[Congressional Record Volume 152, Number 14 (Wednesday, February 8, 2006)]
[Senate]
[Pages S855-S857]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         NEW MARKETS TAX CREDIT

  Ms. SNOWE. Mr. President, I rise today to bring to my colleagues' 
attention a significant and exciting article that appeared in the 
Wednesday, January 25, 2006, edition of The New York Times entitled 
``Luring Business Developers Into Low-Income Areas,'' as written by Ms. 
Lisa Chamberlain.
  I believe my colleagues will be especially interested in this article 
because it explains how the new markets tax credit, NMTC, can create 
new jobs, and economic development, in the destitute rural and urban 
areas. I know that sincere Members of Congress, both Republicans and 
Democrats alike, recognize the credit's ability to transform 
communities and break the poverty cycle. From the beginning, the 
credit's power to help communities overcome poverty has garnered strong 
bipartisan support for the measure.
  The new markets tax credit is unique among Federal antipoverty 
initiatives. Its innovative approach uses the Tax Code to encourage 
long-term capital investments in downtrodden communities identified by 
the census as historically plagued by high unemployment, low levels of 
private investment, and stifling poverty rates.
  The credit provides a modest incentive--a 39-percent credit against 
Federal taxes over a 7-year period--to lure new private investments to 
struggling communities. For this credit, developers agree to invest in 
projects that benefit the community and undertake measures, like 
charging lower rents, to encourage these projects' success.
  Over the next 10 years, private investors will dedicate over $15 
billion in new money to poor urban and rural areas in order to 
revitalize, develop, and ultimately transform these impoverished, low-
income communities. The program's rate of return, as measured by 
increased economic development and lower poverty rates, easily 
justifies its modest costs to the Treasury of $4.5 billion over 10 
years.
  The credit's greatest innovation is its ability to create 
partnerships between the public and private sector that encourage and 
cultivate investments within a diverse range of businesses and 
organizations. These investments propel growth by providing funding for 
small business startups, enable the expansion of manufacturing 
facilities, and the building of retail, mixed use, commercial and 
housing developments. The investments also provide communities with 
important services by creating childcare centers, employment training 
facilities, charter schools, and community health care centers.
  I have seen the credit's ability to reenergize and save local 
economies in my home State of Maine. During the 1990s, Maine's Katahdin 
Forest region fell on hard times. One of the areas largest employers, 
the Great Northern Paper Company, struggled against depressed global 
paper prices and low financial returns associated with owning trees. 
Combined, these factors made it extremely difficult to raise the 
capital necessary to make the mill improvements needed to keep the 
company competitive and retain jobs.
  Because of a $31.5 million NMTC investment made by Coastal 
Enterprises, a community development corporation based in Wiscasset, 
ME, two of Great Northern Paper Company's pulp and paper mills in the 
Katahdin Forest area were able to stay in business and modernize. This 
crucial investment resulted in the direct employment of 650 people.
  The credit also made it possible for Coastal Enterprises to partner 
with The Nature Conservancy in a ground breaking arrangement to promote 
the twin goals of environmental protection and economic development. 
The credit enabled the Nature Conservancy to purchase 41,000 acres, of 
Great Northern Paper Company's 341,000-acre land base, that contain 
critical lake and stream watershed lands. As part of this deal, Great 
Northern Paper Company agreed to place a perpetual conservation 
easement on 200,000 of the remaining 300,000 acres they retained. These 
projects will benefit Maine's environment, and economy, for years to 
come.
  These Maine examples represent a few of the innovative and 
revolutionary ways the new markets tax credit is being used nationwide 
to address local economic troubles. These projects ranges from smaller 
loans to help local business owners become more self-sufficient by 
purchasing their office space to larger ventures like developing a new 
aircraft repair facility.
  Additionally, projects also work to address community deficiencies 
like the building of a much needed shopping center to transform a 
rundown, major transit stop. Such investments enable companies located 
in low-income communities to add jobs, provide more people with needed 
goods and services, and increase the strength of their local tax base 
and economies.
  Competition among applicants for access to the new markets tax credit 
program is spurring the private sector to reach beyond the minimum 
requirements of the law in order to secure a tax credit allotment. 
According to the results of a May 2005 survey conducted by the New 
Markets Tax Credit Coalition, investors are targeting communities to 
develop projects with higher poverty and unemployment rates than the 
law requires. These private investors are also directing capital into 
low income areas faster rate than required by law.
  The credit enables the public and private sectors to work together in 
a way that is truly transforming the Nation's most impoverished 
communities. Through these partnerships, investors are now deploying 
their capital in areas where before they never would have invested 
because the great risks kept flexible capital from being conventionally 
available in these depressed areas.
  The credit is seen as one of the most hopeful ways to address the 
devastating effects of Hurricane Katrina and Rita on the Gulf States. 
We in Congress overwhelmingly recognized and supported the power of the 
credit by dedicating $1 billion dollars in additional funding to 
projects along the gulf coast financed by the NMTC. Many broken Gulf 
State communities desperately wait for the rebuilding, and renovation, 
projects the credit will provide.
  As a bipartisan effort to continue the credit's great successes, I am 
pleased to join my colleague on the Senate Finance Committee, Senator 
Rockefeller, in sponsoring S. 1800, the New Markets Tax Credit 
Reauthorization Act. A companion bill, H.R. 3987, has been introduced 
in the House of Representatives by Congressman Ron Lewis of Kentucky.
  Our legislation extends the new markets tax credit through 2012. 
Under current law, the credit, which was enacted in December 2000 as 
part of the Community Renewal Tax Relief Act, will expire on December 
31, 2007. I ask my colleagues to enthusiastically support this 
innovative and necessary legislation.
  In addition to our legislation, the Senate version of the tax 
reconciliation measure, S. 2020, includes a 1-year extension of the new 
markets tax credit through 2008. I know that my respected colleagues, 
both Republicans and Democrats, support the extension of this important 
bipartisan provision because of its impressive results fighting 
entrenched poverty and unemployment. I urge my colleagues to strongly 
support keeping this provision in the final version of the tax bill.
  The new markets tax credit is able to improve the physical 
infrastructure of low-income communities as well as the lives of its 
residents by harnessing the combined talents of the public and private 
sectors to create jobs, foster entrepreneurialism, construct 
facilities, conserve the environment, and even promote greater access 
to health

