Quick update on the President’s FY 2017 Budget.
The Treasury’s Greenbook – which describes revenue proposals – has not yet been released, but the budget narrative includes the following language calling for a permanent NMTC extension at $5 billion in annual authority:
“To support private-sector partnerships and investments that play a key role in strengthening communities, the President also proposed to expand and make permanent the New Markets Tax Credit, which promotes investments in low-income communities. Under legislation signed into law by President Obama in December, $3.5 billion in New Markets Tax Credits will be available annually through 2019. The Budget would make the program permanent with an annual allocation of $5 billion.”
Kudos to President Obama for his continued support for the NMTC and the CDFI Fund, which also received an increase in the FY 2017 budget.
A special contribution by NMTC Coalition Board Member, Shirley Boubert.
The holiday season is a time when our nation reflects on the bounty we have received over the last year, a time to express gratitude, and also a time to remember those who are less fortunate. Many DC families help serve meals and participate in fundraisers for people in need during the holiday season, many needs remain throughout the year. To help address these issues, the District of Columbia Housing Authority is working to finance community development projects that meet the needs of our city. One of the ways we are doing this is by employing the New Markets Tax Credit (NMTC), which leverages private and public resources for a variety of projects in neighborhoods where access to capital is scarce. A great example of this work is the Conway Center, a new affordable housing, medical center, and job training facility being constructed on Benning Road, in partnership with SOME (So Others Might Eat), US Bank, which invested $7 million in equity raised from federal NMTCs, and other local partners like City First Bank, which provided an NMTC allocation to help with construction of the Conway Center.
The SOME project, using federal NMTC financing, is a prime example of how redevelopment tools are being used east of the river to benefit the community as a whole—building up people and creating stronger community resources for all of our residents. In fact, this new development will provide homes to 200 homeless and very low-income families and individuals, treat more than 10,000 patients per year with medical and dental services, and train some 300 residents with marketable job skills.
The District of Columbia Housing Authority—which is dedicated to providing quality affordable housing to extremely low- through moderate-income households, fostering sustainable communities, and cultivating opportunities for residents to improve their lives— has won several New Markets Tax Credit allocations over the last few years and provided a NMTC allocation through its subsidiary DC Housing Enterprises to support the development of Conway Center.
The NMTC is a unique and flexible financial tool that allows local decision-makers to choose what types of projects would most benefit their community. It provides private investors with a modest federal tax credit for investments made in businesses or economic development projects in census tracts in which the poverty rate is at least 20 percent, or median family income does not exceed 80 percent of the area median. Since it was enacted, the NMTC has helped create over 750,000 jobs nationwide and generated billions of dollars in private investments in projects and communities that likely would never have received injections of patient capital otherwise.
Unfortunately, the NMTC has been historically caught in congressional back-and-forth, with the credit only being authorized on a temporary basis. The NMTC most recently expired on December 31, 2014, after Congress passed a one-year, retroactive extension at the end of the 113th Congress. However, as a final act of the 114th Congress, a five-year extension of the NMTC in the PATH Act was passed and signed into law by the President, which is the longest extension of the NMTC since it was implemented. As a result, community facilities like Conway Center will continue to have access to the capital needed to fill the financing gaps that many projects in low-income communities face.
While many areas of Washington, DC are thriving, ever-growing costs of living make it increasingly difficult for lower wage workers and the unemployed to cope with these challenges. It is not possible for our community’s organizations to address the poverty and homelessness alone, but through thoughtful use of community development resources like the NMTC, we can start to make a difference, by growing job opportunities and training; increasing child care, education, healthcare and healthy food access, and creating more affordable, decent housing.
This holiday season, we are expressing our gratitude by recognizing the work being done by SOME—because we are stronger when we work together. To find out more about So Others Might Eat and how to get involved with their efforts to serve those in need, please visit their website www.some.org.
Shirley Boubert is the NMTC Manager DC Housing Enterprises a Subsidiary of the District of Columbia Housing Authority.
On this day 15 years ago, President Bill Clinton celebrated the signing of H.R. 4577, appropriations legislation that included the provisions of the Community Renewal Tax Relief Act and of course, the New Markets Tax Credit.
Below, find a video of President Clinton’s remarks at a White House ceremony along with the transcript and a photo gallery.
