by Thomas P. Healy
An award of $55 million in New Market Tax Credit (NMTC) by the U.S. Department of the Treasury to the City of Indianapolis could spur up to $150 million in new development in distressed neighborhoods, according to City officials.
Mayor Joe Hogsett announced the award January 23 at the Ivy Tech Culinary School and Conference Center, in Midtown. “This is a great day for the City of Indianapolis,” he said.
As proof of the program’s efficacy in jump-starting economic development projects, he cited the redevelopment of the Center, which benefited from $6 million in NMTC financing in 2012. The Avondale Meadows YMCA was a beneficiary of the program the last time around.
“The true impact of New Market Tax Credit is not in a building or place but in the lives that are changed as a result,” Mayor Hogsett said.
Congress established the NMTC program in 2000 to attract private capital for development and job creation into areas identified as Qualified Census Tracts. The U.S. Department of Housing and Urban Development defines such areas those where at least 50 percent of households have incomes below 60 percent of the Area Median Gross Income (AMGI), or where the poverty rate is 25 percent or more. Individual and corporate investors such as banks, institutions, retirement funds, or other entities can make equity investments in financial intermediaries called Community Development Entities in order to offset tax liabilities with the credit. By providing equity for qualified projects these investors can receive a nonrefundable credit against federal income taxes of 39 percent of the cost of their investment. The tax credit is claimed over a seven-year period. [NMTC fact sheet PDF]
Jeff Bennett, the City’s deputy mayor for community development, said in his remarks at the press conference that the program provides equity for projects that will increase jobs, increase access to high-quality education, and provide enhanced cultural and economic opportunities for city residents.
Indianapolis was one of 120 recipients that were awarded a total of $17.6 billion in NMTC out of a pool of 238 applications. “It’s highly competitive,” Bennett said.
Bennett added that the Department of Metropolitan Development (DMD) economic incentives team will solicit qualified proposals for projects from around the city. “City staff and our community advisory committee will be looking for projects that generate the greatest impact for our neighborhoods,” Bennett said. Projects in the city’s Promise Zones and shovel-ready projects in the pipeline in qualified areas will be reviewed for funding recommendations. “We’ll be making those decisions over the next couple of months,” Bennett said, adding that the approval path requires support from the Metropolitan Development Commission.
A dozen projects have already expressed interest, he said. “The process of allocation is easily as crowded as the process of application. It’s generally oversubscribed.” Bennett said the City will be looking for projects with the highest impact on neighborhoods, offering the most transformation that can be brought to a qualified census tract. “That will be part of our metrics,” he said.
According to George Courtney, the DMD senior project manager responsible for assembling the City’s successful NMTC application, the fact that a Midtown project has previously received assistance doesn’t disqualify another proposal in the district from winning. “The idea is to help turn neighborhoods around with these kinds of investments,” he said.
This was welcome news to Midtown Indianapolis, Inc., executive director Michael McKillip, convener of the Maple Crossing Great Places initiative, which is located within a qualified census tract.
“New Market Tax Credits are exactly the type of resource we’ve been looking for as we work to attract investment in Maple Crossing and address the food desert at 38th and Illinois,” he said. “I’m glad that Mayor Hogsett is making good on his campaign promise to create resources to solve development challenges in neighborhoods.”