[[Page S856]]

care and education. I hope my colleagues will join me assuring that the 
new markets tax credit program remains strong for the future.
  I ask unanimous consent that Ms. Chamberlain's entire article be 
printed in the Record. I ask unanimous consent that this letter, 
showing the support of over 240 representatives of community 
development corporations and financial institutions for S. 1800, be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                [From The New York Times, Jan. 25, 2006]

            Luring Business Developers Into Low-Income Areas

                         (By Lisa Chamberlain)

       When the low-income housing tax credit was created in 1986, 
     it took years for developers, investors and advocates to 
     understand the program and to learn how to make the most use 
     of it. Now it is one of the most important tools for low-
     income residential real estate, responsible for creating 
     approximately 1.5 million units of affordable housing to 
     date.
       Advocates of a little-known development tool called new-
     market tax credits, the only federal tax credit program for 
     commercial projects in low-income areas, believe the same 
     thing is beginning to happen with commercial real estate. 
     Efforts are already under way to reauthorize the program, 
     which expires next year.
       Enacted in December 2000, the new-market tax credit program 
     is helping to create jobs and revitalize streets and even 
     entire downtowns. Projects large and small that most 
     financial specialists agree would never come to fruition 
     otherwise are taking shape because of tax credits worth 
     $500,000 to $150 million and even more.
       For instance, the tax credits are currently financing the 
     rebuilding of a butter manufacturing cooperative in New Ulm, 
     MN, that was damaged in a fire. The loss of the cooperative 
     put 130 people out of work, caused economic hardship for 400 
     family farms and indirectly affected hundreds more jobs in 
     the low-income rural area.
       Just south of the central business district in Grand 
     Rapids, MI, is a nearly completed arts-related mixed-use 
     redevelopment project in an area largely abandoned since the 
     1950's. Called Martineau Division-Oakes, the 12,000-square-
     foot commercial space is occupied by the art department of 
     Calvin College and a cafe. There are also 23 spaces for 
     artists to live and work in. Once the project got off the 
     ground, the city committed $2 million to landscaping, 
     repaving, new lighting, signage and sidewalk improvements in 
     the development's neighborhood.
       ``It's a very flexible and powerful program,'' said Robert 
     Poznanski, president of the New Markets Support Company, one 
     of the main recipients of credits from the Treasury 
     Department, which administers the program.
       ``It's driven by market forces. The federal government 
     doesn't say, `Use it for this type of business.' It can be 
     used for commercial real estate, a charter school or a 
     community center, as long as the application is competitive 
     and the project is in a low-income area as identified by 
     census tract data.''
       Tax credits make riskier projects more viable by reducing 
     the debt associated with development costs. Private investors 
     pay less in taxes and the developer passes the savings on to 
     the community by, for example, lowering rent per square foot.
       The federal program will allocate up to $15 billion in tax 
     credits to community development groups over seven years to 
     make businesses or commercial real estate projects in low-
     income areas more attractive to private investors. Applicants 
     vie for the credits, and so far the process has been highly 
     competitive. In the first three rounds of allocation, 
     beginning in 2003, demand for the credits has outpaced supply 
     by 10 times, according to figures provided by the Treasury 
     Department. Though the tax credits can be used for business 
     development, the majority are used for commercial real estate 
     because of the way the program is structured.
       The most recent allocation was completed last fall, 
     bringing the total disbursement to $8 billion to date. 
     Recipients have five years to use the tax credits to attract 
     private investment, or they are withdrawn and can be reissued 