“The budget also makes good on our commitment to help every community share in our Nation’s prosperity. This is a big deal to me, and also to America’s future. About 18 months ago, I began the first of what I called new markets tours, to shine a spotlight on people and places that had been left behind in this long and remarkable recovery. I wanted every American investor to see the potential of these communities and the promise of the people who live there.
I knew that government couldn’t do it alone and that, in fact, we would have to find a way to get more private investment into these communities. But I also knew that business could not be expected to go it alone, that we had to find some way to bring hope and opportunity home to these communities.
Now, at the same time, to be fair, there were people in the Congress who were interested in this who were struggling for some bipartisan consensus to bring free enterprise to parts of America that have been left behind. Among them, in the House, were Representative Talent, who is here, and J.C. Watts and Danny Davis, who represents Chicago but, like me, was born in Arkansas. And there were other groups that were looking at this.
So we all worked together to give you a budget that delivers something that I believe is truly unique and significant. It includes the landmark new markets and community renewal initiative. It’s the most significant effort ever to help hardpressed areas, both rural and urban, to lift themselves up through private investment and entrepreneurship. It is a triumph of bipartisanship. And again, I want to thank those whom I just mentioned—especially you, Mr. Talent—and I want to thank the Speaker of the House, Dennis Hastert, who went to Chicago with me and Reverend Jackson and without whom we could not have passed this important initiative.
Here’s what it does. First, it establishes the first-ever new markets tax credit. It sets up a new market venture capital initiative. Now, what does all that mean? It basically means if we can get people to put money into really depressed areas, all the rest of America will share part of the risk by giving them a tax credit to do it. And it’s a darn good investment.
We also expanded and strengthened 40 empowerment zones; that’s the program our administration has run for the last 8 years under the able leadership of Vice President Gore. And we created 40 renewal communities across our Nation; that’s an alternative designed essentially by Republicans in the House, with the Democrats who worked with them. And we decided that since nobody knows how to do this, we ought to try in 40 places with each approach and see which one works better, and see what works better with each approach. It’s a terrific idea, and I only wish I was going to be around when all the results come in. [Laughter]
But over the next—sometime over the next, I’d say, 2 to 4 years, probably more like a 4 year period, we’ll actually have evidence of what happened in the 40 empowerment zones, what happened in the 40 renewal communities. That Congress will take the evidence and, I hope, as a result of that evidence, will then enact legislation that will permanently establish a framework for always encouraging America to invest in the areas that otherwise would be left behind.
And if, like me, you’ve spent a lot of time in the Mississippi Delta or Appalachia or innercity neighborhoods or on Native American reservations, you doubtless have concluded, as I have, that intelligence is pretty equally distributed throughout this country and so is the work ethic. But we have not yet equally distributed opportunity and access to capital. We’re trying to figure out how to do it. This is a truly historic day, and we did it together, and I am very grateful. Thank you.”
President Bill Clinton, December 21, 2000
The New Markets Tax Credit Coalition, a national membership organization of Community Development Entities, trade associations, investors, and businesses, commends Congressional leaders for assembling the Protecting Americans from Tax Hikes Act (PATH Act) and including a five year extension of the New Markets Tax Credit.
Since its inception, the federal New Markets Tax Credit (NMTC) has achieved great results, creating nearly 750,000 jobs in economically distressed rural and urban communities and leveraging almost $75 billion in capital for businesses, community services, and facilities.
The extension included in the PATH Act will ensure the delivery of more than $30 billion in new investments in businesses and projects in distressed neighborhoods and towns. Communities will put these dollars to work, creating tens of thousands of jobs through nearly 2,000 projects, including: brand new hospitals in medically underserved rural areas; rejuvenated blighted urban corridors; revived manufacturing activity in regions where the last plant closed decades ago; and tens of thousands of square feet of newly constructed or renovated space nonprofit service providers, schools, daycare centers, and other important community facilities.
Without the NMTC, recovering communities would lose the best federal tool for jumpstarting local economies, creating jobs and providing services. The NMTC Coalition urges Congress to approve the PATH Act.
