New Market Tax Credits in Georgia - A New Partnership for
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A New Partnership for
New Market Tax Credits in Georgia
1
BACKGROUND / HISTORY OF CSRA
• CSRA Business Lending is a 501(c)3 founded in 1979 that has funded 835
projects totaling more than $723 million dollars using SBA-504 and Direct
Loan programs in Georgia and portions of South Carolina.
• Our loans on those projects have totaled $287.5 million dollars and created
or retained over 8,000 jobs.
• We are a Certified Development Company of SBA, an Accredited Lender of
SBA, a Department of Commerce EDA Revolving Loan Fund Lender, and a
USDA Intermediary Lender.
• While our loan programs have allowed us to assist many, we have always
consciously felt we as a non-profit need to do more especially for low-
income, rural, and smaller metropolitan areas of the state.
2
CSRA Has a 30 Year Track Record of Funding Key Economic
Development Projects throughout the State. Some Examples:
The Georgia Theater – Athens. $4.4 million project in low income area. Provided funding after a fire
almost totally destroyed the iconic theater that is one of the centerpieces of downtown Athens.
Created 36 jobs.
Daniel Defense – Bryan County. $2.5 million project in low income rural area for one of the nations
top defense firms. Created 126 jobs.
Aalto Scientific – Eatonton. $9.9 million project in low income rural area for one of the countries top
producers of medical testing technology that calibrates tests for some of Americas top medical testing
labs. Moved 62 jobs to rural Georgia and created another 50.
Southern Veneer – Fitzgerald. $4.8 million in low income rural area for acquisition of a key finished
plywood production facility that was near insolvency during the great recession. Saved 132 jobs and
protected a buying point that purchases close to $1 million of logs monthly.
(In Process) Sweet Grass Dairy – Thomasville. $4.9 million project in low income rural area for
Georgia’s largest cheese producer that is now global in Harrod’s in London, the cheese counter in
Bath, and Whole Foods. Delta Airlines snack package is their cheese. Created 10 jobs.
(In Process) High Line Station / High Noon Brewery – Macon. $2.2 million project in low income
area for key revitalization project in the Plum Street area of Macon for a brewery and event space
venue. Created 24 jobs.
3
Why New Market Tax Credits? Why Now? • New Market Tax Credits are an economic development game changer providing forgivable interest only loans often for millions of dollars to fill a gap or provide an incentive for projects to occur in a qualified low income community (which in Georgia’s case are mostly in rural and smaller metro areas). • As we started to look at NMTC’s we discovered our colleagues in Iowa and Oklahoma that make SBA-504 loans like we do, have received over $700 million in New Market Tax Credit allocations for their states allowing them to do transformational economic development projects. • Georgia is one of the most underserved states for New Market Tax Credits and Georgia unlike many states has no CDE dedicated to focusing solely on its state making NMTC’s difficult to obtain.
NMTC’s in Georgia Compared to Iowa and Oklahoma STATE POPULATION # NMTC Projects Ratio Oklahoma 3,751,000 99 1 per 37.9K Iowa 3,046,000 49 1 per 62.2K Georgia 9,688,000 93 1 per 104.2K There are only 4 Georgia CDE’s that have received allocations: Sun Trust Community Development (Nationally)… $643MM (10 Allocations) Atlanta Emerging Markets (Atlanta Only)… $177MM (6 Allocations) Carver Financial (Nationally)… $80MM (2 Allocations) Habitat for Humanity (Nationally)… $30MM (1 Allocation) Three of the above received allocations in 2020: Sun Trust - $65MM; Carver $50MM; and, Habitat $30MM. $3.5B was awarded in 2020 and $5.0B will be awarded in 2021, with $7.0B possible in next COVID Relief Bill.
