Nonprofit Behind Iconic Arts Display Finds Home With Tax Credit Help

Published by Brad Stanhope on Friday, May 5, 2017

Residents of Providence, R.I., love WaterFire, an iconic series of 100 bonfires on three rivers in the city’s downtown area. The massive artistic events, generally held two Saturdays a month from May through November, have drawn more than 15 million visitors since WaterFire was created by Barnaby Evans in 1994. The community established a nonprofit to support the artwork as an ongoing arts installation.

Now the WaterFire organization is moving to a new, permanent home, thanks to a combination of state and federal historic tax credits (HTCs), new markets tax credits (NMTCs) and other financing. Even better, the building–which stood empty for decades in a high-profile location in an economically challenged neighborhood–will be a showcase for art in a community that needed investment.

“A lot of people come to Providence to see WaterFire,” said Shawn Luther, vice president and chief credit officer at Nonprofit Finance Fund, which provided a capital campaign bridge loan to WaterFire. “But WaterFire didn’t have a physical space to call their own. With this, there will be a place for community education and even environmental education. They can use the space as an events space, too.”

“From an economic development perspective, WaterFire events have brought millions of visitor dollars to Providence,” said Mary Thompson, senior vice president of community development banking at tax credit investor Bank of America Merrill Lynch. “They’re attended by 500,000 to 700,000 people each year and are a huge economic driver. But [WaterFire has] never had a permanent home. Now they can really expand their programs and become a lynchpin in the transformation of the neighborhood.”

Surprising Find

Evans, WaterFire’s executive artistic director, said the organization rented several spaces around town over the years, which sometimes made it difficult for logistics, planning and operations. The result was a search for a larger, permanent home, Evans said.

WaterFire didn’t originally look at the U.S. Rubber Factory building. “This building had been mothballed so long that few people even knew what it looked like inside,” Evans said.

The building met the minimum requirements. “We were looking for a larger space that could accommodate 25 boats and 12 trucks,” Evans said. “WaterFire [preparation] happens over a nine-month season and there’s a fair amount of moving materials, lights, sets and equipment back and forth, which is best done in a controlled space.”

The nonprofit got more than the minimum. “We ended [up] restoring an important historical building with an impressive, soaring interior space,” Evans said. “It became something more like the Crystal Palace or a cathedral.”

‘Creative Placemaking,’ Unexpected Credits

The building is part of a large U.S. Rubber factory complex that included 29 buildings erected between 1885 and 1960. The plant closed in 1975.

“This is a great example of creative placemaking,” said Robert Poznanski, senior vice president and chief operating officer at Local Initiatives Support Corporation’s (LISC’s) New Markets Support Company. “The arts serve a lot of purposes, including being an economic engine. A lot of creative people are entrepreneurial and serve as urban pioneers. It’s trite, but true: They are often the first movers into a challenged community.”

Initial inspections revealed environmental challenges. Environmental remediation began in fall 2015, partially funded by an EPA Brownfields Cleanup Grant. Renovation began in mid-2016 and leaders hoped to move into the building in early May.

Journal May 2017 nmtc waterfire

Image: Courtesy of Jeffrey Stolzberg
WaterFire, which presents an iconic series of bonfires several times a year in Providence, R.I., is moving into a new home made possible through new markets tax credit (NMTC) and historic tax credit (HTC) equity.

At the start, tax credits weren’t a given. Evans said work began before all financing was secured and WaterFire was prepared to launch a phased restoration plan with just a $3.2 million state cultural facilities bond. “We were prepared to do a more minimal reconstruction project if tax credits could not be secured,” he said. “Our design team at DBVW Architects and our construction team at TRAC Builders Inc., have been superb and were willing to expand the scope of work dynamically in response to our finding success. As we continued to bring new funding sources on line, we were able to do a more sophisticated restoration … The synergy of funding sources added complexity, which was ably organized by Peter Mello [WaterFire’s managing director], working with Barbara Sokoloff Associates and Klein Hornig LLP.

“The expanded funding allowed us to be more expansive in the construction phase than we anticipated,” Evans said. “We were able to expand the scope. Doing it now was less expensive than doing it later and the added work could be leveraged by tax credit programs.”