FOR IMMEDIATE RELEASE
NMTC Leaders Applaud 5-Year Extension of Community Development Tax Credit
WASHINGTON, D.C.—Late last night, Congressional leaders and the White House came to an agreement on a tax extender deal, which includes permanency for a few provisions and two- to five-year extension for other expired or expiring tax credits. The New Markets Tax Credit (NMTC) received a long-term extension of five years (2015-2019) at its current level $3.5 billion annually. The House and Senate still need to approve the measure.
“The federal New Markets Tax Credit has achieved great results since its implementation, creating nearly 750,000 jobs in economically distressed rural and urban communities and leveraging almost $75 billion in capital for businesses, and community services and facilities,” said Bob Rapoza, spokesperson for the NMTC Coalition. “The strong bipartisan support for the federal NMTC in both the House and Senate is a testament to its success in delivering much needed investments for community revitalization projects.”
Congressional champions also applauded the extension of the NMTC:
“The New Markets Tax Credit Program has a history of success nationwide and this extension is a huge step in the right direction. In Missouri, the NMTC has made a real difference in economically distressed communities, including financing for the first new grocery store in the Pagedale community in 40 years, expanding and helping improve the operation of a number of manufacturing businesses, and filling in the funding gap for the construction of 65 home ownership units in a St. Louis neighborhood with very high unemployment.”
—Senator Roy Blunt (R-MO), who introduced New Markets Tax Credit Extension Act of 2015 (S. 591) on February 26, 2015, a bill which would make the NMTC permanent. Senator Blunt was the lead sponsor of a similar bill in the 113th Congress as well.
“This long-term extension of the New Markets Tax Credit (NMTC) Program is a major win for community revitalization, job creation, and economic development throughout New York State. The NMTC Program has already provided critical funding to important projects throughout New York, like the expansion of Roswell Park Cancer Institute’s Clinical Sciences Center in downtown Buffalo. Now, with this five-year extension, communities from Rochester to Albany and New York City to Niagara Falls can continue to access this important financing tool for years to come.”
—Senator Chuck Schumer (D-NY), who is the lead Democratic cosponsor on S.591.
“The New Markets Tax Credit has leveraged an unprecedented level of investment to low income communities, helping revitalize blighted areas with high levels of poverty and unemployment. In Maryland, I’ve seen it make a real difference, creating over 7,000 full-time jobs and more than 25,000 construction jobs over the past decade, all while expanding local business opportunities and community services. I am pleased to see the long-term extension for this credit, because the New Markets Tax Credit helps communities, helps people, and I am all for that.”
—Senator Ben Cardin (D-MD), who is an original and lead cosponsor of S. 591.
“The New Markets Tax Credit is a powerful tool that uses public-private partnerships to revitalize economically stressed areas and encourage job creation. In Ohio alone, the tax credit has helped create more than 30,000 construction jobs and 12,000 full-time jobs. I’ve seen first-hand the positive impact the projects financed through the NMTC program have in turning around struggling neighborhoods, and I am pleased that extending this tax credit means more communities will benefit.”
—Congressman Pat Tiberi (R-OH), who introduced New Markets Tax Credit Extension Act of 2015 (H.R. 855) in the House on February 10, 2015, which would make the NMTC permanent.
“The New Markets Tax Credit (NMTC) spurs economic development, encourages private investment, and creates jobs. This important and popular initiative has generated more than $70 billion in capital for projects in economically stressed areas across the United States. It produces substantial investment in struggling communities that otherwise would be ignored. That is why I remain such an outspoken supporter of the program. In my opinion, extending the NMTC is a proven tool to help rebuild America and create jobs.”
—Congressman Richard E. Neal (D-MA), who is the lead Democratic cosponsor on H.R. 855.
“We care about making sure smaller cities and rural areas, like the areas we represent, have access to the capital and investments necessary for their community and residents to thrive. It’s only fair they have access to the resources they need and the NMTC is helping to fill this gap. Look no further than Hornell, New York to see the real and positive impacts this program can have right here in our back yard. With the support of local residents and businesses, the Y conducted a successful fundraising campaign, but they were still nearly $2 million short of the total project cost of $6.2 million. NMTC financing filled the gap, making the new facility a reality. We were glad to see the project get underway and hope there will be many more like it in the future.”
—Congressman Tom Reed (R-NY), an original and lead cosponsor of H.R. 855.
