We are seeing Foundations, Community Development Financial Institutions (CDFIs), and nonprofits responding to fill this market need. Kresge Foundation has released its program to enhance the capacity of FQHCs and the primary care system. IFF, an Illinois-based CDFI, announced a new initiative, Health Centers for Healthy Communities. What can we do in Ohio?

Finance Fund, in partnership with the Ohio Association of Community Health Centers, conducted a survey of the 37 FQHCs in Ohio. The survey queried organizations regarding their current need for new investment and the resulting increase in services these investments would generate.

88% planned some type of real estate investment
76% planned future equipment investment

Finance Fund invites you to join the conversation as we develop potential solutions to increase access to capital in Ohio’s low-income communities. Comment below or contact Finance Fund’s Director of Development, Valerie Heiby at vheiby@financefund.org or Special Project Consultant Mark Barbash at mbarbash@financefund.org for more information.

 “The Ohio New Markets Tax Credit program is one of the first of its kind in the country, and we are eager to see the new developments that come from this program,” Patt-McDaniel said.

The Ohio New Markets Tax Credit program leverages the successful Federal New Markets Tax Credit program to attract additional investments to Ohio. Entities that received a tax credit allocation from the Federal New Markets Tax Credit program were eligible to apply. Finance Fund will twin their state credits with their federal credits on qualified projects within Ohio’s low-income communities matching both state and federal parameters.

For more information on the Ohio New Markets Tax Credit program, the Federal New Markets Tax Credit program or potential projects, please contact Moniqua Spencer, Chief Program Officer at Finance Fund, at mspencer@financefund.org.

Finance Fund was able to provide more than $2.45 million from our Finance Fund Capital Corporation (FCAP) and the New Markets Tax Credits (NMTC) resources for expansion and new equipment for the sand and gravel facility. This will not only help OBM compete in new markets and increase revenue, but will enable the company to hire new employees and stimulate Jackson’s economy.

This Thursday we’ll proudly join OBM in celebrating the new facility with a ribbon-cutting ceremony, tours of the facility and special before and after displays. Several local and state dignitaries will be in attendance, in addition to company CEO, president, employees and business partners.

Here’s to Ohio Basic Minerals—another Ohio economic development success story!

On Wed., April 21, we proudly hosted several state legislators, community leaders and Finance Fund project partners at the Capital Club in downtown Columbus. It was an excellent opportunity to share how Finance Fund has positively impacted some of the state’s most distressed communities.

We highlighted four partnership “success stories,” including Ohio Basic Minerals in Jackson; Save-a-Lot grocery store in Columbus; Noble Learning Center in Caldwell; and Miami Valley Child Development Centers (MVCDC) in Dayton. Each project touted key Finance Fund goals – job creation, safe childcare access and neighborhood revitalization.

We shared important information about the New Markets Tax Credits (NMTC) program. Last October, we were awarded $50 million in NMTC funding, with $30 million designated specifically for non-metropolitan, rural areas in Ohio. Funding is still available for qualifying projects – we strongly urge those interested to contact us for more information on a possible partnership with us.

We thank our distinguished guests for their presence, and look forward to new partnerships that will lead to more jobs, revitalized communities and safer access to care.

It was a busy week for our government leaders. President Obama made a stop here in the Buckeye State at the Lorain County Community College (LCCC) to talk jobs and the economy; Gov. Strickland delivered the State of the State address highlighting more of the same, and finally, Obama outlined strategies for healthcare, clean energy and – you guessed it – jobs, jobs, jobs.

Clearly our country and our state are in a time of economic hardship. We have an unemployment rate hovering at 10% – give or take – and large and small businesses alike are “trimming the fat,” so to speak, by laying off workers and stretching their current employees thin to cover business demands.

So what can a state and a nation that’s been stuck under the dark cloud of a dismal economy do? Just as Gov. Strickland said, we must believe in Ohio. Finance Fund continues to believe in our great state. We’re doing all we can to be a bright spot in the doom and gloom of the financial crisis.

