WASHINGTON, DC—The US Department of the Treasury yesterday announced it would distribute $3.5 billion of New Market Tax Credits to 85 Community Development Entities throughout the US, in its tenth round of allocations. To date, the Community Development Financial Institutions Fund has made 749 allocation awards totaling $36.5 billion in tax credit authority, including $3 billion in Recovery Act awards and $1 billion that was specifically set aside for recovery and redevelopment in the wake of Hurricane Katrina.

As GlobeSt.com reported this morning, Treasury assistant secretary for financial institutions Cyrus Amir-Mokri, US Senator Charles E. Schumer (D-NY) and CDFI Fund director Donna J. Gambrell made the announcement. The Fund distributed the NMTCs to the CDEs, which are spread through 28 states and the District of Columbia. The CDEs will provide services in a wide range of local and state areas as well as on the national level.

According to Gambrell, more than 70% of NMTC investments have been made in communities that meet the highest distress criteria, above even the program's requirements. “That result effectively demonstrates how essential the program is to spurring economic development in underserved areas,” she commented.

HOW IT WORKS

The NMTC works much like the Low-Income Housing Tax Credit program. Through a competitive application process, the CDFI Fund allocates tax credit authority to CDEs, which act as financial intermediaries through which investors provide capital to a qualified business in a low-income community. Investors receive tax credits in exchange for equity in the CDE, which then uses that capital to make loans—often more flexible and with better terms than the market norm—and investments to businesses in distressed areas.

The NMTC program works to alleviate the stigma that may be attached to investing in distressed and low-income communities. Investors can claim a tax credit worth 39% of their original CDE equity stake, claimed over a seven-year period. Yet there's another potential benefit for investors, aside from the recognition for supporting community revitalization: entering new markets before they become popular, which increases their chances of success.

A PROVEN WINNER

The program has been quite successful, particularly with public-private partnerships; since its inception in December 2000, $31 billion worth of tax credits have helped to preserve and create nearly 360,000 jobs and establish community facilities and new businesses into the most distressed neighborhoods. By the bricks, it's supported the construction of 17.1 million square feet of manufacturing space, 49.4 million square feet of office and 42.7 million square feet of retail.

Its success spurred Congress to extend the NMTC program at the end of the year, and President Obama has proposed a permanent extension of the credit, with an annual budget of $5 billion, as part of his fiscal year 2014 budget.

BY THE NUMBERS

In the latest round, a pool of 282 applicants requested some $21.9 billion in NMTC investments. The fund was able to provide awards to just 30% of the total applicant pool, representing 16% of the total amount requested by applicants.

The predominant financing activity for all of the CDEs receiving funds is focused on either real estate or operating businesses. Of the 85 allocatees, the majority—41, or 48%—invest in a national service area. They received $1.9 billion in total credits. Fourteen of the allocatees (16%) focus on a multi-state service area. Fifteen (18%) will focus activities on a statewide service area and the same amount will focus on local markets.

It's anticipated that some $1.86 billion, or 54.3%, will be invested in major urban areas. Another $824 million (24%) will likely be invested in minor urban areas and the balance, $744 million (21.7%) in rural areas. Additionally, the CDFI Fund will require awardees to invest $691 million in nonmetropolitan counties.

Examined a different way, the bulk of the allocates—49, or 57.6%—are nonprofits or subsidiaries of nonprofits, receiving $1.79 billion. Another 26 (30.6%) are certified Community Development Financial Institutions or subsidiaries of certified CDFIs. They received allocations totaling $1.05 billion. Thirteen of those selected (15.3%) are government-controlled entities or subsidiaries of such entities, receiving $420 million in all. And eight (9.4%) are minority-owned or controlled entities, with allocations totaling $285 million.

In all, 53 of the allocatees (62.4%) are CDFIs, non-profit organizations, government-controlled entities, minority-owned or controlled entities or subsidiaries of such organizations. They received allocations totaling $2.020 billion. Twelve (14.1%) are non-CDFI banks or bank holding companies, publicly traded institutions or subsidiaries of them. Their share was $575 million. Eight of the entities receiving NMTCs, or 9.4% of the total pool, are real estate development companies or their subsidiaries. They received $260 million in allocations.

THE MAJOR RECIPIENTS

At the end of the day, the 85 allocations ranged in size from $15 million to $80 million, with the median at $40 million. Among those receiving the largest allocations were CEI Capital Management LLC of Portland, ME and the Clearinghouse CDFI of Lake Forest, CA, with $80 million in credits each. New Orleans' Advantage Capital Community Development Fund and Los Angeles' National New Markets Fund LLC each received $75 million.

The third largest sum, $70 million, was awarded to three organizations: Chase New Markets Corp. of New York City, Denver-based Greenline Community Development Fund LLC and Rural Development Partners LLC of Mason City, IA. All of these entities except for the Clearinghouse CDFI—which serves multiple states—focus on a national service area.

For the full list of NMTC Program allocates, download this year's award book.

To obtain information about individual awardees, click here.