NMTC Community Development Leaders Meet on Heels of Tax Extenders Legislation Introduction in the House
Contact: Bob Rapoza, firstname.lastname@example.org, (202) 393-5225
WASHINGTON, D.C.— Today and tomorrow, the New Markets Tax Credit Coalition is holding its Annual Conference, drawing community development experts from around the country. The conference will take place at the Hotel Monaco and includes keynotes from Senator Ben Cardin (D-MD), Congressmen Richard Neal (D-MA) and Tom Reed (R-NY), as well as CDFI Fund Director Annie Donovan. The conference takes place just one week before the 15th anniversary of the bipartisan Community Renewal Tax Relief Act of 2000, which established the NMTC, was signed into law by President Bill Clinton.
“The NMTC has achieved great success since its implementation, creating nearly 750,000 jobs in economically distressed rural and urban communities and leveraging almost $75 billion in capital for businesses, and community services and facilities,” said Bob Rapoza, spokesperson for the NMTC Coalition. However, the credit has lapsed in and out of authorization despite its accomplishments. “Presently, lawmakers are working to pass a bill to extend a package of tax provisions that expired at the end of 2014, including the NMTC.”
The conference will serve as a forum for attendees to learn about the new leadership in the House, and discuss policy and regulatory plans for the NMTC. Attendees will meet Congressional champions of the NMTC in addition to networking with industry peers. Attendees will also have the opportunity to visit their respective Members of Congress during a Lobby Day this afternoon, and the Coalition will host a Capitol Hill Reception in the evening from 5:30 pm to 7:00 pm in room B-369 of the Rayburn House Office Building.
On the second day, the Coalition will hold its Annual Business meeting where its newly elected leadership will be announced, including: Robert Davenport of National Development Council, who will serve as President; Heidi DeArment of Montana Community Development Corporation, who will serve as Vice President; Jose Villalobos of TELACU, who will serve as Treasurer; and Kermit Billups of Greenline Ventures, who will serve as Secretary. Finally, the conference will wrap-up with panels featuring legal and federal agency experts, as well as leading NMTC investors.
“These two days are an important opportunity for the NMTC Community to reflect on the success over the past decade and a half, discuss best practices for the industry, and make plans for the future,” said Rapoza.
About New Markets Tax Credit Program
The New Markets Tax Credit was enacted in 2000 in an effort to stimulate private investment and economic growth in low income urban neighborhoods and rural communities that lack access to the patient capital needed to support and grow businesses, create jobs, and sustain healthy local economies. The NMTC is a 39 percent federal tax credit, taken over seven years, on investments made in economically distressed communities. Today due to NMTC, more than $75 billion is hard at work in underserved communities in all 50 states, the District of Columbia, and Puerto Rico.
Dear Chairman Brady,
The New Markets Tax Credit (NMTC) Coalition and its members would like to congratulate you on your new position as Chairman of the Ways and Means Committee. We are excited to have the opportunity to work with you in your new role, and look forward to serving as a resource for your office as you contemplate reforming the tax code.
Before you begin your work on tax reform, we urge you to take action to ensure that expired provisions like the New Markets Tax Credit receive a multi-year extension. The NMTC was designed to increase the flow of capital to businesses and low income communities by providing a modest tax incentive to private investors. Since its implementation, the NMTC has leveraged an unprecedented level of investment to low-income communities—delivering more than $70 billion in total capital investment through public-private partnerships. Without an extension, hard hit urban and rural communities will be deprived of billions in financing for important projects.
Last spring, the NMTC Coalition organized a letter from 1,600 businesses, trade associations, local elected officials, and nonprofit organizations urging Congress to extend the NMTC. That letter includes several dozen signatures from organizations located in Texas, where the program has generated nearly $2 billion in total project financing, creating more than 20,000 jobs. For example, the NMTC helped the Houston Food Bank acquire and rehabilitate three buildings totaling more than 440,000 square feet. The new facility quadruples the size of the food bank’s former space.
Over the past 30 years, community development spending has fallen by more than 75% as a share of GDP. The NMTC is filling that gap and meeting the needs of low income communities at a lower cost to the federal government. Furthermore, instead of Washington picking winners and losers, the NMTC empowers local decision-making on important economic development projects. From business expansions to new healthcare and childcare facilities, the program was designed as a flexible incentive for economic development that meets evolving community needs.