Finance Fund is an organization that’s been making strides for Ohio development and job creation since 1987 – with no “red” or “blue” strings attached. In fact, we’ve leveraged more than $759 million to Ohio small businesses, nonprofits and Head Start programs, which has created thousands of jobs and benefitted the lives of countless Ohioans. Here are some vital stats:

- FF has granted more than 2,457 awards to countless community-based organizations
- FF has enabled access to more than 15,312 units of affordable housing for low-income people;
- More than 8,991 full-time jobs
- Over 3,033 early care and education spaces (classrooms) for 69,377 children

For 23 years, we’ve identified needs and put our money where our mouth is:

- We supported the Heritage Marketplace/Save-a-Lot grocery store revitalization, with a $1 million New Markets Loan, resulting in 18,900 square feet of redeveloped space, 46 full- and part-time jobs, and access to affordable groceries for 25,000 people.

- Additionally, Finance Fund loaned Ohio Basic Minerals $2.45 million for a site renovation of the manufacturing plant. Thirty-five renovation jobs were created, seven in-house jobs were maintained and 30+ jobs will be added by 2012.

We truly believe that in order to grow and cultivate a strong economy and business climate, we must believe in our businesses and provide them with essential resources and guidance to flourish.

Our outlook is strong – we’ve got more funding available to eligible businesses and nonprofits this year, and we’re enthused to begin lending in order to create more jobs and stimulate economic and community development. We have more than $75 million in loan funds and nearly $3 million in grants and linked deposits to place into Ohio’s distressed communities in the next 12 months. Obama talks change; Strickland keeps believing and both plan for more small business stimulus programs. But Finance Fund continues to “make action happen” by lending to businesses, creating jobs and fostering revitalization.

This round of New Markets Tax Credit funding enables us to continue to invest in projects that support Ohio’s distressed communities. These projects help stimulate local economies through capital investment, job creation, and community development. You can read more about some of those projects here and here.

Join me in congratulating our team that has spent endless days and nights working on our NMTC application. Kudos to all of them in this successful effort that will benefit all Ohioans.

The vacant and abandoned properties issue is twofold, including both homes and commercial buildings that have been left unoccupied. Both issues are intertwined and understanding their relationship is vital to the redevelopment of these neighborhoods. People need places to work, but they also need places to live with their families. It’s just as simple as that.

The road to redevelopment of these neighborhoods will be long and challenging, not something Ohio will finish overnight. Some of the first steps simply involve taking care of the security and financial risks associated with abandoned properties, such as crime, garbage waste and lack of tax base. Many cities have wrestled with the challenge of maintaining the upkeep of vacant properties, some cities shifting responsibility to mortgage holders entirely.

Ohio’s cities have launched programs to help aid businesses and homeowners. For example, the city of Cleveland started its Vacant Properties Initiative Fund with loans specifically for commercial property ownership. Some cities have requested outside assistance to improve their vacant properties situation, such as Youngstown, Ohio. The National Vacant Properties Campaign provided a report to Youngstown and Mahoning County regarding ways to improve property ownership. Their findings included involving community-based groups, better enforcement of regulations, developing a regional approach to property banking and cultivating community development. The goal of these initiatives is to encourage businesses to remain in communities, keeping jobs available and the economic infrastructure stable.

At Finance Fund, we have been working in these types of situations for more than twenty years. Although many of our programs help reclaim vacant properties, like the Ironton Close to Home III project, we recently developed a program specifically to help nonprofit, community-based organizations gain site control of vacant and abandoned properties. This program, LandLOC, works by providing a flexible line-of-credit to qualifying organizations enabling site control of vacant or abandoned properties. Activities eligible for financing include legal and acquisition costs as well as expenses associated with the safety, security and stabilization of the property. Interested nonprofits should contact me at 614.221.1114 for more information.

