New Markets Tax Credits could spur jobs, overcome market hesitation in corridor
The City of Vancouver is nearing the end of the visioning process for the 1,133-acre area around Fourth Plain Boulevard, as reported on page 10. The corridor study area is bound on the west by St Johns Boulevard, on the east by Burton Road and on the south by a combination of 18th Street, 19th Street and Burton Road. State Route 500 bounds the study area to the north. The end goal is to identify gateways to economic development and revitalization.
New Markets Tax Credits may be just the tool for developing the Fourth Plain corridor. The federal program, enacted in 2000 as part of the Community Renewal Tax Relief Act, is designed to spur $15 billion in investments into specifically designed for-profit domestic corporations. These investment institutions, or Community Development Entities (CDEs), make loans and capital investments into businesses in low income areas. Investors in a CDE can receive a tax credit worth 39 percent of the initial investment, distributed over seven years.
Allocations are made by the federal government each spring to certified CDEs, which enable them to attract investors and lenders for specific projects. A real world success story, said Karen Williams, an attorney with regional law firm Lane Powell PC and an expert in New Markets Tax Credit financing, is downtown Phoenix, which was allocated about $150 million. The up-front focus on infrastructure there gave “private developers the incentive to overcome market hesitation,” she said.
Recent difficulties were reported with applying the New Markets Tax Credits in Northeast Portland, with developers citing too-high attorneys fees, too-small projects, infrastructure problems and competing downtown renewal possibilities.
Williams said a combination of investments using the credits and local tax increment financing in the Fourth Plain corridor may be the best use of the federal program. The area, she said, “could use the federal subsidy to boost the local ability to take advantage of infrastructure improvements from tax increment financing.”
According to the U.S. Department of Treasury, there are 15 CDEs in Washington State and 22 in Oregon, mostly in Portland, but none in Southwest Washington, so an existing agency would have to become certified for the purpose of making Qualified Low-Income Community Investments, or one would have to be created. A national CDE could also come in with a project.
Vancouver Housing Authority Board Member and economic development strategist Eric Hovee said the tax credit program may be an option to create jobs at the recently purchased Kyocera site. Such a program could spur business growth along the length of the study area, with its large parcels and undeveloped tracts.
The New Markets Tax Credits program sunsets in 2007, and is up for Congressional reauthorization this year.
Proven success stories are flowing from the program – it’s an investment tool that warrants investigation by the city and the VHA.
