NMTCs Bring New Fuel for Growth to Low-Income Urban and Rural Areas

Rodgers Wade Manufacturing of Paris, Texas (whose replica Eiffel Tower is pictured here), is one of hundreds of manufacturers whose expansions have benefited from NMTC financing.

Photo: Getty Images

Last week $5 billion in New Markets Tax Credits awarded to 104 Community Development Entities (CDEs) were announced by the U.S. Department of the Treasury’s Community Development Financial Institutions Fund. It was the 20th round of funds in a program created by Congress in December 2000 to spur investment in low-income urban and rural communities.

Since the inception of the NMTC Program, the CDFI Fund has made 1,667 awards totaling $81 billion in tax allocation authority (including $3 billion in Recovery Act Awards and $1 billion of special allocation authority used for the recovery and redevelopment of the Gulf Opportunity Zone).

How does this latest round of credit awards break down geographically?

Sorting the 104 new awards by CDE location produces the top states and cities by number of awards, listed below.

But the sorting comes with a caveat: Most recipients have a statewide, multistate or national service territory. Amounts range from $15 million awarded to two CDEs to $65 million awarded to 13 CDEs (including two each in Phoenix and Denver), all of them with a statewide, multistate or national scope.

In fact, when sorted by total funding, 14 CDEs are listed before encountering the first locally focused entity, San Francisco Community Investment Fund, which was awarded $60 million in NMTCs. Others include PIDC Community Capital in Philadelphia; Phoenix Community Development and Investment Corporation; Genesis LA CDE in Los Angeles; and Chicago Development Fund, all of which were awarded $50 million or more.

“The award recipients [chosen from 196 applicants requesting $14.7 billion in tax credit allocation authority] are headquartered in 35 different states, Puerto Rico and the District of Columbia,” said the Treasury announcement. “Over 20% of the investments will be made in rural communities. It is estimated that these award recipients will make nearly $1.2 billion in New Markets Tax Credit investments in non-metropolitan counties.”

One of the 13 recipients awarded $65 million in NMTCs is Rural Development Fund, based in Forest City, Iowa, which has received 13 NMTC awards (and now five in a row) totaling $816.7 million since the company’s inception in 2004. In a release last week, RDP said it has financed 50 projects to date, “spurring economic growth, food access and quality accessible jobs in underserved rural communities nationwide.”

Among the projects it’s assisted this year was $15 million in NMTC financing for the expansion of the Food Bank of the Rockies distribution center in Aurora, Colorado, supporting nearly 180 jobs. “Anticipated increase of food distribution is 1.7 million pounds in 2021 to 5 million pounds in 2028,” RDF said in a June release, “with pantry sites established at 20 additional schools in underserved rural areas with potential to engage 100+ new rural partners by 2028.”

“The program is up for renewal next year with the potential of permanency,” said Dan Helgeson, CEO of Rural Development Partners, last week. “We encourage those who feel so inclined to urge their state legislators to support this vital program for revitalizing the under-served areas of the country.”

A $60 million award went to Lansing, Michigan-based Cinnaire, a multi-state organization whose recent projects include an $8.5 million NMTC investment to support the expansion of The Field School, a pre-K-8 private, nonprofit Christian school serving Chicago’s Austin neighborhood on the city’s West Side. “The Field School’s expansion is a testament to the power of community investment and the importance of accessible, high-quality education,” said Peter Giles, Cinnaire senior vice president of public funding. “We are proud to support this transformative project that will provide a state-of-the-art learning environment for students in one of Chicago’s most underserved neighborhoods.”

As analyzed in this space last year, the previous round of NMTC funding saw the same amount of tax credits ($5 billion) going to 102 CDEs, led by largely the same states and cities.

“Historically, NMTC Program awards have generated $8 of private investment for every $1 invested by the federal government,” the Treasury release stated. “Through the end of fiscal year 2023, NMTC Program award recipients deployed more than $63.6 billion in investments in low-income communities and businesses; with impacts such as the creation or retention of more than 894,000 jobs, and the construction or rehabilitation of nearly 259.5 million square feet of commercial real estate.”

A week before the new round of NMTC awards, the Treasury’s CDFI Fund announced a separate $40.1 million in awards to 171 FDIC-insured banks through the fiscal year (FY) 2024 round of the Bank Enterprise Award Program, for increasing investments to communities experiencing severe economic distress across the nation. The banks are located in 23 states and the District of Columbia. The CDFI Fund received 176 applications requesting more than $101 million in grants, which is over 2.5 times the amount available.

CDFI Fund Director Pravina Raghavan said the banks receiving awards “are providing essential loans and investments that other financial institutions are unwilling to offer. Notably, in this round, 126 banks provided $485.3 million in loans to 2,286 businesses in highly distressed areas while 102 banks made $43.2 million in loans and investments to 6,055 residents in these communities.”

Since its inception in 1994, the CDFI Fund has provided more than $7.4 billion through a variety of monetary award programs, $81 billion in tax credits through the New Markets Tax Credit Program and has guaranteed nearly $2.5 billion in bonds through the CDFI Bond Guarantee Program, the Treasury announcement stated, helping to build the capacity of more than 1,400 Certified CDFIs.

Manufacturing Gets NMTC Support

As past coverage in Site Selection has showcased, manufacturing is part of the picture too. A progress report released in June by the NMTC Coalition said among the 322 projects totaling $7.6 billion that received $4.5 billion in NMTC allocation (at a 10-year cost to the federal government of $1.17 billion), “NMTC financing supported 89 manufacturing and industrial businesses with direct loans and equity investments for working capital, new equipment, or new or renovated industrial space, including shared, light industrial space for multiple manufacturing businesses.”

In August, Maine-based CEI Capital Management LLC (CCML) announced it had closed $10 million in NMTC capacity for Global Polymer Industries, Inc. to complete a major footprint expansion and purchase new custom equipment to mold thermoplastics. The buildout will create approximately 205 new higher paying full-time jobs in the rural southeastern South Dakota town of Madison. Earlier this year, the firm closed $12 million in NMTC capacity to enable expansion by Rodgers Wade Manufacturing, a millwork and fixture company in Paris, Texas, that will provide working capital to sustain a 70% increase of the company’s workforce as the firm acquires assets and onboards former employees from a shuttered operation in a nearby community.

“In addition to purchasing assets, Rodgers Wade hired 30 of the shuttered plant’s former employees, boosting their payroll from 57 to 87 full time workers, with an additional 10 new hires projected,” said a CEI release in April. “The company provides significant relocation support for the employees making the 115 mile move to Paris, paying transportation and lodging for exploratory visits to the town, providing ‘day in the life’ experiences at the plant, giving a $2,000 relocation stipend and providing short-term housing at no cost to the employee.”

In addition to an average starting wage of $21.79 per hour, Rodgers Wade allocates $5,000 per employee annually for skills training and professional development with local providers and schools that may lead to a promotion or wage increase.

“This is a growing manufacturing company with a long history and exciting future. We not only work alongside Rodgers Wade employees, but we are also neighbors and classmates. The people we work with are part of the fabric of our community working together to better our local economy for today and for the future,” said John Hamer, Rodgers Wade President.

A comprehensive project database maintained by the NMTC Coalition allows searching by a number of parameters, including across the 699 manufacturing projects (many of them in food manufacturing) tracked so far by the organization. — Adam Bruns