The next time you drive past a vacant property in your community, try to look past the eyesore and envision how it could be transformed into new, productive use. This is one important step in how Ohio’s communities will achieve redevelopment and thriving neighborhoods, by envisioning the future together. 

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With the implementation of our CDFI strategy, which confers CDFI characteristics to one of our affiliates (Finance Fund Capital Corporation or FCAP), there was an opportunity for some funding to do a more in depth study of this market enabling us to frame, more definitively, our lending strategy. As part of moving toward CDFI certification for FCAP, the CDFI fund awarded funding to do a study of community lending.

In March the study, Financial Intermediaries For Community And Economic Development In Ohio: Market Assessment, was released by The Center for Economic Development & The Center for Housing Policy Research of the Maxine Goodman Levin College of Urban Affairs, Cleveland State University. The purpose of this research is to describe and quantify the needs of Finance Fund’s current and potential clients, identify the role the Fund’s partners play, and understand the market potential for the services provided by Finance Fund.  There weren’t a lot of surprises, but there were some impactful affirmations.

1.    The type of projects funded by partners includes commercial revitalization, community facilities, homeownership, and small business entrepreneurship.
2.    The study indicates that financial intermediaries seeking to expand their services can play a vital role in providing funding assistance to the organizations that need to fund projects in their respective communities.
3.    Some organizations that had used or attempted to use financial intermediaries in the past had difficulty in navigating through the application process, whereas other organizations were not sure how financial intermediaries could benefit them.
4.    The responding partners indicated a low level of collaboration with funding partners and intermediaries.  One reason may be unfamiliarity with financial intermediaries. Other reasons include staffing constraints, types of projects, geographic criteria, and real or perceived difficulty of partnering and constraints imposed by the intermediary.
5.    The study identifies a gap between the balance of activities revealed in the client survey and the available funding resources identified in the inventory. The inventory also offers possible funding avenues in new project areas where funding relationships have not yet been established. For example, the inventory identifies 25 sources for funding in the area of environmental programs and green communities.

The study’s overall conclusion is that there is room for financial intermediaries such as Finance Fund to do more marketing and provide more information to partners and organizations that may need their services. This was not a surprise but an affirmation, and is part of the reason you are reading about it in this forum. The complete market assessment will be published to our Web site, www.financefund.org in the next couple of months.

House Bill 1 (the Governor’s proposed budget) contains language establishing an Ohio NMTC. The intent of the bill is to mirror the federal NMTC program thereby enhancing Ohio’s ability to attract new investors and additional investment capital. The bill is fairly well conceived and presented in HB 1 but has a few items that should be addressed before passage. This is a relatively small program at $25.6 million ($10 million in foregone public tax revenue) which makes it increasingly important to design it in a way that will be as effective as possible.

First, the bill creates a program that defines “applicable percentage” or the amount of tax credit that can be taken as 0% for the first two credit years (January 1, 2010 & 2011), 7% for the third and 8% for the last four. This means that the program wants to solicit investment and not give return for two years. Though I understand the desire to conserve capital in tight budget years, it is my opinion that investors will not invest for those first two years, which in the current capital market is an eternity. Investors invest to obtain yield or return on capital. No return = no investment. [HB 1, Section (2)]

Second, the bill seems to get prescriptive about the types of investors being solicited. It specifically discusses holders of “qualified equity investment” or investment that triggers tax credit as insurance companies, foreign insurance companies, and financial institutions. Though there is significant investment potential from these investor groups, if the purpose is to solicit “new investment” from taxpaying entities it seems counterproductive to frame a statute that limits who can play. The 2007 Government Accounting Office report on NMTC showed that the major federal NMTC investors were corporations and individuals. [HB 1, Sections 5725.33 (7), c, (B); 5729.16 (B); 5733.58 (B)]