     elsewhere through 2014.
       Dennis Sturtevant, president of Dwelling Place, a nonprofit 
     community development organization, spearheaded the Martineau 
     Division-Oakes project in Grand Rapids. The project used 
     historic tax credits and other grants, in addition to new-
     market tax credits, to generate $2.2 million in equity from 
     National City Bank.
       ``When you're talking about tough neighborhoods and all the 
     costs associated with renovating dilapidated, obsolete 
     buildings with lead and everything else,'' Mr. Sturtevant 
     said, ``you need to combine all these resources to make it 
     work.''
       Sean P. Welsh, regional president of National City Bank, 
     said: ``It required a lot of creativity. It's complicated, 
     but it's really driving a lot of the urban redevelopment in 
     this and other areas around the country.''
       One deal that most everyone agrees would have never 
     happened were it not for the tax credits is Plaza Verde in 
     South Minneapolis. Formerly an abandoned building in a low-
     income Hispanic neighborhood, it is now a 43,000-square-foot 
     business incubator, with locally owned retailing on the 
     ground floor, office space on the second level and a theater 
     company on the top floor.
       JoAnna Hicks is the director of real estate for the 
     Neighborhood Development Center, the nonprofit organization 
     that spearheaded Plaza Verde. Even after expenses were 
     deducted, including legal fees, new-market tax credits 
     created almost $1 million in equity for a project that cost 
     $4.2 million total.
       ``Because it's such a complicated financial tool, it's hard 
     for small nonprofits to use,'' Ms. Hicks said. ``But now that 
     we understand it better, we're able to apply it to other 
     projects as well.''
       Using another allocation of the tax credits, Ms. Hicks's 
     organization has also undertaken the development of a nearly 
     completed public market, called Midtown Global Market, a $17 
     million project that will be home to more than 60 vendors 
     selling fresh and prepared foods, as well as handmade arts 
     and crafts.
       As the program has only begun to mature, larger projects 
     are just getting under way. Bridgeport, CT, is undertaking a 
     major redevelopment of its downtown, with approximately 25 
     percent of the financing coming from new-market tax credits. 
     The total project is estimated to cost up to $150 million.
       ``If structured properly, it makes a real difference 
     between a scary development and the deal not being done at 
     all,'' said Kevin Gremse, director of the National 
     Development Council, which provides financial advice and 
     services to municipalities.
       Mr. Gremse used his organization's new-market tax credit 
     allocation to attract a New York City-based private 
     developer, Eric Anderson of Urban Green Builders, to take on 
     the task of reviving downtown Bridgeport, which has suffered 
     years of decline.
       Advocates are cautiously optimistic that the program will 
     be reauthorized in 2007. Congress recently passed a bill to 
     assist Gulf Coast states with rebuilding efforts after 
     Hurricanes Rita and Katrina, which included $1 billion more 
     for the new-market tax credit program geared toward that 
     region.
       ``The fact that Congress expanded the program is a good 
     sign,'' said Robert Rapoza, who manages the New Market Tax 
     Credit Coalition, an advocacy organization pushing for the 
     program's reauthorization. ``But we have work to do. This is 
     a new tool and government-sponsored finance is relatively 
     uncommon. We're continuing to put together data to strengthen 
     our case.''
       Of course, it helps to have banks advocating for the tax 
     credit as well. As one of the more active players in the tax 
     credit industry, Zachary Boyers, a senior vice president of 
     U.S. Bank in St. Louis, closed more than 50 deals involving 
     new-market tax credits in 2005 alone.
       ``The banking community is behind this,'' Mr. Boyers said. 
     ``We are deeply involved in spreading the word. We are 
     working on ways to quantify its impact, which is not easy to 
     do. But other investors, including banks and large 
     corporations, would confirm that they would never be 
     investing in these projects without it.''
                                  ____