Georgia’s NMTC’s Since 2017
Have Been Predominately in Atlanta
Project NMTC/Project Community Dev. Entity
Ron Clark Academy - Atlanta $8,000,000/$23,000,000 Atlanta Emerging (AEM)
Boys and Girls Club - Augusta $10,000,000/$10,000,000 Carver State
Prince Avenue Market – Athens $17,150,000/$20,779,492 Ent. Partners/NDC
Quest Center for Change – Atlanta $10,500,000/$11,339,975 Atlanta Emerging (AEM)
Space to Soar – Atlanta $8,500,000/$8,733,750 Atlanta Emerging (AEM)
Chris 180 – Atlanta $13,000,000/$13,537,762 NFF/Primary Care Dev.
Atl. Neighborhood Dev. – Atlanta $5,000,000/$5,000,000 Housing Partnership Net.
Atl. Community Food Bank – Atlanta $46,000,000/$47,137,643 Kroger/PNC/Rural Dev.
ACE – Cleveland/Atlanta $30,000,000/$30,000,000 Carver State
Beadles & Balfour – Moultrie $11,800,000/$28,400,000 MuniStrategies
YMCA Atlanta – Atlanta $22,000,000/$24,534,789 AEM/MBS Urban/SunTrust
Special Olympics Georgia – Atlanta $7,300,000/$7,300,000 Ent. Partners
Pittsburgh Yards – Atlanta $6,500,000/$6,500,000 AEM/Brownfield Rev./ECF
Eligible Low Income NMTC Tracts - Georgia
7
Eligible Low Income NMTC Tracts – Iowa
8
MOU for Shared Services
Who/What is Iowa Business
Growth Company?
5409 NW 88th Street, Suite 100 • Johnston, IA 50131
• SBA Certified Development Company
PHONE 515.223.4511 • FAX 515.223.5017
EMAIL iabusgrowth@iowabusinessgrowth.com
IowaBusinessGrowth.com
– Established in 1981
– Only CDC that is a member of Iowa
Bankers Association
• Market, package and service SBA 504 program
• Staff of seven
– Office in Johnston
• Territory is the state of Iowa — and only Iowa
• Resource for Iowa Banks — SBA, Economic Development
Programs
• Market, structure and service New Markets Tax Credit projects
– $320 million in 6 allocations to date through Iowa Community
Development with 2020 pending
• Exclusive administrator of the Wellmark Small Business Loan
10Investor Fund Management Team -
• Novogradac & Company –
– Michael Kressig, CPA
• Michael Kressig is a partner in the St. Louis office of Novogradac & Company LLP, where he specializes in community
development and affordable housing, including new markets tax credit (NMTC), low-income housing tax credit (LIHTC)
and historic rehabilitation tax credit (HTC) transactions. He has more than 20 years of public accounting and business
advisory experience. His consulting expertise includes forecasts and projections, deal structuring and related services.
Mr. Kressig also works extensively with real estate partnership and compliance audits, advises clients on accounting,
tax and regulatory issues and is a frequent speaker at industry events. Before joining Novogradac & Company LLP, Mr.
Kressig was partner in charge of Sabino & Company's assurance services group and directed the firm's real estate
services practice group. Mr. Kressig also served as a senior manager with Deloitte LLP, where he specialized in
financial industry audits as well as merger and acquisition consulting and due diligence. Mr. Kressig received a
bachelor’s degree in business administration, majoring in accounting, from Rockhurst University. He is licensed in
Missouri as a certified public accountant.
• Twain Financial Partners –
• Twain offers a suite of services to help ease the administrative and financial burden of the NMTC program for both
Investors and CDEs. Our Client Services and Partner Reporting teams provide services for a wide range of customers,
from Fortune 500 companies to small CDEs.
• We currently provide the following services:
•Manage 793 Investment Funds (with QEIs in excess of $10 billion).
•Administer 250 CDEs, and provide CIIS reporting for 127 CDEs.
•Collect and process 3500 documents annually.
•Asset manage 65 NMTC investments. •Maintain 1159 bank accounts and process approximately 700 cash
transactions per month.
• Lathrop Gage –
– Jared M. Minkoff
• Jared Minkoff has extensive experience in all aspects of development and finance. He has a national practice
representing investors, community development entities, developers and lenders in transactions utilizing federal and
state new markets and historic tax credits. Jared has also represented clients in projects utilizing federal and state low
income housing tax credits, as well as conventional real estate development and finance, and commercial leasing.