Third, the definition of “qualified active low-income community business” or businesses eligible to get loans or other investments from tax credit proceeds as “any business that derives or projects to derive 15% or more of annual revenue from the rental or sale of real property.” It would seem the rationale here is to do business investment and not fund office buildings, condominiums, or lease-able commercial space. The result will be, depending on the specificity of the regulations and interpretation of reviewer, the exclusion of businesses that as a matter of course in low-income communities use real estate to stimulate economic revitalization. For example a local non-profit development corporation could not build a community facility such as a health center, child care center, or community service space. These dollars could not fund a business incubator or a share business space common in rural areas of the state. Restricting the program to non-real estate projects will severely affect its usefulness. [HB 1, Section 5725.33 (5)]

The efficacy of the NMTC has been documented by numerous public and private sources. For example, a 2007 report from the Government Accounting Office (GAO) suggests that NMTC increases financial involvement by investors in low-income communities. The NMTC Coalition’s 2008 Progress Report indicates investment, deployment, and demand are trending upward. A few examples of the efficacy of NMTC and its proven ability to spur economic growth in distressed communities include:
•    88% of investors say that they would not have made the same investments in low income communities without NMTC
•    At the beginning of 2007 with $12 billion in allocation, it has attracted $4.4 billion in investment with investment growth annually in the first 3 years of the program
•    Every $1 of federal tax revenue forgone as a result of the credit induces $8.90  in investments in low-income communities
•    Financed businesses that created or maintained more than 14,000 full-time equivalent jobs
•    Financed the construction or rehabilitation of nearly 27,000 affordable housing units

In addition, the 2007 GAO report showed that the total dollar amount of investments, number of investors participating, and efficiency of the NMTC program are all increasing at a rapid rate. It placed Ohio as third behind California and New York in dollars deployed and first in number of projects.
Emblematic of Ohio’s demand and capacity, with $75 million received, Finance Fund’s NMTC investments have:
•    Helped create 1,249 full-time equivalent jobs
•    Invested in projects creating 1,467 construction jobs
•    Invested in projects creating 536 child care slots
•    Helped to create 431 units of for-sale housing
•    Invested a total of $44,593,153 leveraging $221,159,679 in other funding.
One example of NMTC investment is in Caldwell, Ohio. Before 2005, if you were a parent in Noble County or one of its surrounding counties and were looking for child care, you would face a continual battle. Availability, cost, safety, quality, and accessibility all added to the frustration of finding the right place, the comforting place to care for your children.

It wasn’t much better for caregivers. Noble Learning Center had been in business for years — always addressing the space issues of high rent, low quality, no availability, poor fit, and no option to renew lease. Driven from location to location, Noble Learning Center operated out of rented apartments on the second floor of a senior center in rural Ohio. Then came the unfortunate news that they would not be able to renew their lease.

Unsure about the future of the Center at all, Center director LaShona
DeVolld made the call to Finance Fund that turned her dreams into reality. Her passion to provide for the community’s children and Finance Fund’s commitment to help them succeed by providing necessary access to capital, allowed the children of this very rural area to have a quality facility to plant the seeds of learning that will help them grow and develop into successful individuals.

LaShona discovered an old abandoned National Guard Armory with an open floor plan and a solid brick structure. She thought she had found her new home. After much patience and perseverance, LaShona purchased the former armory building and began major renovations. Funds received from multiple investors, including Finance Fund’s New Market Tax Credit Program, were used for these renovations, as well as furniture, equipment and supplies. Thanks to this program the center can continue its legacy of being the only licensed child care center in a four-county region and providing opportunity not only for children to learn and grow but for parents to gain peace of mind and economic flexibility.

The resulting child care center not only provides service for 135 children, it supported 20 construction jobs, 15 full time jobs, the productive reuse of an abandoned 14,880 square foot building and has become an economic engine in the local economy.

