CDFI Fund Director Relishes Renewal, Impact of NMTC Program
By Caitlin Jones & A. J. Johnson
6 min read
As she approaches her one-year anniversary as Director of the Community Development Financial Institutions (CDFI) Fund, Donna Gambrell is looking forward to at least one more funding round for the federal new markets tax credit (NMTC) program and is celebrating its accomplishments.
She also suggested there may be a possible role for the NMTC program and/or the CDFI Fund in addressing the nation’s home foreclosure problems, in comments to the Tax Credit Advisor on 10/17/08 in a wide-ranging interview.
Appointed in November 2007 to a three-year term as Director of the CDFI Fund, a part of the U.S. Treasury Department, Gambrell oversees a number of programs, of which the NMTC is one. Established in 2000, the NMTC program is administered by the CDFI Fund in partnership with the Internal Revenue Service. Under it, organizations called community development entities (CDEs) that receive NMTC allocations in competitive funding rounds raise capital from investors and deploy it in qualified businesses in low-income communities.
Gambrell was pleased by the recent one-year extension of the NMTC program made by the financial rescue act signed 10/3/08 (see p. 1 article). The legislation extends the program through calendar 2009, and authorizes another $3.5 billion in allocation authority for one more funding round, in 2009. Asked to name one or two changes to the NMTC program she feels would make it even better and more effective, Gambrell cited a multi-year or permanent extension of the program.
Meanwhile, the CDFI Fund on 10/20/08 announced NMTC allocation awards totaling $3.5 billion in the program’s sixth funding round. The one change from awards in prior rounds is a proportionate level of allocations to rural-oriented CDEs and for investment in rural areas (see p. 1 for awards article). This year’s allocation agreements are all expected to have been sent out by this December to the CDEs that have just won allocation awards. The only major change to the allocation agreement from last year will be the rural proportionality provisions, including language to hold CDEs to the minimum percentage (if any) of their allocation that they committed to invest in rural areas.
Significant Positive Impacts
Gambrell noted she’s enjoyed seeing the various ways in which the NMTC program has positively impacted low-income communities. “I’ve been really pleased with the success of the new markets tax credit program, as well as how quickly we’ve been able to put allocations out in communities, and about how organizations have been able to use those tax credits,” she noted. “I’ve seen the transformation of communities using the tax credits.”
Gambrell noted the NMTC program has been cost-effective and funded a wide variety of projects – charter schools, shopping centers, etc. She noted the program’s success is also illustrated by the fact that the CDFI Fund has consistently received more than eight times in requests for NMTC allocations than the amount available. The Fund has held six funding rounds so far, making 364 allocation awards totaling $19.5 billion in NMTC authority.
Gambrell noted that a new report on the NMTC program (issued by the CDFI Fund on 10-20-08), based on data collected during 2002-2007, shows the substantial favorable impact of the program since its inception. “New markets tax credit investments are being made in communities with significantly higher levels of distress than are minimally required under the program rules,” she said. “People are really going above and beyond that threshold for distressed communities, and looking for ways in which they can make investments.” (For report, go to http://www.cdfifund.gov.)
Gambrell mentioned some NMTC projects she’s seen firsthand. One is Thurgood Marshall Academy, the first law-themed public charter high school in Washington, DC. Located in the underserved Anacostia section of the city and serving 360 students, the Academy combines a comprehensive, standards-based curriculum with education about law, democracy, and human rights. Recent key achievements include a 100% graduation rate and 100% college acceptance rate. Another project Gambrell cited involved development on a cleaned-up brownfield site in San Diego that has spurred development of small businesses, affordable housing, and a community cultural center. A third example was construction in an underserved ward in Washington, DC of the neighborhood’s first chain grocery store in 10 years.
“You’ve seen the kind of investment made in distressed communities that would not have been made, had it not been for new markets tax credit allocations,” said Gambrell.
Some of the emerging trends in NMTC projects are more renewable energy-type projects and sustainable forestry projects.
Possible New Role
Gambrell said she hasn’t seen any adverse impact so far on the NMTC program from the current national financial and credit crises. In fact, she noted about $238 million in qualified equity investments have been made in the past 60 days.
At the same time, though, she suggested that there may be a possible tie-in with or role for the NMTC program and/or CDFI Fund in addressing the nation’s home foreclosure crisis, and possibly the new Neighborhood Stabilization Program (NSP) being administered by the U.S. Department of Housing and Urban Development. Under NSP, some $3.92 billion in federal grants is being allocated to states and localities to help finance the purchase or redevelopment of foreclosed homes and abandoned properties in threatened neighborhoods (see article on p. 2).
“As part of this whole economic stabilization effort, what we want to see, of course, is [not only] the stabilization of financial institutions, but also the stabilization of communities,” Gambrell said. “And I think the CDFI Fund – the programs that we have, new markets tax credits – play a critical role in that, regardless of the organizations that are involved in it, whether it’s the CDEs or other participants or stakeholders. A definite role. And I see that not only for our new markets tax credit program, but for our other programs as well.”
Gambrell didn’t cite any specific plans for the NMTC program in this area. But Gambrell will be in the midst of Treasury’s unfolding new program for federal purchases of problem assets from banks, including home mortgages, and to try to help distressed homeowners avert foreclosure and stay in their homes. On 10/13/08, Gambrell was appointed as interim Chief of Homeownership Preservation in Treasury’s new Office of Financial Stability. “The focus of that will be on homeownership preservation,” she explained, “making sure that borrowers who are at risk right now are able to keep their homes. I think there’s a natural synergy between that effort, which is a large-scale effort, in complementing what the CDFI Fund has done since its inception.”
Gambrell will simultaneously serve in this new post and continue as Director of the CDFI Fund.
Future Activities
As for future activities, the CDFI Fund expects at some point to “freshen up” its existing Q & A document on NMTC compliance matters, and will be opening the 2009 NMTC funding round. Traditionally, the CDFI Fund has issued a notice of allocation availability in December to open next year’s funding round.