11What is a New Market Tax Credit?
Click below to see a video our colleagues in Iowa have prepared that
we think provides a great overview of how New Market Tax Credits
work.
https://www.youtube.com/watch?v=1Xf_TNzqNDk
12Iowa Community Development’s
NMTC Projects Tell Their Story
Click below to see a short video on how our peers at Iowa Community
Development has used New Market Tax Credits in their state.
https://youtu.be/G9grvwI_9VU
13NMTC Program Overview – How They Work…
$10 million dollar NMTC allocation will produce a $3,900,000 or 39% Tax Credit
to a project ($10,000,000 * 39% = $3,900,000)
$3.9 million dollar tax credit converts to cash by being sold at a discount at 75¢ (+/-) on the
dollar to an investor to provide capital now to the project versus in the future
($3,900,000 * .75¢ = $2,925,000) (Investors Buy the Credits at a Discount and Save Money on Taxes)
The $2,925,000 is loaned in a low interest seven year forgivable loan from GCRF to the
business after our tax credit sale and forgiven through a predetermined put/call purchase option
to buy that Note back at the end of seven years for $1,000. The business then forgives their
debt creating essentially free equity to the project. It is a taxable event.
Transaction costs are expensive and typically can reach $400,000
($2,925,000 - $400,000 = $2,525,000)
Economic Benefit to the Business = $2,525,000
The remainder of the $10,000,000 investment comes from a leveraged loan from a bank loan or
other source of funding ($7,075,000 in this instance) that flows through GCRF to the company.
If it is a bank making that leveraged loan they set the terms and conditions and the collateral is
assigned back to them in the event of default. That term is seven (7) years.
The tax credit is then taken over the seven years with 5% ($500,000) being taken the first three
years and 6% ($600,000) being taken in years 4 through 7. The credits can be used over an
extended period beyond seven (7) years to benefit the investor in years of high earnings.
NEW MARKET TAX CREDITS TYPICALLY FILL TWO NEEDS – A GAP IN FINANCING THAT
IS NEEDED TO MOVE A PROJECT FORWARD OR AS AN INCENTIVE FOR ECONOMIC
DEVELOPERS TO WIN PROJECTS FOR THEIR STATES AND COMMUNITIES
14NMTC – Leveraged Loan Structure
Lender $7,075,000 loan
(Sub CDE) $2,925,000 Equity @.75 NMTC
GCRF Investor
Fund 1, LLC NMTC $3,900,000
$10,000,000
QEI
2% upfront fee
$200,000
3rd parties
CDE (GCRF, Inc.)
$7,075,000 $2,725,000
$150,000
Loan A
Transaction costs Loan B
$100,000 fee paid
(to get deal annually (included
closed) in loan interest)
Business
15Recapture Potential:
• Failure to continuously invest or reinvest substantially all (85%
in years 1-6, 75% in year 7) of a QEI in qualified low income
community investments (QLICIs) during the 7 year NMTC
compliance period. Note this concern may also be triggered
by a borrower failing to constitute a qualified active low
income community business (QALICB), or if a borrower’s
tenant engages in one or more prohibited business activities.
• Failure for the CDE to maintain its eligibility status.
• NOTE THERE HAS NEVER BEEN A RECAPTURE EVENT
IN THE HISTORY OF THE NMTC PROGRAM.
16Iowa Project Example – NMTC Used as Incentive
IBM Dubuque, IA “Project
Roshek Building (IBM), Dubuque, IABig Blue”
Office Building – renovation of 180,000 square foot historical building
Project size: $45.5 million
2008 ICD NMTC Allocation used: $10 million
Investor: US Bank
Project Construction
Direct Jobs 1300 190
Planned annual payroll: $58.5 millionRoshek Building (IBM), Dubuque, IA
Office Building – renovation of 180,000 square foot historical building
Project size: $45.5 million
2008 ICD NMTC Allocation used: $10 million (Obtained $20 million
additional for a total of $30 million creating over $6,000,000
million for the project.
