The federal New Markets Tax Credits (NMTC) program has been a boon to low income communities. It typically works as a “gap filler” in the capital stack for economic development and community development projects that locate or expand in the community. A December 2015 law extended the program for 5 years and authorized $3.5 billion worth of credits per year. Dan McRae’s White Paper provides a simple explanation of the complicated process for accessing and closing this financing.
The MOU- the “deal document” for incentives
A document called the Memorandum of Understanding, or MOU, has become the standard for project locations. It is the “deal document” that forms the basis of the bargain between the company and the community. Dan McRae was the author of the first MOU used in Georgia many years ago. Dan’s White Paper on the MOU provides a narrative to the current state of the art, accompanying the Table of Contents for the State’s “winningest” MOU, which successfully located both a large industrial project and its expansion.
New Market Tax Credits Infographic
“What, I got $10 million in New Markets Tax Credits allocation, and only got $2.5 million in free money?” Yes, you really do hear that sometime. And maybe it’s understandable. NMTC is complicated. But now, you have this “flow” of funds Infographic to sort out allocation, credits, sheltered income and unsheltered income, and trace the actual funding. Using it, you can understand the true benefits of NMTC financing. Have fun!
Bonds and Capital Stacks
This is Dan McRae’s White Paper on financing projects (“Financing Projects with Acronyms”. ) It informs concerning the nature of revenue bonds, what bodies may issue them and when they are tax-exempt, who the participants are and how much time a bond issue takes and what it costs. The White Paper also covers special types of bonds such as PILOT bonds. It is rare these days that a project is financed with just one kind of equity and just one kind of debt. So, this White Paper explains what a capital stack is and what the sources are other than revenue bonds for obtaining all of the capital that the project needs. Dan uses this White Paper to teach financing to groups as various as investment bankers and commercial bankers, bond issuers and borrowers, real estate developers and corporate users, and elected and appointed officials.
The Abatement Statement
As of August 14, 2015, seven non-elected members of a component of a private sector, nonprofit organization, the Governmental Accounting Standards Board (“GASB”), unilaterally took a controversial action that will force changes in economic development across the nation.
GASB as of that date adopted its Statement No. 77- Tax Abatement Disclosures (the “Abatement Statement”). The Abatement Statement is effective for reporting periods beginning after December 15, 2015, but GASB encourages earlier application of it.
This White Paper examines the Abatement Statement in detail and compares its requirements to actual practices in economic development. The different abatement mechanisms that are used in Georgia and in other states are very relevant to the disclosure that has to be made, and this White Paper addresses that issue, as well.
For now, a heavy burden of interpretation rests on state and local public bodies. We can expect a great deal of activity on their part as they work to find out what is required. This White Paper “fills the gap” with its presentation on the Abatement Statement as it is now understood.