
- More than 72 percent of all NMTC investments have been in communities exhibiting severe economic distress, including unemployment rates at least 1.5 times the national average, a poverty rate of 30 percent or more, or a median income at or below 60 percent of the area median.
- The NMTC pays for itself. For example, in 2012, the NMTC produced $15.2 billion in economic activity, and this activity generated $984 million in federal tax revenue, more than enough cover the $800 million annual cost of the program in 2012.
“The NMTC is one of several dozen tax credits that have an unknown fate, after Congress only passed a one-year, retroactive extension in the last weeks of the 113th Congress, leaving the credit expired just a few weeks later on December 31, 2014,” said José Villalobos, President of the NMTC Coalition and Senior Vice President of TELACU. “The introduction adds to a growing demand for a more definite answer on tax reform and provides hope that lawmakers can find common ground that benefits the communities and people they represent.”
Senators Steve Daines (R-MT) and Ben Cardin (D-MD) joined as original cosponsors of the Senate NMTC bill. For examples of how the NMTC is making an impact your state, see the NMTC Coalition’s Project Profile Map.
Yesterday, the New York Times wrote about the recovery of downtown Cincinnati, and the Over the Rhine neighborhood in particular. Although the article does not mention it explicitly, many of the catalytic projects described by the Times would not have been possible without financing provided through the New Markets Tax Credit (NMTC).
Below is a map of some of the projects covered in the piece along with an assortment of other Cincinnati projects. Click a green icon to learn more:
According to the latest data from the CDFI Fund, between 2003 and 2012, the NMTC delivered a total of $474 million in financing to Cincinnati businesses and economic development projects. Community Development Entities using NMTC allocation in Cincinnati between 2003 and 2012 include:
- Cincinnati Development Fund
- Cincinnati New Markets Fund, LLC (3CDC)
- Coastal Enterprises, Inc. (CEI)
- Consortium America, LLC (Trammell Crow Company)
- Fifth Third New Markets Development Company LLC
- HEDC New Markets, Inc (National Development Council)
- Key Community Development New Markets LLC
- Local Initiatives Support Corporation (New Markets Support Company)
- Merrill Lynch Community Development Company (Now BAML)
- National City New Market Fund, Inc. (Now PNC)
- National New Markets Tax Credit Fund, Inc (Community Reinvestment Fund, USA)
- Ohio Community Development Finance Fund (Finance Fund)
- PNC Community Partners, Inc.
- Stonehenge Community Development, LLC
- Uptown Consortium, Inc.
- Urban Development Fund, LLC
- WNC National Community Development Advisors, LLC
Thanks to NMTC Coalition board member Dave Gibson (PNC Financial Services Group) for alerting us to this article.
Washington, D.C. – Three members of the House Ways and Means Committee, including Congressmen Pat Tiberi (R-OH), Tom Reed (R-NY) and Richard Neal (D-MA), introduced a bill to secure the future of the New Markets Tax Credit (NMTC) today. New Markets Tax Credit Extension Act of 2015 would ensure that rural communities and urban neighborhoods left outside the economic mainstream have access to financing to grow their economies and create jobs.
A new report by the New Markets Tax Credit Coalition shows the economic impact of the NMTC between 2003 and 2012. The program created nearly three-quarters of a million jobs in rural and urban communities.
With the release of “Decoding the Tax Code” today, Senator Tom Coburn (R-OK) continues to claim that the NMTC projects result in the government choosing favorites. The report rehashes the tired and baseless criticism of the NMTC levied in his previous report, “Banking on the Poor,” released this fall in conjunction with a GAO report that he commissioned, “Better Controls and Data are Needed to Ensure Program Effectiveness.”
In fact, the NMTC is the furthest thing from Washington picking winners and losers. It is a market-driven program based on a philosophy that communities know best, they just need access to capital. Furthermore, the Treasury Department data continues to demonstrate the effectiveness of the NMTC at growing businesses, creating jobs, and improving local economies. Through public-private partnerships, the Credit brings community revitalization projects to fruition that likely would not have gone forward, but for NMTC financing.
The Coburn report notes that the impetus for the New Markets Tax Credit is to help struggling communities. He contends it does not succeed in this, writing that “Most of the country, however, is considered a low-income community for purposes of the program.” However, data from the U.S. Department of Treasury indicates that the NMTC has delivered more than $60 billion in capital to businesses and revitalization projects nationwide in some of the poorest communities; these investments have generated over 550,000 jobs and of the 74,134 census tracts in America, only 30,099 (41%) qualify. Moreover, according to the NMTC Coalition’s survey of 2013 NMTC projects, 80 percent of investments went to severely distressed census tracts that far exceed the statutory requirements for investment.