This program has always received bipartisan support. We hope you will make a NMTC extension a priority for the Committee.
Congratulations again, and we look forward to working with you in the coming years.
Today the CDFI Fund released the 2015 NMTC Application. Below are a few of the changes we’d like to highlight:
Restrictions on the Use of QLICI Proceeds:
The NOAA includes new restrictions on the use of QLICI proceeds:
As a condition of eligibility for this Allocation Round, the Applicant will not be permitted the use of the proceeds of Qualified Equity Investments (QEIs) to make Qualified Low-Income Community Investments (QLICIs) in Qualified Active Low Income Community Businesses (QALICBs) where QLICI proceeds are used to repay or refinance any debt or equity provider or a party related to any debt or equity provider whose capital was used to fund the QEI except if: (i) the QLICI proceeds are used to repay documented reasonable expenditures that are directly attributable to the qualified business of the QALICB, and such past expenditures were incurred no more than 24 months prior to the QLICI closing date; or (ii) no more than five percent of the QLICI proceeds are used to repay or refinance prior investment in the QALICB. Refinance includes transferring cash or property directly to any debt or equity provider or indirectly to a party related to any debt or equity provider.
Question 13a on the application asks CDE applicants to answer “yes” or “no” whether they will comply with the above rules. If an applicant answers “no” then their application will be denied.
The Compliance and Monitoring FAQ provides more details and two examples:
42. What are the restrictions on the use of QLICI proceeds to directly or indirectly reimburse expenditures incurred by a QALICB or Project Sponsor (an entity that owns or Controls the QALICB) and to directly or indirectly fund a QEI?
Beginning with the CY 2015 round, only documented reasonable expenditures that are directly attributable to the qualified business of the QALICB can be paid or reimbursed from QLICI proceeds to directly or indirectly fund a QEI, provided that these expenditures have either been (i) incurred no more than 24 months prior to the date on which the QLICI transaction closes, or (ii) represent no more than 5 percent of the total QLICIs made by the CDE into the QALICB.
Reasonable expenditures are expenditures for a legitimate business purpose that occur during the normal course of operation, and must be similar in amount and scope when compared to expenditures by a similar entity for a similar project under similar circumstances. Such expenditures may be made directly by the Project Sponsor on behalf of the QALICB or be funded through a loan or equity investment made by the Project Sponsor to the QALICB.
Of note, the IRS has not issued guidance on what costs are reimbursable under §45D. Until such guidance is made public, the CDFI Fund supports the use of the above parameters for transactions involving the reimbursement of incurred cost. The following examples are offered for additional clarity.
Example 1: Project Expenditures within 24 Months
Within 24 months prior to the closing of the QLICI transaction, a Project Sponsor uses funds it has raised from various sources to obtain development permits, begin construction, acquire or install equipment, or acquire other property related to the project; all of which represent reasonable expenditures and for which the Project Sponsor has retained documentation (i.e. invoices, receipts, proof of payment, etc.) totaling $1,000,000 and are directly attributable to the qualified business of the QALICB.
Out of $10,000,000 in total QLICIs, up to $1,000,000 of the QLICI proceeds can be used to reimburse the Project Sponsor for these documented expenditures and to directly or indirectly fund a leverage loan. The remaining QLICI proceeds ($9,000,000) could be used for operating needs, working capital needs, equipment, additional construction expenditures, or other needs related to the project or business of the QALICB.
Example 2: Project Expenditures up to 5% of QLICI Proceeds
Same facts as Example 1, except an additional $700,000 of documented, reasonable expenditures incurred by the Project Sponsor were incurred greater than 24 months prior to the closing of the QLICI transaction.
The QALICB may use no more than 5% of QLICI proceeds to reimburse documented, reasonable expenditures that are directly attributable to the qualified business of the QALICB regardless of when those expenditures were incurred. In this scenario, if the total QLICIs to the QALICB was $10 million, the QALICB could use up to $500,000 to reimburse expenditures that were incurred prior to the QLICI closing.
