NMTC Brings Hundreds of Jobs to Barnwell, SC

On Monday, Swiss Krono, a producer of engineered wood, announced plans for a $200 million expansion in Barnwell, SC where the unemployment rate is nearly 15 percent. The project was made possible thanks to the NMTC. From Woodworking Network:
More than $45 million in tax credits, allocated by the National New Markets Fund, The Innovative Fund, Dakotas America, and SunTrust Community Capital, will go toward funding a 250,000-square-foot, $200 million expansion of Swiss Krono’s plant in Barnwell, South Carolina. … The expansion is expected to create 500 construction jobs and 105 permanent jobs at the plant. …. “Swiss Krono is grateful to receive the benefit of new markets tax credits, allowing us to grow the commitment we made to this area over a decade ago,” said Erik Christensen, president and CEO of the company’s U.S. subsidiary. “This investment will set us up to continue that support for decades to come.”
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The NMTC, Business Financing, and Entrepreneurship

By Paul Anderson

Today, the White House released its annual Economic Report of the President. The report included a sidebar on "Distressed Communities and the Tax Cuts and Jobs Act that mentions the New Markets Tax Credit (see right) and then later goes on to describe the Invest in Opportunity Act (IOA).

While the IOA and New Markets Tax Credit (NMTC) target many of the same census tracts, no question that the NMTC and the IOA serve different but complementary purposes. Opportunity Funds will make equity investments in businesses. Community Development Entities mostly use the NMTC to provide debt to businesses and community facilities. That's why we are so excited see these programs working side by side. 

We appreciate the White House highlighting the NMTC's success, but I do feel the need to correct a couple of misconceptions about the NMTC, real estate, and entrepreneurship.

First of all, we should not be too quick to dismiss the value of construction and rehabilitation projects in creating jobs and opportunity. Construction jobs - while often temporary - typically provide good pay and benefits. The construction industry - perhaps more than any other industry - offers apprenticeship and on the job training, providing an avenue for advancement. Construction spurs secondary economic activity (down the supply chain) that is easy to identify and measure. While an increase in construction income and the resulting macroeconomic boost to the economy may be temporary, real estate investment creates or improves a tangible asset that will serve a community for decades to come.

White House Comment on Distressed Communities and the Tax Cuts and Jobs Act

"The Federal government has an active set of policies to encourage investment and job creation in distressed communities, including Empowerment Zones, Enterprise5 Communities, Renewal Communities, and New Market Tax Credits (NMTC). The NMTC—arguably, the most successful of these programs—is structured to induce “patient” capital, providing substantial investment incentives if assets are held over a full seven years. As a result, although the majority of NMTC recipients would not have otherwise invested in the benefiting community, real estate has been the investment of choice, both because real estate returns are naturally long-run and because these investments clearly complied with NMTC regulations (Bernstein and Hassett 2015). But real estate is likely not the most effective tool for job growth, and the program is reportedly difficult for entrepreneurs to navigate."

Purpose of NMTC-Financing (2003-2016)

Purpose of Loan or InvestmentTotal (2003-2016)Percentage (2003-2016)
Total$43,572,242,863
Real Estate$22,011,770,193 50.5%
Non-Real Estate$21,560,472,67049.5%

Secondly, it is a misconception that the NMTC almost exclusively finances construction. While a majority of NMTC projects (roughly 65%) involve some sort of construction or rehabilitation, most NMTC real estate projects also involve the provision of working capital, purchase of equipment, or other financing supporting for an operating business. When you look past the project level and trace NMTC transaction activity to the primary purpose of each financial note, the share of real estate vs non-real estate is about even (see table to the right).

Finally, while it is true that the NMTC does not often provide direct financing to entrepreneurs, the program has been used to capitalize small business loan pools supporting emerging businesses and startup. And increasingly, the NMTC is financing projects that support the entrepreneurial ecosystem. In 2016, according to NMTC Coalition survey data, about 6% of projects financed were business incubators, creative office space, and other physical infrastructure that helps accelerate the development of small businesses, support aspiring culinary entrepreneurs, or foster social enterprise. Below find a few of the many examples across the country. 

Supporting the Entrepreneurial Ecosystem

The Highlander Accelerator, Omaha, NE

The Highlander Accelerator in Omaha, Nebraska, rejuvenated the blighted former site of a failed 23-acre public housing complex demolished in 2009.

The Accelerator offers rents 50 percent below the market rate to facilitate a carefully selected mix of nonprofit and commercial tenants that maximize impact on the educational opportunities, health, and well-being of disadvantaged neighborhood residents. The facility includes over 17,500 SF for Whispering Roots (right), a nonprofit aquaponics organization that will produce fish and leafy greens in a high-tech “closed loop” system.

Studebaker Innovation Center/Renaissance District, South Bend, IN

Adaptive reuse of a former Studebaker automobile manufacturing facility (built between 1923 and 1946) into office, education, incubator, advanced manufacturing and training space. Created 634 full-time equivalent jobs and 131 construction jobs.