The report also rehashes criticisms of several individual NMTC projects that Senator Coburn deems unworthy of investment. However, the hallmark of the credit is its flexibility, which allows for diversity in projects based on needs and opportunities identified by citizens and local leaders—not Washington bureaucrats. The vast majority of NMTC projects are child care and healthcare facilities, grocery stores, and manufacturing facilities.
Senator Coburn once again misconstrues NMTC investor returns by citing a flawed GAO report that provides an inaccurate analysis of the operations of the NMTC. GAO overestimated the return for one investor by 400 percent through faulty analysis, later conceding that such a large return probably was not the case. The NMTC Coalition estimates that the actual NMTC investor returns align with market rates of 6 to 7 percent annually, at the lower range of the typical return for risk-based capital.
Coburn cites the NMTC’s cost as $1 billion in Fiscal Year 2014, but fails to note that for $1 billion in forgone federal revenue, the NMTC will deliver more than $8 billion in capital to businesses, community facilities, and revitalization projects in low income communities. According to a new report that will be released by the New Markets Tax Credit Coalition tomorrow, the NMTC generates a substantial return on investment for federal taxpayers. In 2012, the estimated cost of the NMTC to the federal government was $800 million, but NMTC projects generated $984 million in federal tax revenue, more than enough to cover the cost of the program.
The fact is that Senator Coburn is a longtime critic of the NMTC and other tax incentives for community development because he opposes federal efforts to revitalize low income communities, even when those efforts are achieved through market-driven mechanisms. He seems to fundamentally misunderstand how market competition limits investor returns, maximizes the benefit to important projects, increases private sector leverage, and pushes the decision-making process from Washington to the local level.
Today, the New York Times published an article by Economic Policy reporter, Jonathan Weisman. The piece, entitled, “As Tax Breaks Face Scrutiny, It’s Crunch Time in Congress,” begins by attacking the New Markets Tax Credit by criticizing the Georgia Aquarium, which received financing through the Credit. Below, please find some information that refutes this unfounded critique by Mr. Weisman.
- The NMTC was established in 2000 and since the first allocations in 2003 the Credit has spurred some $60 billion in investment and this financing has resulted in the creation of over 550,000 jobs.
- The profile of the area in which the Georgia Aquarium is located: According to the New York Times’ poverty map, the current poverty rate for that area is 40.5%. At the time of the financing, the poverty rate was even higher: 43.6%. The project created over 1,000 jobs, of which 338 are permanent, including many entry level positions. NMTC financing made up less than 25% of total project cost.
- Museums comprise a small percentage of the overall NMTC portfolio – less than 5%. But the profile of the community – high poverty rates and severe economic distress–is precisely what the NMTC was intended to target. Museums and cultural amenities are often small but very important part of a comprehensive revitalization plan for many urban areas and rural main street communities. In addition to the jobs, investment, and foot traffic they bring to local small businesses, these organizations’ programming, education, and outreach efforts deliver intangible benefits to the surrounding low income community.
- The NMTC is a modest incentive – 39% over 7 years or 5.5% return per year – to investors. In return for this credit, taxpayers–most of whom are private financial institutions – invest in projects in low income communities.
- Only 41% of the nation’s census tracts are eligible and only 29% meet the high distress criteria established by the federal government — poverty rates above 30%, median incomes at or below 60% of area median or unemployment rates at least 1.5 time the national average. Over 75% of the NMTC activity is in these high distress census tracts.
- The purpose of the Credit is to provide a tool for local communities to spur revitalization. Decisions on which projects and what financing are made by local leaders in cities (like Atlanta) and rural communities across America – not in Washington.
- The vast majority of projects financed commercial and industrial facilities, health and daycare centers and small business loan funds. The diverse range of beneficial projects financed by the NMTC, can be seen on our project map on the Coalition website: http://nmtccoalition.org/map/
- The Coalition has a detailed response to the unfounded criticisms made by Senator Coburn in August – you can get it here: http://nmtccoalition.org/new-markets-tax-credit-reports-ignore-success/ This fact sheet may be helpful in refuting any other misconceptions about the NMTC.