In summary, the QALICB may elect to either reimburse reasonable expenditures incurred within 24 months of the QLICI closing date as in the first example ($1,000,000) or reimburse reasonable expenditures that represent up to 5% of the QLICI proceeds incurred prior to the QLICI closing date ($500,000). It may not do both. If the QALICB is using QLICI proceeds to reimburse or repay the Project Sponsor for documented, reasonable expenditures directly attributable to the qualified business of the QALICB that were incurred within the previous 24 months ($1,000,000), it may not use QLICI proceeds to repay or reimburse the Project Sponsor for any expenditures that occurred outside of 24 months.
43. How will the CDFI Fund monitor the restriction on the use of QLICI proceeds to directly or indirectly reimburse expenditures incurred by a QALICB or Project Sponsor required under the CY 2015 NMTC Application?
CDEs must include such covenants in financing agreements with QALICBs as may be necessary to reflect this restriction. The agreements containing such covenants must be available for inspection by the CDFI Fund. Second, the CDE should collect information as may be necessary and maintain documentation to trace the use of QLICI proceeds to use by the QALICB at the time of the initial QLICI is made and at least annually thereafter. Where the QALICB will repay or refinance a debt or equity provider or a party related to a debt or equity provider under the 24-month or five percent exception rules, the CDE should maintain documentation supporting that the reimbursements can be directly traced to actual expenditures. This documentation must be available for inspection by the CDFI Fund. Documentation to support compliance with this restriction must be retained for the period of the QLICI in the QALICB plus three years or the seven-year compliance period plus three years, whichever is shorter.
44. Can a QALICB use QLICI proceeds to pay a debt or equity provider to monetize an asset owned or controlled by the QALICB or an Affiliate of a QALICB, including but not limited to the accreted value of an asset?
No. The purpose of the NMTC Program is to attract additional investment into eligible communities. The use of QLICI proceeds to monetize existing assets does not represent new investment. Rather, transactions of this type represent a change in the form of the existing asset of the QALICB.
New Underserved States
Each year, the CDFI Fund names ten “underserved” states that have received the least NMTC allocation in proportion to their statewide population residing in low income communities. This year, Arkansas and Wyoming are new to the list, replacing Alabama and Nebraska on the 2014 list. From the Application Q&A:
Since the inception of the NMTC Program, QLICIs have been made in all 50 states, the District of Columbia, and Puerto Rico. However, the CDFI Fund has identified Puerto Rico along with the following 10 states as areas that have received fewer dollars of QLICIs in proportion to their statewide population residing in Low-Income Communities: Arkansas, Florida, Georgia, Idaho, Kansas, Nevada, Tennessee, Texas, West Virginia, and Wyoming. The above states are identified by obtaining the total dollars of QLICIs invested (2003-2013) in each state and dividing the total dollars of QLICIs by the population residing in LICs in that state.
Targeting of Native Areas:
Investing in Federal Indian Reservations, Off-Reservation Trust Lands, Hawaiian Home Lands, and Alaska Native Village Statistical Areas is now included in the list of “innovative uses” of a NMTC allocation in Question 18 in the Application. The Application Q&A explains how to determine whether a project is in any of these areas:
If the Applicant commits to investing in Federal Indian Reservations, Off-Reservation Trust Lands, Hawaiian Home Lands, and Alaska Native Village Statistical Areas, how can the Applicant identify whether potential NMTC investments are located in these areas?
Applicants should use the CIMS3 to geocode addresses and determine whether potential QALICBs are located in Federal Indian Reservations, Off-Reservation Trust Lands, Hawaiian Home Lands, and Alaska Native Village Statistical Areas. Please visit https://www.cims.cdfifund.gov/preparation/?config=config_nmtc.xml
Describing Structures with Multiple Financial Notes
The application includes new instructions for describing a financial product structured with multiple financial notes. From the application:
Question 14a/b: TIP: For each product, the Applicant should clearly discuss how the product is structured as well as benefits this structure provides to borrowers/investees. A financial product structured with multiple financial notes (e.g., an A and B note, or an A, B, and C note, etc.) must be described as one financial product. In this case, the rates and terms of the financial notes should be discussed on a blended basis. For additional guidance on calculating blended interest rates, see the Application Q&A. The individual financial notes should not be listed as separate products unless they will also be offered on a stand-alone basis. Applicants will not be scored as favorably if they do not follow these instructions.
From the Application Q&A:
How should an Applicant respond to Question 14 if it will offer multiple financial notes to a single QALICB?