An Interview with Andrew Wiand, Executive Director of enFocus, at the Renaissance District

Rocky Mountain Innosphere, Fort Collins, CO

Supporting Culinary Entrepreneurs

The Findlay Kitchen, an Incubator in Cincinnati

Union Hall – A Dynamic Center of Gravity for Entrepreneurs in Cincinnati, OH

LA Prep Commercial Kitchen Incubator

NMTCs Serve Up New Space for Food Business Entrepreneurs

Ivy Tech Culinary School

R House: Baltimore's Emerging Chefs

FareStart Culinary Academy Puts Homeless on Path to Success

BOOM! Health Project Includes Workforce Training Cafe

Enterprise Community Partners and Chase financed a mixed-use project in the Bronx that includes, among other things, a café called BOOM!Café, which will double as a community space and workforce training center on the ground floor. BOOM is working with Catalyst Kitchen, an incubator of food service social enterprises based in Seattle, to establish a training program and business model for the café.

Learn more about the project.

Recent NMTC projects in Akron, OH and Bellows Falls, VT

Chroma Technology, Bellows Falls, VT: The growth of Chroma Technology, a leading manufacturer of optical filters and related products, has far exceed their existing production capacity. Financing from MHIC will increase the company’s manufacturing and research and development facility by over 150%. The prosperity of this company is extraordinarily vital to this very low-income community because it is employee-owned and, with profit sharing, most of the employees can earn approximately $100,000/year. This expansion project will result in 28 new hires within the next 5 years. Akron Community Revitalization Fund: Akron, OH The Akron Community Revitalization Loan Fund, which will be overseen by the Development Finance Authority of Summit County (DFA), is designed to provide small loans to help launch projects — everything from rehabbing buildings to opening new businesses — in distressed census tracts. The DFA created the fund with support from a NMTC allocation.  Learn more.

Rep. Lynn Jenkins (R-KS) visits Kansas City Tech Start-up Payit

Rep. Lynn Jenkins (R-KS) visits NMTC-financed Payit
Rep. Lynn Jenkins (R-KS) visits NMTC-financed Payit
On June 29, 2016, U.S. Rep. Lynn Jenkins (KS-02), the fifth-highest-ranking member of House Republican leadership and a member of the U.S. Ways and Means Committee, toured Kansas City startup PayIt. PayIt is a cloud-based mobile solutions platform for government, leveraging its technology and insights to rewrite and automate the citizen engagement experience. PayIt’s patent-pending mobile platform brings speed and simplicity to the citizen-government payment processing experience for state and local services, such as the DMV, permits and licensing, turnpike passes, income tax, traffic citations and more. Kansas Transportation Authority recently deployed the PayIt Kansas mobile app, providing K-TAG account users the ability to access and manage their K-TAG account anytime, anywhere, directly from their smartphones. The visit was an opportunity to showcase to Rep. Jenkins how the New Markets Tax Credit (NMTC) program facilitates financing for a variety of businesses and projects, from housing developments to community centers to manufacturing plants, located in states and communities that are underserved by traditional sources of capital. A member of Kansas City’s thriving technology start-up community, PayIt’s rapid growth also reflects the area’s strong tech talent and entrepreneurial spirit. NMTC financing for the project was provided by Advantage Capital Partners.

Treasury Secretary Lew and Congressman Xavier Becerra Visit L.A. Prep Incubator

UPDATE, 5/23/2019: L.A. Prep has changed names to Amped Kitchens. Same owners, same great team, and two new locations!

Last month, to mark National Small Business Week, Congressman Xavier Becerra (D-CA), Chairman of the House Democratic Caucus, joined Treasury Secretary Jack Lew at the NMTC-financed L.A. Prep in Lincoln Heights.

The L.A. Prep project involved the acquisition and renovation of 56,000 square foot former warehouse into an incubator for small food producers who have outgrown their startup spaces. The project moved forward thanks in part to $16 million in NMTC allocation from Los Angeles Development Fund and UrbanAmerica. Capital Impact Partners provided $11 million in leveraged debt, with $5.1 million in equity provided by U.S. Bancorp CDC. Civic Enterprise, real estate development firm focused on revitalizing emerging urban neighborhoods, developed the project.

“Two-hundred jobs created: 50 tenants and one-third minority-owned businesses at L.A. Prep & L.A. Kitchen,” said Congressman Becerra. “I’m so proud we have places like this in the district, setting small business owners up so that they can get access to capital and help create more jobs for people across our district and beyond – not to mention, nutritious and delicious food!”

All L.A. Prep tenants receive: an exclusive production space; on-site access to everything a growing food-making business needs: flexible cold, dry and frozen storage; a demonstration kitchen; co-working space and more; a staffed warehouse to assist with receiving and logistics. L.A. Prep partner and co-founder Food Centricity, a business accelerator focused on early and growth stage food companies, provides business support and other key services to help the tenants succeed.

Tenant Spotlight: L.A. Kitchen

L.A. Kitchen student
L.A. Kitchen student

L.A. Prep’s largest tenant is the social enterprise L.A. Kitchen, which offers culinary training programs for at-risk individuals.

