Meals on Wheels of San Francisco Inc. (MOWSF) is building a new state-of-the-art kitchen which will allow it to expand, increase meal production and continue its mission of helping people stay in their homes and remain independent.

The new kitchen is financed in part by new markets tax credits (NMTCs) and has been seven years in the making–it took almost two years to find a site to build in San Francisco.

“When I first came to [the current] kitchen, it was making about 500,000 meals [per year] and now it’s making 2.1 million, and we didn’t necessarily have the capacity for the 500,000 meals,” said Ashley McCumber, the CEO of Meals on Wheels of San Francisco and the leading force for this development. “As we hit our 50^th anniversary next year, we realized we were hitting a wall on how to serve more meals for people.”

Challenges in San Francisco

Building in one of the most expensive cities in the country in the middle of a construction boom proved to be a significant challenge. McCumber planned on $32 million in construction costs, but the total ended up around $41 million. The increase in cost was created by several factors, including a struggle to find available contractors and workers, as well as high tariffs on steel.

San Francisco also has particular green building standards, which can make construction more difficult and expensive, but Meals on Wheels maximized the solar footprint for the new building, knowing that it would save money in the future.

Luis A. Rodriguez, an attorney at Goldfarb & Lipman LLP, worked with McCumber to find a financing solution for the development, and NMTC equity was a good fit but also presented its own challenges.

“The uniqueness [of this development] is the fact that this is a target population transaction. The property was not located in a qualifying low-income census tract and we couldn’t really document our clients,” McCumber said.

Image: Courtesy of Meals on Wheels SF
The new Meals on Wheels SF kitchen will double meal production and capacity for seniors living in San Francisco.

Even more unusual is that this development came together with four different community development entities (CDEs): JPMorgan Chase Bank, San Francisco Community Investment Fund, Community Vision (formerly known as Northern California Community Loan Fund) and Capital Impact Partners. There were also three upper-tier loans, one from First Republic Bank, one from Capital Impact Partners and one from Community Vision.

“The use of the NMTC investment was key to helping MOWSF, which would not have the ability to undertake a project of this size and scope,” said Nicole Boone, vice president for Chase’s Community Development Banking, “This project illustrates why the NMTC program is helping to make a difference.”

Solving the NMTC Puzzle

The development is not located in a low-income census tract, which presented challenges for NMTC financing. Rodriquez worked with Bryan Hung, a partner in Novogradac’s Long Beach, Calif., office, and the MOWSF team to find a way to structure the transaction so it could qualify and stay in compliance within NMTC regulation. The development ultimately had to qualify for NMTC through the targeted-population provision. Reporting each client that Meals on Wheels served under the targeted-population requirements would have required a lot of administrative work and time, so instead, the development chose to use its own employees to qualify and stay in compliance.

“It took a lot of parties to come together to get the structure down,” said Rodriguez. “This one took a lot of focus to get things together and get through complications and challenges on the way to closing. It was a great team effort to get all of this to come together and accomplish our goal.”

Much-Needed Service

In San Francisco, 68 percent of seniors served by MOWSF live alone. Last year, MOWSF volunteers donated around 21,000 hours and staff served around 4,700 clients–providing in-home wellness and safety checks, nutrition counseling and companionship. Through other self-reported client information and assessments, MOWSF knows that 74 percent of the older adult recipients live under federal poverty level and the cost of living in San Francisco is 62 percent higher than the national average.

“We have people that make more and own their own homes, but still need help,” said McCumber. “A lot of the time, people have care workers to help them around the house and we look for people who don’t have that. People who are aging generally don’t think about assistance until they’re in crisis.”

Often clients are referred to Meals on Wheels by family members or the clients themselves recognizes their need, but a majority of clients are referrals from doctors, social workers or discharge planners.

“MOWSF is an important anchor in the San Francisco community,” said Boone, “And this new facility will help provide more opportunities to serve San Francisco’s homebound seniors.”

For Capital Impact Partners, one of four CDEs and a lender for the development, the development was a perfect fit. Capital Impact Partners invests in underserved communities, especially in projects that support seniors, improve access to healthy foods, and serve the bay Area, where one of Capital Impact Partners’ four national offices is located. 

“This was only our second Meals on Wheels transaction ever,” said Will Robison, the loan officer for Capital Impact Partners. “Understanding how they function and operate was new for us, but we were comforted by the strength of the MOWSF team, the community’s support for the project, and the impact the project will have on the city.”

Capital Impact Partners was the last to bring a NMTC allocation to the development, which was the final piece of funding needed to close the financing and allow MOWSF to begin construction.

A Huge Job

The new kitchen would hire an additional 40 employees–most of them low-income at the time of hire–and will retain its 80 current employees.

“We currently make about 8,000 meals in a production day which is one [eight-hour] shift,” said McCumber. “We wanted to build a kitchen that could make 10,000 in one shift but have the capacity for two [eight-hour] shifts and maximize to seven days a week.”

It can be easy to forget the amount of work that goes into delivering meals to seniors.

“This project checks the box on multiple fronts for the NMTC program,” said Hung whose team consulted on the complex financial structuring and targeted population process. “It allows MOWSF to more than double its capacity to provide critical services to homebound individuals in the San Francisco community, while also creating jobs for low-income individuals. Targeted-population transactions are always more difficult to close than traditional NMTC transactions, but it was even more of a challenge for an organization the size of MOWSF. The transaction needed the efforts of all of the MOWSF employees from top to bottom to successfully close. This speaks volume to the dedication of the organization and its employees to the organization’s mission.”

“The way in which people gravitated to this project showed a couple of things,” said McCumber. “First that this mission is universally valued and understood; people, even if they haven’t had a direct experience with someone who’s homebound, they get it. Second, that there are so few distressed community projects like this for people who are seniors and aging.”

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