Question 14 of the NMTC Allocation Application asks Applicants to describe up to three financial products that will be offered with capital raised from its NMTC Allocation. Each financial product described by the Applicant must be a stand-alone financial product. For each product, the Applicant should clearly discuss how the product is structured, as well as the benefits this structure provides to borrowers/investees. A single financial product may contain multiple financial notes offered together. For example, the Applicant will offer a financing package that includes a senior loan (A note) and a subordinate loan (B note) to QALICBs. This financing package should be described as a single financial product to the extent that the individual loans will not be offered individually.
Applicants that will offer multiple financial notes in a single financial product should describe the rates and terms of the financial notes on a blended basis where possible. To determine the blended interest rate for two or more financial notes, the Applicant should calculate the weighted interest rate for each financial note. See Question 37 below. To the extent different financial notes have different flexible features (e.g., the A-note has a 30-year term and the B-note has a seven year term), Applicants should clearly describe the flexible features of each financial note.
In Question 14(b), what does subordination mean as a flexible feature?
Subordinated debt is NOT a specific type of debt product for the purposes of this question. Per the TIP to Question 14(b) and Question 35 above, a financial product with multiple financial notes (e.g., an A and B note, or an A, B, and C note) must be described as one product. The Applicant may describe subordination as a flexible feature for the product(s) described in Question 14(b). For example, the Applicant is offering a product with an A and B note where the B note is subordinate to the A note. The Applicant may also discuss CDFI FUND | NMTC Program Allocation Application Questions and Answers 26 subordination in relation to the financing provided to the QALICB by other CDEs in multiCDE transactions or in relation to non-NMTC financing provided to the QALICB.
Earlier this month, Clearinghouse CDFI and Lake Mead Christian Academy celebrated the groundbreaking of their new Henderson, NV facility. Clearinghouse CDFI provided long-term financing for the school, that provides infant day-care services and schooling for grades K-12. The Lake Mead project is part of a recent surge in NMTC activity in Nevada, a state that – until recently – had been underserved by the program.
Lake Mead Christian Academy currently serves 610 students and carries a higher graduation rate than the overall state. Extracurricular activities and ministry services are also provided to the local community through the school.
Financing for this project was made possible thanks to Clearinghouse CDFI’s use of the New Markets Tax Credit program along with funds Clearinghouse CDFI recently received through the U.S. Treasury’s CDFI Bond Guarantee Program.
Growing NMTC use in Nevada
Between 2003 and 2014, only three NMTC projects were closed in Nevada. In response to this situation, and in order to ensure a more equitable distribution of NMTC across the country, the CDFI Fund several years ago began to give a small preference to applicants promising to target one or more of ten “underserved” states. This approach has succeeded. States like Nebraska, Kansas, and Nevada are finally seeing more NMTC investment. By the end of 2015, there may be as many as a dozen NMTC projects in Nevada.
CDEs with investments in Nevada include Nevada-based Las Vegas Community Investment Fund, Clearinghouse CDFI, CRF USA, and Zions Bank. Other CDEs targeting Nevada with available allocation left include Dudley Ventures, Al Wainwright LLC, Citigroup, Enhanced Capital, Mid City Legacy LLC, Stonehenge Capital Company LLC, US Bank, Aries Capital, and Wells Fargo. These CDEs may have already closed projects in Nevada. If you represent one of these CDEs, please contact email@example.com and let us know so we can highlight them on this post.
2015 Nevada NMTC projects include:
Northern Nevada Hopes
Northern Nevada HOPES medical center to offer 38 jobs, serve 6,000 patients.
Eclipse Cinemas is the development of vacant land into a one-stop, downtown entertainment complex. Impact: 200 construction jobs & 81 full-time jobs created.
Washoe Travel Plaza
The development of the Washoe Travel Plaza will produce a sustainable source of revenue for this Nevada and California tribe. Impact: 125 jobs on Native American land
Historic Westside School
The groundbreaking for the rehabilitation of the Historic Westside School in Las Vegas was Jan. 17. The project received $14 million in NMTC financing from the Las Vegas Community Investment Corporation and U.S. Bancorp Community Development Corporation.
If you have projects in Nevada, please contact firstname.lastname@example.org so we can highlight them.