On Friday, October 16th, Educare of California at Silicon Valley (“ECSV”) and Opportunity Fund will celebrate the recent opening of a new Educare facility in San Jose’s Santee neighborhood. The new school, which is more than 7 years in the making, will provide year-round early childhood education and care to 160 children. The project would not have been possible without the support of several local foundations, U.S. Bank, and the expired federal New Markets Tax Credit (NMTC) program. This is the seventh Educare facility financed by the New Markets Tax Credit program nationwide, which has financed more than a thousand community facilities in low-income areas across the country. In fact, the NTMC is one of the most effective federal tools available to finance new or upgraded facilities for nonprofit service providers, schools, hospitals, nursing homes, daycare centers, job training centers, nursing homes, and other community facilities. If Congress does not act to extend the program, low income communities could lose out on more than an estimated $1.7 billion in desperately needed capital for these projects.
The NMTC Has Financed More than 1,000 Community Facilities
A Decade Financing Community Facilities
Between 2003 and 2012, the NMTC financed 1,403 daycare centers, schools, facilities for nonprofit service providers, community centers, healthcare clinics, and other important amenities. Below is a breakdown by category:Nonprofits in low income areas experience financial challenges in maintaining or constructing adequate facilities. Unlike for-profit entities, they often have thin cash flows and uncertain revenue sources, mostly generated from government contracts, private foundations, or individual giving. Their geographic location presents financing challenges, and some small nonprofits lack the skills and expertise internally that are needed to manage a large-scale facility construction project.The NMTC has been extraordinarily important to local communities, and the nonprofit sector in particular, filling the financing gap and making community facility renovation, expansion, and construction possible. Beyond filling the financing gap, CDEs often offer loans with flexible terms and conditions, below market interest rates, and other features not offered in the conventional lending market.
Opportunity Fund and Educare Celebrate Opening of New School in San Jose
The project would not have been possible without the federal New Markets Tax Credit Program
Educare is a national initiative to close the “achievement gap” facing many low-income children, through early childhood education, family services, research, and teacher training. The new San Jose facility is the flagship Educare School in California, located in a San Jose school district with a minority population of more than 90 percent and an unemployment rate nearly twice the national average.
ECSV is a collaborative project among 16 public institutions and private groups who provided financial support, including FIRST 5 Santa Clara County, the Franklin-McKinley School District, East Side Union School District, the Santa Clara County Office of Education, the Health Trust, the Silicon Valley Leadership Group, and the David and Lucile Packard Foundation.
Despite the generous support of private foundations, the project faced a funding gap, so in the summer of 2014, U.S. Bank and Opportunity Fund turned to the NMTC to provide financing for construction of the new $14.8 million, 28,000 square-foot facility.
“Opportunity Fund was thrilled to support the construction of Educare’s beautiful new facility, which will provide early childhood education to 160 of the community’s most vulnerable children,” said Jeff Wells, Director of Opportunity Fund’s New Markets Tax Credits program.
Opportunity Fund and US Bank
This is the fifth Educare site that U.S. Bank subsidiary U.S. Bancorp Community Development Corporation has financed. Opportunity Fund has financed more than 900,000 square feet of new or rehabilitated non-profit community facility spaces. Those facilities serve more than 500,000 low-income clients. (Learn more).And Opportunity Fund is just one CDE among nearly 100 receiving allocation awards in the last round of NMTC allocation in June. Without a Congressional re-authorization, before the end of the year, organizations like Opportunity Fund and countless others will be unable to finance these projects in areas underserved by conventional lenders.
NMTC-Financed Community Facility Case Studies
Status of the NMTC
The NMTC expired at the end of 2014, but it can still be extended. The New Markets Tax Credit Extension Act of 2015 (HR 855), introduced by Reps. Tiberi (R-OH), Neal (D-MA), and Reed (R-NY), would extend the NMTC indefinitely and increase the allocation level. Senators Blunt (R-MO), Schumer (D-NY), Daines (R-MT), and Cardin (D-MD) introduced S. 591, which is nearly identical to its House counterpart.