In addition to its offices, WaterFire will expand its educational programs, mount art exhibitions, host events for the community and train the next generation of artists and boat-builders in the new headquarters.

The historic nature of the building is impressive.  “They rebuilt all their windows, so the space changes as the day goes on and the light changes,” Thompson said. “Another really cool feature is they have a roof deck with a fabulous view of the city and neighborhood.”

Jeanne Cola, executive director of LISC Rhode Island, said community engagement and education is her favorite part of the deal. “They’re going to bring the community into the building and that’s why we were attracted to this project–connecting to the community and being a resource for the community,” Cola said. “There are intangible benefits of drawing people into the projects. It will be amazing.”

Financing

Bank of America Merrill Lynch was the tax equity investment expert and invested nearly $5 million in HTC and NMTC equity. “From a banking perspective, we’re a longtime supporter of WaterFire. We’ve been supporting their events over 10 years,” said Thompson. “We’ve done a significant amount of investment in historic tax credits and new markets tax credits, specifically in this neighborhood.”

WaterFire was able to get $2.3 million in equity from the state in exchange for state HTCs, plus it received a $3.2 million state cultural facilities bond, grants totaling $1.3 million and has a capital campaign goal of nearly $1.8 million.

Journal May 2017 nmtc waterfire timeline

Combining Credits

While the use of HTCs and NMTCs helped financially, they complicated the deal logistically.

“The goal was to twin the credits, because the project needed it,” Thompson said. “It makes it more complicated, but we’re thrilled to do it because it provides the most benefit.”

The combination was necessary. “We had to find a way to use the credits,” said Derek Farias, vice president of Barbara Sokoloff Associates, a development and community planning consulting firm in Providence. “This allowed [Bank of America Merrill Lynch] to be an investor in both. The team came up with a creative structure. Without the new markets tax credits, the rehabilitation would have been more like a garage. We wouldn’t have been able to bring the community in.”

Adding to the Neighborhood

Benefits of the new WaterFire home extend to the neighborhood, something desired by LISC, which provided loans, NMTC allocation and a lot of guidance.

“LISC’s involvement was critical. This was a boarded-up, empty building covered with graffiti on the main thoroughfare from downtown. Restoring this building has already had an impact,” Evans said. “[The restored building] changes people’s opinions of the area. Several other construction projects have now begun. LISC is an ideal partner because they understand innovation and creativity and invest strategically to make the biggest impact.”

Poznanski said that WaterFire will do more than retain and create jobs. “It stabilizes and grows an organization that is contributing a lot of economic energy to a neighborhood we’ve supported for a long time,” he said.

“It’s also catalytic,” Cola said. “Because WaterFire got NMTCs, a private developer next door is building hundreds of units of affordable housing. That’s an incredible benefit.”

A Major Partnership

Evans said the presence of the building will change the WaterFire organization. “This will allow us to start a larger dialogue,” he said. “It is going to give us the chance to build better partnerships, pursue larger projects and expand our educational outreach.”

Others are excited, too. “When they first purchased the building, we didn’t know it would become a community center,” said Barbara Sokoloff, president of Barbara Sokoloff Associates. “The investment of the NMTCs is so spectacular and WaterFire’s energy, visibility and reputation is really creating an events and headquarters space that will have impact all along the street.”

WaterFire’s founder sees it as a beautiful story.

“This is a great story of innovative financing, creative placemaking, creative designers, professional builders and hard work all coming together to create something extraordinary,” said Evans. “We have taken a big building, underused and covered with graffiti since the 1960s, and made it sing. The scale and quality of the entire space is astonishing. Together, we have restored a rugged factory building from Providence’s heroic industrial past and transformed it beyond all expectation into a soaring, inspiring place conducive to art. Our mission is to inspire the community and it is very important to us that this new art space is right in the midst of a working-class neighborhood that has long been underserved. Art has the power to inspire us all, but we want to make sure we are bringing art to a community that has the most to benefit.”

The result isn’t quite as breath-taking as the bright flames of WaterFire, but it’s special. 

Journal May 2017 nmtc waterfire financebox