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Bloomberg reports misuse of Clinton tax credits
President Bill Clinton
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TEXT OF STORY
STEVE CHIOTAKIS: Now, to a federal program that was supposed to solely help revitalize poor and struggling inner city neighborhoods. But the program's also being used however -- frequently -- as financial tool for big corporate developments. We're talking about banks that are investing in hotels and retail centers, not necessarily in the most blighted areas.
In the March issue of Bloomberg Markets magazine, reporter David Dietz explored how the New Markets Tax Credits -- passed by Congress and signed by President Clinton in 2000 -- has been a boon for corporate development.
And David Dietz is with us now. Good morning.
DAVID DIETZ: Good morning.
CHIOTAKIS: How are banks getting their hands on this money to build all this stuff?
DIETZ: Well it's a Treasury Department program that annually hands out $3 to $5 billion, and banks use this money to supposedly invest in poor communities.
CHIOTAKIS: And are they doing that?
DIETZ: We have to acknowledge that there are some good projects, but billions of dollars is going toward things like luxury hotels and office buildings and museums and theaters geared towards an upscale audience.
CHIOTAKIS: Well, the non-profits are also getting some of this money, these tax credits if you will. So what are they saying about this?
DIETZ: Well, a lot of the non-profits don't like what's going on because the intent of the program was to put as much money as possible into truly needy communities. And not downtown commercial cores where a great deal of this money is going.
CHIOTAKIS: Does the Federal government know that these funds are used for purposes other than revitalization of truly impoverished places.
DIETZ: Yes they do. The answer is well, these projects create jobs. And while that's true, you have to ask yourself whether or not that is a result that was intended by the program. I think that jobs are certainly a benefit, you have to ask yourself what kinds of jobs are created and whether those jobs are going to people in needy communities.
CHIOTAKIS: David Dietz, reporter from Bloomberg Markets magazine. David, thank you.
DIETZ: You're welcome. Thank you.
Lets look who really profits from New Market Tax Credits
NMTC are good for CDFI executives ( Mr Michael Rubinger heads a CDFI and according to the IRS 990 Forms Mr Rubinger Salary for 2008 was $419,000 - I can understand why he feels so strongly about New Market Tax Credits - they are key to his success.
Robert rapoza - Mr Rapoza Firm specializes in Lobbying CDFI - Community Development Financial Institutes - I'd love to know what Mr Rapoza makes for doing Gods work - perhaps he works for free.
One of Mr Rapozas Clients is Coastal Enterprises Intiatives headed by Ron Phillips...
Now, Ron Phillips - he is the smart CDFI CEO - the NON-profit part of CEI - Coastal Enterprises pays Mr Phillips $112,000 and then there is a for-profit subsidiary - I'd be willing to bet Mr Phillips gets a little extra Pay for his For-Profit Work.
Ron could you share the rest of your Comp plan with us?
Annie Donovan - is COO for NCB Impact - a Non-Profit CDFI that benefits from New Market Tax Credits - she is paid $243,000 according to the IRS990s - the CEO, Terry Somonette - was paid $555,000
New Market Tax Credits have spawned a huge Industry - and the Industry Insiders are the first to speak up because they don't want the gravy train and the Big Banks are happy to have the Tax Breaks
I'm sure these folks work really hard - imagine that someone is making $555,000 to give away Tax Credit Money??????
Despite what this story implies, New Markets Tax Credits have, in fact, been a tremendous boost to struggling low-income neighborhoods. Because of this federal program, there today are grocery stores, entrepreneurial small businesses and major retailers in neighborhoods that have long been starved for healthy commercial corridors. There are new charter schools and affordable daycare centers giving families an alternative to crumbling, substandard facilities. There are community health clinics in places where the emergency room is otherwise the only primary care option. Food banks have been able to expand to meet increased need. Senior centers have opened. Community art centers have taken root. The impact is quite remarkable.
We can speak to this from direct experience. The Local Initiatives Support Corporation (LISC) has invested more than $536MM in New Markets projects that have developed nearly 7 million square feet of commercial and community space in disadvantaged neighborhoods. Yes, we are a nonprofit. Yes, we focus on high-distress areas. Yes, the credit is part of our comprehensive efforts to improve quality of life for low-income residents. In fact, these projects represent nearly 18,000 jobs in communities with high unemployment and $1.4 billion in total development activity that likely would not otherwise take place.
The New Markets program is a critical tool in the ongoing effort to help troubled neighborhoods move toward opportunity, stability and growth. That's the story that far too rarely makes the news. But it's the one that matters most.
Michael Rubinger
LISC President and CEO
I know from experience that the Bloomberg Article failed to tell the true story of the NMTC program. Our company is called Travois and we provide NMTC financing to economic development projects on Indian Reservations. We have seen this program support powerful programs to increase the quality of low income people's lives. Ninety percent of NMTC investments have been made in census tracts the government recognizes as "highly" distressed. Those investments have created 500,000 jobs. Future pieces on this topic should tell the whole story of the NMTC program and the amazing job community development professionals are doing with it coast to coast.
As co-founder of the NMTC program, David Dietz’ article in Bloomberg Markets, March 2011, and and NPR interview, was misleading. Our NMTC Coalition, of which I was also co-founder and recent board chair, just celebrated the 10th anniversary of this innovative and popular U.S. Treasury program. Please view the report here: http://nmtccoalition.org/10th-anniversary-report . Mr. Dietz’s headline should have read From Wall Street to Maine Street, the Innovative Federal NMTC Leads the Way in Socially-Responsible Investing. Coastal Enterprises, Inc., a nonprofit community investment organization in Wiscasset, Maine, joined like-minded mission organizations to create this program. 3,000 projects have been financed with over $15.5 billion in tax credit authority. Our field is rooted in the civil rights movement. The NMTC overall has been a god-send to many of us – particularly in rural regions – generating new capital investment and creating economic opportunity for people and places at the margins of society.
From the perspective of one mission-driven nonprofit, the NMTC program is extremely valuable to the low-income communities we support. Like many nonprofit lenders using the program, we structure transactions so that 60% or more of the benefits generated by the credit stay in the community to support institutions such as health centers serving the medically underserved, charter schools providing educational opportunities to low-income student in poorly performing school disticts, and projects bringing healthy food to "food deserts." Many of the projects we finance are not viable without the credits. We have invested $300 million and created over 4,000 jobs, 6,000 school seats and 13 health centers serving 72,000 medically underserved persons. And there are LOTS more success stories out there. I urge Marketplace to cover a few. I think your viewers would find them interesting.
Read the Facts about NMTC:
• 90% of NMTC investments – for 2000 business and projects -- have been in communities with poverty rates above 30%, median incomes less than 60% of area median, unemployment rates more than 1.5 times the national average;
• $50 billion has been invested in low income communities that otherwise would not have benefited from private sector capital - using $15 billion of NMTC at a cost to the federal government of $6 billion; an 8:1 leverage;
• An estimated 500,000 jobs have been created or retained through NMTC investments in businesses and development projects in communities with high rates of unemployment and other factors of economic distress;
• Hotels account for less than 5% of NMTC investments; the majority of NMTC financing is used to benefit community facilities, manufacturing businesses, lending to operating businesses, industrial and other companies using mixed-use space;
• Case studies and more key findings in the NMTC Coalition’s 10th Anniversary Report can be found at http://nmtccoalition.org/wp-content/uploads/2010/12/NMTC-10th-Anniversar....
