Community & Economic Development for Rural Communities
There are many federal, state, local, nonprofit and for-profit community and economic development subsidies, which target rural communities.
We represent manufacturers, healthcare providers, educational institutions, renewable energy providers, recycling providers, multifamily developers, and nonprofits.
Community Reinvestment Associates, LLC is a national boutique financial consulting firm specializing in bridging financial gaps by identifying and securing community and economic development subsidies, as well as traditional debt and equity.
We have facilitated over $4.2 billion of community and economic development financings, including those involving new markets tax credits; historic tax credits and preservation easements; low-income housing tax credits; opportunity zone financing; USDA Programs; and CDFI Programs. Additionally, we have extensive experience in applying for and obtaining tax increment financing, taxable bonds, tax-exempt bonds, and various federal, state and local subsidies, as well as facilitating private-public partnerships, including securing traditional debt, equity, and donations. All of these sources of financing are collectively known as the “capital stack.”
Tax credit finance consists of selling or transferring tax credits to investors which provides significant cash and/or forgivable loans to qualified borrowers and projects. This process is referred to as “tax credit syndication.” Often these transactions involve leveraging other sources of financing which provide a significant multiplier effect in monetizing these credits as well as other pieces of the capital stack.
We have several years of experience in financial, legal and accounting matters as well as substantial experience in community and economic development. This experience provides us with the ability to underwrite financings for the each of the community and economic development programs; identify sources of the capital stack; secure the capital stack; and efficiently and effectively structure and close these complex financings.
With respect to federal, we assist our clients with respect to, for example:
- applying for financing under the federal new markets tax credit program (the “NMTC Program”);
- applying to the United States Agriculture Department (the “USDA”), including subsidies provided by 8 of its major Business Programs and 5 of its major Community Facilities Programs (as well as representing borrowers applying to applicants that have received such subsidies to lend or otherwise provide to borrowers); and
- applying to the Community Development Financial Institutions Fund (the “CDFI Fund”), including 5 of its major community development programs (of which the NMTC Program is a part) (as well as representing borrowers applying to applicants that have received such subsidies to lend or otherwise provide to borrowers).
The NMTC Program
Rural borrower or nonprofit operations and projects that a good candidates for the NMTC Program include those involving manufacturing, health care, grocery, education, qualified mixed-use, community-based services, renewable energy and recycling.
The major economic and non-economic benefits of NMTC financing are discussed in more detail after the following 3 paragraphs.
NMTC financing can generate a forgivable loan (a “Forgiven NMTC Loan”) equal to approximately $1,650,000 if the total borrower financing needs are at least $5,000,000. The Forgiven NMTC Loan can be higher but needs to be no more than 33% of the NMTC financing, which can be a sub-part of the overall financing. Thus, if (a) the overall financing is $10,000,000, and (b) there is a gap of $1,650,000 in the overall financing, then although the gap in financing is 16.5% of the overall financing, it is still 33% of the NMTC financing.
The remaining 67% of the NMTC financing is provided from the borrower’s other sources of financing (i.e., from the other $8,350,000 available from other sources of financing), the proceeds of which run through the IRS Approved Leverage Structure in order to generate the Forgiven NMTC Loan. The source of the proceeds of the Forgiven NMTC Loan is the effective purchase price paid by the NMTC investor which is also run through the IRS Approved Leverage Structure.
Otherwise, the borrower can still obtain NMTC financing in the form of a non-forgivable loan (a “Non-Forgiven NMTC Loan”), which is not forgiven but has below-market interest rates and low debt service payments through a maturity date of up to 40 years. It also does not have a percentage limitation. The Non-Forgiven NMTC Loan is generally between $500,000 to $5,000,000.
Those located in rural communities are particularly targeted for NMTC financing because of the critical substantial community impacts that they provide.