It is proposed that the State of Ohio create an Ohio NMTC program modeled after the federal program. Ohio has felt the backlash of a faltering economy perhaps even more so than the majority of other states in the nation. According to the Bureau of Labor Statistics, in February 2009, the Ohio unemployment rate was up to 9.4% compared to the national average of 8.1%. According to ODJFS, Ohio’s nonfarm wage and salary employment dropped 7,600 over the month, from 5,208,000 in January to 5,200,400 in February, with manufacturing and construction industries seeing a significant effect. Finally, Ohio’s 29 Appalachian Counties have been hit particularly hard, with a poverty rate of approximately 20% as compared to the rest of the state’s rate of 13%. This program would add targeted value to the Ohio economy by stimulating investments in Ohio’s low-income communities. The demand for the federal NMTC is extremely strong and has been since its inception in 2000; i.e. $11 in request for each $1 in allocation authority. A state NMTC program will supplement the federal program by incenting investment, attracting additional investors, and provide more opportunities for Ohioans. The economic impact of an Ohio NMTC program would assume an annual tax credit allocation of $25.6 million for a seven-year program. It would include the following:
•    Annual costs $10 million  in public funding or $70 million over 7 years
•    Leverages $25.6 million in direct investment annually or $179 million over 7 years
•    Leverages an additional $164 million annually ($6.40/credit financing $1)  or $1.1 billion over 7 years
•    $190 million  in projects annually or $1.3 billion over 7 years
•    Increases tax revenue through business, property, income, and other tax structures
•    In times of economic stress investors tend to be more conservative creating gaps in traditional financing as well as NMTC projects. If a state program mirrors the federal model it would easily fill that gap by adding additional  incentive to invest or invest more
•    Create jobs for Ohioans

The Ohio NMTC would be one of just a handful of its kind in the nation—placing Ohio on the map as a leader in this cutting edge initiative. Other successful programs include:
•    In 2007 Louisiana enacted a 35%, 3-year tax credit that supplements the federal program
•    Also in 2007 Missouri approved a $15 million tax credit program for investments in projects in distressed municipalities
•    In 2007 Mississippi enacted the Credit for Equity investments in Community Development entities
•    Texas enacted a state insurance premium tax credit for investment of certified capital in a certified capital company (also based off of the NMTC model) that began in the 2008 tax year
•    Connecticut created a $500 million tax credit program for investments in projects in distressed communities
•    The Michigan legislature is currently considering a state NMTC as well

In conclusion, the Federal NMTC program is proven to be one of the most effective tools in improving low-income communities. An Ohio NMTC program mirroring federal credits would effectively raise private capital, offer flexible financing products not otherwise available, increase Ohio’s competitiveness for investment dollars, invest in businesses and development projects in Ohio’s distressed communities creating jobs and building wealth for low income people, and enhance tax revenue. This program could be a life line for Ohio’s poorest communities. I want to thank you for the opportunity to address the Committee and for your time and attention on this matter. At this time I will be happy to answer any questions you might have.

Sources:
1.    Miara, Jim, The New Markets Tax Credit Program, A CDOs for Cities Briefing Paper: How This New Incentive Can Strengthen America’s Cities, CEOs for Cities, Boston MA, 2004
2.    The New Markets Tax Credit, Progress Report 2008, A Report by the New Markets Tax Credit Coalition, May 2008
3.    United States Government Accounting Office, Report to Congressional Committees, Tax Policy, January 2007
4.    National and State Corporate Income Tax Rates, U.S. States and OECD Countries, 2008, Tax Foundation, 2009, http://www.taxfoundation.org/taxdata/show/23034.html
5.    State Individual Income Tax Rates, 2000-2009, Tax Foundation, 2009, http://www.taxfoundation.org/taxdata/show/228.html
6.    Community Development Finance Institution Fund, New Markets Tax Credit, Compliance and Monitoring Frequently Asked Question, November 2006
7.    Promoting Investment in Distressed Communities: The New Markets Tax Credit Program, Community Development Finance Institution Fund, U.S. Department of the Treasury, October 2008
8.    Ohio Department of Job and Family Services News Release, March 2009
9.    Economy at a Glance, US Bureau of Labor, http://stats.bls.gov/eag/eag.OH.htm