How does the New Markets Tax Credit Program work?
The New Markets Tax Credit Program stimulates economic and community development and job creation in the nation’s low-income communities by attracting investment capital from the private sector.
The NMTC Program provides tax credits to investors who make “qualified equity investments” (QEIs) in investment vehicles called CDEs. CDEs are required to invest the proceeds of the qualified equity investments in low-income communities. Low-income communities are generally defined as those census tracts with poverty rates of greater than 20 percent and/or median family incomes that are less than or equal to 80 percent of the area median family income.
The credit provided to the investor totals 39 percent of the investment in a CDE and is claimed over a seven-year credit allowance period. In each of the first three years, the investor receives a credit equal to five percent of the total amount paid for the stock or capital interest at the time of purchase. For the final four years, the value of the credit is six percent annually. Investors may not redeem their investments in the CDEs prior to the conclusion of the seven-year period.
Border Communities Capital Company LLC
Border Communities Capital Company LLC offers its products and services toward underserved communities located near the United States-Mexico border in the states of California and Arizona. The targeted counties include San Diego, Imperial, Riverside and Yuma counties. A portion of BCCC’s allocation will be deployed on non-metropolitan communities.
Border Communities Capital Company makes equity investments, equity equivalent investments and loans to finance land and infrastructure development, vertical building of office, retail, commercial, industrial, and service space. The products to be offered include development and construction short- and intermediate-term loans. BCCC can offer below market interest rates, longer than standard period of interest-only payments, more flexible borrower credit standards, loan loss reserves that are less than standard, non-traditional forms of collateral and other below market or non-conventional features. With this allocation, Border Communities Capital Company will continue to provide capital and financing to projects that spur development, upgrade communities, and create services and opportunities for low-income communities and people.
2009 Allocations of New Markets Tax Credits
Border Communities Capital Company, LLC (BCCC) was formed as a Community Development Entity (CDE) in 2002 and won a $50 million NMTC allocation in the first funding round. BCCC won an additional $50 million of NMTC in the 2009 funding round. BCCC will have placed $19 million of its total $100 million allocation in non-metro counties.
Sample Closed Transactions:
Mercado del Barrio
San Diego, California
BCCC NMTC Allocation: $9.7 million
Product Type: Commercial and Retail
NMTC Investor: US Bank
Developer: Shea Properties
Description
Mercado del Barrio consists of new construction of 83,803 square feet of retail space. Construction is scheduled to finish December, 2012.
The project is located in the Barrio Logan community of San Diego adjacent to the historic Chicano Park. The project directly catalyzed the construction of 92 rental residential units set aside for persons earning 60% or less of area median income and a Hispanic grocer the community has requested since the mid-1970s. The overall project won a First Place Neighborhood Planning Award from the San Diego American Planning Association. Upon stabilization it will have created 223 direct construction period jobs and 231 direct permanent jobs.
BCCCs investment provided senior and subordinated debt through the NMTC program.
Sandisol Hotel
Imperial Beach, California
BCCC NMTC Allocation: $10 million
Product Type: Hospitality
NMTC Investor: Wells Fargo Bank
Developer: Pacifica Companies
Description
Sandisol Hotel consists of new construction of 78 rooms and includes meeting and retail space. Construction is scheduled to finish September, 2012.
The hotel’s theme is eco-tourism and in line with that theme is LEED certification. The Hotel was strongly supported by the City of Imperial Beach as evidenced by its $6.9 million redevelopment grant. A goal of the hotel is to spur redevelopment and the hotel will form the centerpiece of the beach district. Upon stabilization it will have created 342 construction period jobs and 71 permanent jobs.
BCCCs investment provided senior and subordinated debt through the NMTC program.
Liberty Station Shopping Center
San Diego, California
BCCC NMTC Allocation: $30 million
Product Type: Commercial and Retail
NMTC Investor: Bank of America
Developer: McMillin Commercial
Description
Liberty Station Shopping Center consists of new construction of 128,800 square feet of retail space and 30,200 square feet of office space. Construction was completed October, 2007.
The project was among the initial phases of the redevelopment of the historic San Diego Naval Training Center. It created 250 construction period jobs and 330 permanent jobs.
BCCCs investment provided direct equity, senior and subordinated debt through the NMTC program.
Contacts
Jerry Hannon
Border Communities Capital Company, LLC
Email: jhannon@chelseainvestco.com
Company: http://www.chelseainvestco.com/affiliated_companies/bccc.html
James Schmid
Border Communities Capital Company, LLC
Email: jschmid@chelseainvestco.com
Company: http://www.chelseainvestco.com/affiliated_companies/bccc.html