                    New Markets Tax Credit Coalition

       Dear Senator/Representative: We are writing to you to 
     indicate our support for the New Markets Tax Credit 
     Reauthorization Act of 2005 (S. 1800 and H.R. 3957). This 
     legislation extends the New Markets Tax Credit through 2012.
       The New Markets Tax Credit was established in the Community 
     Renewal Tax Relief Act of 2000. The purpose of the Credit is 
     to increase private sector investment in low income 
     communities by providing a modest federal tax incentive. 
     There is ample evidence that the Credit is working to do just 
     that.
       Thus far, the Department of the Treasury has finalized 
     allocations of $6 billion in Credits. After only two years, 
     close to $3 billion in investments in low income communities 
     have been made. These investments have resulted in the 
     financing of projects in economically distressed urban and 
     rural communities including:
       Creation of the first new supermarket and shopping center 
     in a low-income community in 30 years in Cleveland;
       In Baltimore, economic revitalization and thousands of jobs 
     in an urban community where past efforts foundered;
       Development of a new facility for daycare and other 
     community services that shows the potential to lead the way 
     for other development in Chicago;
       Business expansion, job creation and opportunity in rural 
     Oklahoma;
       Revitalization of the timber industry in northern Maine.
       The New Markets Tax Credit has attracted a wide range of 
     private sector investors including private financial 
     institutions and insurance companies. A list of investors in 
     New Markets Tax Credits includes Bank of America, Wachovia, 
     GE Commercial and Industrial Finance, NationalCity Bank of 
     Ohio, Spirit Bank of Bristow, Oklahoma and TD Banknorth in 
     Maine.
       The Credit has had an important impact on the lending 
     practices of these institutions. For example, since gaining 
     access to New Markets Tax Credits, GMAC Commercial Holding 
     has increased its direct investments in low-income 
     communities by more than 20%.
       For these reasons, we support reauthorization of the New 
     Markets Tax Credit. We urge your support for this important 
     program.
           Sincerely,
                                      (Signed by 225 Signatories).

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