Investor: US Bank
Project Construction
Direct Jobs 1300 190
Planned annual payroll: $58.5 millionICD Project Example – NMTC Used as Gap to Move Project Forward
Frank Loyd Wright Hotel Restoration – Mason City, IA
19Wright on the Park, Mason City
Renovation of former bank building and hotel designed by Frank Lloyd
Wright. Will be used as a boutique hotel, restaurant, and conference
center.
Project size: $18.9 million
2008 ICD NMTC Allocation used: $10 million
Investor: US Bank
Project Construction
Direct Jobs 11 25
$1.47 million of the benefit will go to a Mason City Foundation for
support of future low income Mason City area benefit.
20Our Ask: Application Help
• Letters of interest from investors (banks) that they would be interested in
investing in a project that meets NMTC eligibility guidelines and subject to
GCRF and their banks underwriting. It demonstrates to Treasury/CDFI there is
a base of support for the program in the state amongst the financial institutions.
• Verification of a project pipeline. GCRF will need to identify a project
pipeline to Treasury/CDFI with the assistance of economic developers. Once
again its not committing to fund those projects. It is saying if we had the credits
today here are current projects that we could potentially use the tax credits on.
It demonstrates to Treasury/CDFI that there is a base of support among the
economic development agencies. The projects can be public, private, for-profit,
non-profit, there is a wide eligibility. Can be in tentative planning stages or even
under construction.
• We plan on asking for $100 million in credits in hopes we would get $30-$70
million. We will need $200 million in letters of interest and a pipeline of $200
million in projects.
This is the key ask of the banks and economic developers we are meeting with.
21Bank Letter of Interest Needed
Mr. Randy Griffin, President
Georgia Community Reinvestment Fund, Inc.
3626 Walton Way Extension, Suite 300
Augusta, Georgia 30909
Dear Mr. Griffin:
Please accept this letter as support for the Georgia Community Reinvestment Fund (GCRF) application to the US Dept. of Treasury New
Market Tax Credit (NMTC) program. _________ Bank, (City), (State) is dedicated to helping Georgia businesses grow and invest in our
state. We have reviewed GCRF’s proposed NMTC program and concur that there is no other financing tool like this available in the
marketplace. As such, we recognize the potential for success of this unique and flexible financing tool that would offer below market rate
interest loans and equity capital to qualifying businesses expanding and investing in qualifying low income census tracts throughout
Georgia.
Therefore, _________ Bank has interest in an investment of $____________ in GCRF which would be exchanged for New Market Tax
Credits. It is our understanding that such an investment would qualify as a Qualified Equity Investment under the terms of the New Market
Tax Credit Program and that GCRF will use the funds to implement the proposed program of making business incentive loans to qualifying
businesses throughout Georgia.
We are submitting this letter of interest with the understanding that businesses applying for funding under GCRF’s proposed NMTC
program would have to meet tests of location, community and economic impact as well as the underwriting standards and due diligence of
both GCRF and our bank.
22Pipeline Identification of Projects Example Needed
from Both Banks and Economic Developers
Project #1 – Georgia Community Reinvestment Fund
Project Glove - a 150,000 sq/ft medical/surgical glove manufacturing facility. The project would create 74
jobs with an average wage of $55,000/yr. The company has multiple patents and trademarks for value
added hand health gloves, that are innovative and class leading in the sector. They are seeking to be the
first manufacturer of medical gloves in the US, which will provide them with a competitive advantage over
other companies with federal and state governments through the Buy America Act.
Location City - _____________
Location State - GA
Address or Proposed Location - ____________________
Estimated Total Project Cost - $_________________
Anticipated Sources of Funding (Bank Loans, Other Loans, Historic or Other Tax Credits, Equity) -
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
Note: The projects can be public, private, for-profit, non-profit, there is a wide
eligibility. Can be in tentative planning stages or even under construction.
23THANK YOU!
Randy Griffin – GCRF – 706-210-2010 (rgriffin@csrardc.org)
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