New Markets Tax Credits News Briefs - October 2013

Tuesday, October 1, 2013

The Office of the Comptroller of the Currency (OCC) updated its Insights report on the New Markets Tax Credit (NMTC) program. This update, “New Markets Tax Credits: Unlocking Investment Potential,” discusses banking and federal savings association (FSA) methods to structure transactions, highlights regulatory changes since the previous NMTC Insights (published in 2007), discusses leveraged loans and provides new case studies of successful NMTC projects. The report also discusses public welfare investment authority. The report is available at www.newmarketscredits.com.

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The River Valley Regional YMCA, located in Williamsport, Pa. received $2.2 in NMTCs in September. The $2.2 million was part of a finance transaction that totaled $8 million and was completed by the Commonwealth Cornerstone Group. The Pennsylvania Housing Finance Agency allocated the funds to replace the YMCA’s eight interconnected buildings with a single building. The new building will be 64,000 square feet and will be Americans with Disabilities Act-compliant. The new features such as the addition of three preschool classrooms, a more accessible gymnasium and a new senior center/teen activity room make the building more efficient for program use. The YMCA will also have a fitness area, racquetball courts and a new swimming pool. Total project cost was more than $426 million. The YMCA broke ground Sept. 5 and is anticipated to open in October 2014.

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Robert Rapoza, representing the NMTC Coalition, and Michael Novogradac, representing Novogradac & Company LLP, participated in a round table briefing on NMTCs and LIHTCs July 18 with members of the House Ways and Means Select Revenue Subcommittee. Following the briefing, Rep. Patrick Tiberi, R-Ohio, asked three questions on the following topics: waste, fraud and abuse; whether the credit is too generous; and the credit’s efficiency and whether it can be improved. The NMTC Coalition and Novogradac & Company responded to each topic. They stated that there is no evidence of waste, fraud or abuse or of noncompliance. Additionally, they said that the outcomes of the NMTC have improved and that the NMTC has fulfilled its purpose to harness private sector capital to revitalize rural and urban communities. Both representatives also stated that the credit is not too rich, as there are three key parties that directly or indirectly receive a position of the subsidy, the allocated amounts are based on financing gaps and the NMTCs are generally marketed among numerous investors to generate market competition. Regarding efficiency, Rapoza and Novogradac cited a 2012 report issued by the NMTC Coalition that found that the income taxes paid by NMTC-financed businesses and generated by the direct and indirect jobs created offset the cost of the NMTC to the federal government. Finally, they said that the NMTC is a tool for revitalization, and that without the NMTC, investments would not reach businesses and revitalization efforts in underserved markets.

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On Aug. 28, the OCC published the latest edition of its Community Development Investments newsletter. Entitled, “Extending Credit in Indian Country: How Banks Use Federal Programs to Promote Economic Development,” this issue studies the current economic conditions in Indian Country, presents examples of how national banks and federal savings associations can use federal programs to lend and invest in this market and provides a primer on Community Reinvestment Act implications for OCC-regulated institutions that seek to do business in Indian Country. The newsletter is available at www.occ.gov.

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The Kansas City Missouri Community Development Entity (KCMO CDE) announced in September that it allocated NMTCs to two projects. U.S. Bancorp Community Development Corporation will invest equity in A.B. May, a home services company, which received $5 million in NMTCs to transition from a 14,000-square-foot building in Leawood, Kan. to an 82,000-square-foot building in Kansas City, Kan. A.B. May expects to add 70 jobs to the payroll when it moves into the building by mid-2014. KCMO CDE also provided $6.8 million allocation to Custom Truck & Equipment, a provider of vocational trucks, cranes and construction equipment. KCMO CDE has expended $75 million in NMTC financing since 2008.

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