Where Do NMTC Projects Go?
As we consider the overwhelming success of the New Markets Tax Credit (NMTC) Program, we are compelled to ask certain questions: Where are NMTC projects located across the country? Are projects being targeted toward communities with the greatest, particularly during these unprecedented times of a pandemic and an economic downturn for many communities?
Through the most recent year that data exists (2017), there were 5,746 NMTC projects in 3,654 census tracts. NMTC projects across the US, in terms of dollars per capita for low-income communities, are located primarily in the Northeast, Northwest, and some places in the South and northern Midwest.
America’s fifty largest cities have fared well under the NMTC Program. While these cities have 20 percent of the eligible population, they have received 41 percent of total investment and 33 percent of projects. Baltimore has received the most NMTC investment in terms of total project cost per eligible population.
From the inception of the program through 2017, Pennsylvania received 174 NMTC projects and QLICIs of over two billion dollars or $386 per member of the eligible population. Over this same period, Philadelphia received approximately $974 million of QLICI investment for 65 projects.
To ensure that the NMTC Program sparks investment and economic development in communities that are struggling economically – census tracts with high poverty rates or low median incomes – NMTC Program has certain criteria to make certain that the communities with the greatest needs have access to get the investments necessary to deliver revitalization.
[The current data suggest that NMTC projects located in neighborhoods that, relative to eligible census tracts that did not receive NMTCs, tend to have lower median incomes, higher poverty rates, and larger numbers of people who are nonwhite. Those communities in the U.S. that are socioeconomically disadvantaged in the country receive the most NMTCs. Metropolitan areas receive more NMTC project dollars per capita than rural or nonmetropolitan areas because they have the greater need.
To be eligible for NMTCs, census tracts must be located in “low-income communities” (LICs) that meet one of the following criteria. The CDFI Fund also designates a subset of tracts and investment purposes as having greater investment needs and therefore eligible for NMTCs.
- The tract has a poverty rate of at least 20 percent.
- If the tract is located within a metropolitan area, the median family income for the tract does not exceed 80 percent of statewide median family income.
- If the tract is located within a metropolitan area, the median family income for the tract does not exceed 80 percent of the greater of the statewide median family income or the metropolitan area median family income.
- The tract has a population under 2,000, is contiguous to one or more low-income communities, and is within an empowerment zone.
- A tract is in a “high-migration county” (defined as a county with net out-migration of at least 10 percent when comparing the latest census to two decades before), and it does not exceed 85 percent of statewide median family income.
The NMTC program provides a great amount of flexibility related to the purpose and type of project for which an NMTC allocation is applicable. QALICBs may use NMTC loans and equity to finance equipment, for business operations, or non-residential real estate projects. Although no type dominates the NMTC landscape, the most common types of projects are those in the following areas:
- health care
Let’s Work Together to Develop the Northeast and Philadelphia!
The financing of qualified businesses with NMTCs is complex. At Savage & Associates, we take great pride in our ability to help our clients structure creative, cutting-edge transactions that overcome market challenges, especially those presented by unforeseen events like the pandemic. These innovative transactions ensure that as much allocation as possible is generated from NMTCs to provide optimal effects to qualified active low-income community businesses. Savage & Associates prepare our clients so that you they are in the best position to engage in community development and transformation through the NMTC program.
If you have any questions about New Market Tax Credits or any other development financing program, call 215.880.9441 in Philadelphia, or 202.817.3941 in Washington D.C. to arrange a consultation. You can also visit our website at Savage & Associates 24 hours a day, seven days a week for more information.