L.A. Kitchen is the vision of Robert Egger, founder of the award-winning D.C. Central Kitchen. The idea is this: L.A. Kitchen collects or purchases surplus fruits and produce from farms and wholesale companies in the region. These products fuel a 15-week, culinary arts job training program, preparing at-risk foster youth and older adults transitioning out of incarceration for jobs in the culinary field, helping reduce systemic patterns and become productive members of the Los Angeles community.

Photos from Secretary Lew and Congressman Becerra’s visit:

Rivera Beach Marina Village Promises to Transform the Distressed Waterfront

12717945_554987451334538_5751783884929754680_n Yesterday in Riviera Beach, FL, they cut the ribbon on the new Riviera beach Marina Village. Hundreds showed up Thursday afternoon to get a first look at the new waterfront property. The $35 million redevelopment project is almost complete and will have an event center, restaurants, hotels, shopping and office space. Officials with Riviera Beach CRA, including NMTC Coalition Board Member Tony Brown, are confident that the project will transform the Riviera Beach waterfront into a vibrant and authentic destination spot for residents and visitors alike, spurring broad revitalization of the surrounding community. “Today is symbolic and just shows public, private partnership and residents coming together and city officials listening to them,” Riviera Beach City Councilwoman Dawn Pardo said. You can find a photo album of the event on Facebook. Several news crews were on hand to take in the event, including CBS 12. Below is their report:

Lake Mead Christian Academy Project Part of a Surge in NMTC Activity in Nevada

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 protected] and let us know so we can highlight them on this post. 2015 Nevada NMTC projects include: Northern Nevada Hopes HOPES Northern Nevada HOPES medical center to offer 43 full-time jobs and 105 construction jobs and to serve 10,000 patients. Eclipse Cinemas Main-Photo 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 Small 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 [email protected] so we can highlight them.

San Jose Educare Project Shows the Importance of the NMTC for Nonprofits and Community Facilities

educare1On 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:

nmtfinancedcommunityfacilities

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

 
educare2

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

opportunityfundcomp_1_logo-usbank-siteheader

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).

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.

US Conference of Mayors Considering Resolution Supporting the New Markets Tax Credit

mayors2 The 83rd Annual Meeting of the US Conference of Mayors begins today in San Francisco, CA, and the fate of the New Markets Tax Credit (NMTC) – a critical tool for both urban areas and small towns – is on the minds of many of the conference attendees. The program expired last December, and without an extension, low income communities will lose billions in annual investment for businesses, community facilities, and revitalization projects. Each year, the Conference of Mayors debates and passes resolutions endorsing effective programs and policies. This year, Mayor Francis Slay of St. Louis, MO introduced a resolution in support of the NMTC. The resolution also endorses the two bipartisan NMTC extension bills currently pending before Congress:
  • S. 591, introduced by Senators Blunt (R-MO) and Schumer (D-NY); and
  • H.R. 855, by Representatives Tiberi (R-OH), Neal (D-MA), and Reed (R-NY).
Mayor Slay introduced the resolution along with ten other mayors from every corner of the country: Eric Garcetti, Mayor of Los Angeles; Rahm Emanuel, Mayor of Chicago; Martin J. Walsh, Mayor Boston; Stephanie Rawlings-Blake, Mayor of Baltimore; Michael A. Nutter, Mayor of Philadelphia; Carolyn G. Goodman, Mayor of Las Vegas; Charlie Hales, Mayor of Portland (OR); Greg Stanton, Mayor of Phoenix; Paul Soglin, Mayor of Madison; Marilyn Strickland, Mayor of Tacoma; and Michael F. Brennan, Mayor of Portland (ME). The slideshow below gives a small flavor of some of the important NMTC investments in the above mayors’ home cities: The resolution cites data from the NMTC Coalition’s Economic Impact Report, showing the tremendous efficiency of the NMTC in creating jobs at a low cost to the federal government:
WHEREAS, the New Markets Tax Credit, between 2003 and 2012, generated $31 billion nationwide in direct investments to businesses, which created approximately 750,000 jobs, at a cost to the federal government of less than $20,000 per job, and these New Markets Tax Credit investments leveraged over $60 billion in total capital investment in businesses located in communities with high rates of poverty and unemployment;
It also urges support for a permanent extension of the NMTC, which expired last year:
NOW, THEREFORE, BE IT RESOLVED, that The United States Conference of Mayors does hereby support the “New Markets Tax Credit Extension Act” (S. 591 and H.R. 855), which would make certain the New Markets Tax Credit continues to be available as a financial tool for economically distressed communities, spurring investment and revitalizing areas that need it the most.
Rios_signs Today, at 3:30pm Pacific Time, the Metro Economies Committee will convene to discuss the resolution. Rosie Rios, Treasurer of the United States, will give remarks entitled “Using New Market Tax Credits and Other Federal Tools to Promote Economic Growth in Local Communities”. The Department of Treasury administers the NMTC program through the CDFI Fund.