The New Markets Tax Credit Program (NMTC) is part of the Community Renewal Tax Relief Act of 2000 and has provided $15 billion in investments to targeted communities. The NMTC is administered by the Community Development Financial Institutions (CDFI) Fund under the U.S. Department of the Treasury. The CDFI Fund was cre­ated for the sole purpose of expand­ing the availability of credit, invest­ment capital, and financial services in distressed urban and rural com­munities. Certification as a Community Development Entity (CDE) is required to apply to receive a NMTC allocation.

A CDE is any duly organized entity treated as a domestic corporation or partnership for federal income tax purposes that has a primary mission of serving, or providing investment capital for, low-income communities or low-income persons and maintains accountability to low-income community residents through their representation on any governing board of the entity or any advisory board to the entity. The CDFI Fund certifies CDEs on an ongoing basis, and allocates NMTC Allocations annually to select CDEs through a competitive application process.

How the NMTC Program Works?

CDEs make loans and capital investments in businesses located in underserved areas or serving underserved populations.  By making an investment in a CDE, an individual or corporate investor receives a tax credit worth 39% (30% net present value) of the initial investment, distributed over seven years, along with any anticipated return on their investment in the CDE. The investor receives a tax credit equal to five percent of the total amount paid for the capital interest or stock purchase over the first three years and six percent annually for the remaining four years.  Investors may not redeem their investments prior to the conclusion of this seven-year period.

Case Studies

NNMF has invested in a wide range of projects that span from healthcare facilities, to film production facilities, to transforming historic hotels into job creating mixed-use development. With a national footprint, NNMF has a portfolio that includes investments in Northern California, the Pacific Northwest, the South, Detroit and Ohio. Some of these projects are profiled below:

Ochsner Baptist Medical Center: $3.75 million NNMF Investment

NNMF’s first NMTC investment was in Ochsner Medical Center (formerly Memorial Hospital) which prior to Katrina had treated more uninsured patients than any other private hospital in the region. This project, as a community hospital that houses a 317 bed acute care facility in New Orleans, has had dramatic healthcare impacts on its surrounding impoverished community.

After Hurricane Katrina, more than 16,800 healthcare service jobs in total had been lost in New Orleans. Ochsner was non-operational and remained surrounded by floodwater and without power for a prolonged period of time. With only one of the city’s seven hospitals operating at pre-Katrina levels: two were partially open and four remained closed, there was a critical shortage of medical care centers, forcing patients to seek health care services miles away from the city.

NNMF’s investment helped redevelop over 230,000 square feet of medical service space and brought back critical high-wage high-demand jobs to the city. NNMF considers rebuilding New Orleans’ health care system as a critical factor to the region’s economic revival.

The Argonaut Building: $7.5 million NNMF Investment

In downtown Detroit, MI, NNMF is one of six CDEs that have each provided an allocation of NMTC authority for the $145 million redevelopment project involving the rehabilitation and adaptive re-use of a 760,000 square-foot, 11-story building. The facility is the historic Argonaut Building, developed around 1928 and once the main automotive design center and research laboratory for General Motors Corporation. GM donated the building for the project, which is expected to be completed this fall.

The new Argonaut facility will become a second campus and residential facilities to house up to 300 students for local design school, College for Creative Studies (CCS), as well as an arts and design-focused charter middle and high school.  The charter school will serve up to 900 local students, and space for nonprofits, arts, and design businesses will be co-located within the facility. Under the oversight of CCS will be a Design Research Center that will work with corporate and public clients to undertake research to spur development of new technologies, products, and engender the creation of new businesses.

Redevelopment of the Argonaut Building will incorporate a range of green building practices and systems. The entire design is focused on environmental sustainability and future Silver LEED Certification with space set aside for future development to incorporate on-site alternative energy production.

Second Line Stages: $ 6 million NNMF Investment

The Second Line Stages project, for which NNMF received the 2009 Nation’s Best Tax Credit award by the Council of Development Finance Agencies (CDFA) , is the financing of the nation’s first “green-from-the-ground-up” film studio in Louisiana where its once predominant tourism industry is falling and the film production industry is rapidly growing.  This project will help anchor the Louisiana film production industry and bring substantial economic, social and environmental benefits to a region still reeling from the effects of Hurricane Katrina.

Situated in New Orleans’ Lower Garden District, the 90,000 square foot studio combines new construction with restoration of a historic yet severely dilapidated warehouse. Construction is expected to be completed in January 2010 on the studio’s production offices, screening theater and three sound stages. All major elements of the project – from the stages to the parking lot – are designed to meet the U.S. Green Building Council’s advanced LEED Silver Certification standard.

The studio will include a training and resource center to help local residents find jobs in the region’s burgeoning entertainment production industry. The development team has built alliances with local community organizations to create educational programming for at-risk youth, apprenticeship programs and neighborhood security and safety initiatives. These resources will foster economic growth in the surrounding community and the city at-large.

Ms. La Franchi, as the founder and CEO of SDS, develops innovative market-driven approaches to economic development. SDS has built and capitalized more than $2 billion of Double and Triple Bottom Line private-equity funds with its affiliated partner Economic Innovation International, Inc. These funds seek: (1) market rates of return, (2) positive community/social impacts, and (3) environmental sustainability. Further, the two firms jointly manage the $125 million National New Markets Fund, LLC, an allocation of federal tax credits for real estate projects in low-income communities. Ms. La Franchise is also a co-author of the Double Bottom Line Handbook funded by the Ford Foundation. During the past four years, SDS’ Nonprofit Capacity Building Division has secured $15 million in grants for nonprofit clients serving high-poverty communities. Strategic Development Investments, an SDS subsidiary, manages two TBL public equity stock portfolios (Large Cap Domestic Fund and International Fund) that seek to outperform their respective benchmarks while meeting social and environmental criteria.

NNMF is a partnership created by two mission-driven firms – Los Angeles-based Strategic Development Solutions and Boston-based Economic Innovation International – dedicated to investing in qualifying low-income census tracts nationwide. NNMF supports economic and community development investments in real estate projects, and provides a range of technical assistance such as conducting project feasibility, positioning and marketing projects, and identifying and securing other alternative sources of funding to facilitate such projects. NNMF has received $125 million in New Markets Tax Credit (NMTC) Allocations awarded by the CDFI in 2006, 2007 and 2008. NNMF is using these allocations to provide financing to projects with demonstrable community impacts, such as job creation and retention, wealth creation, wage increases, and provision of essential community services such as healthcare and childcare. NNMF also works with each project to incorporate environmental sustainability and four of nine projects are working toward LEED certification up to LEED Platinum.

For information on additional investments visit www.sdsgroup.com/nnmf-project-list.html