Keynote Address of Director Donna Gambrell at the National Housing & Rehabilitation Association’s 2008 Summer Institute

July 23, 2008

Introduction

Thank you, I am delighted to be here for the National Housing & Rehabilitation Association’s 2008 Summer Institute, held in conjunction with today’s New Markets Tax Credit Symposium.

I would first like to recognize Rosa Martinez who is here with me today. Rosa is the Program Advisor for the New Markets Tax Credit Program (NMTC Program) and has been an enormous asset to the Community Development Financial Institutions Fund (the Fund) and to the NMTC Program.

I often say that community development requires the establishment of strong working relationships to succeed. Across the room I see a broad range of developers, lenders, investors, Community Development Entities (CDEs) and practitioners coming together to learn more about how the NMTC Program is used to attract private-sector, market-driven investment in distressed urban and rural communities. I can tell you that there is a strong desire at the Fund to grow and continue to build upon these relationships in order to further our shared interests in improving the economic health of distressed communities.

Allow me to just briefly highlight some important updates. Through calendar year 2008, the Fund has been given the authority to issue $19.5 billion in New Markets Tax Credits (NMTCs). To date, five award rounds have been completed and the Fund has made 294 awards totaling $16 billion in allocation authority – this includes $1 billion in allocations for the Gulf Opportunity Zone. In March of this year, the sixth round of the NMTC Program closed, in which $3.5 billion in total allocations are available. The Fund is currently in the process of reviewing the applications and the award announcements will likely be made in October.

Today’s sessions focus on central issues for the NMTC Program: the development of for-sale and rental housing, financing health care facilities, compliance and regulatory issues, and structuring transactions. Last, but most definitely not least, is a session on measuring the community impacts of the NMTC Program. This session of the day may just be the most important and critical to the NMTC Program’s continued support in Congress and success across the country.

My remarks this afternoon will focus on a variety of topics that highlight the importance of the NMTC Program.

Impact Data

The Fund collects a wealth of institutional and transaction level data through the Community Investment Impact System (CIIS). Launched in 2004, CIIS serves as a standardized database to collect NMTC loans, investments and community development impacts – all geographically coded. This data allows the Fund to track NMTC investments at the census tract level and in specific geographic locations. Analysis of this data continues to show that the NMTC Program is working in distressed communities as an effective tool to attract investment.

The Fund requires all CDEs that receive NMTC allocations to provide annual reports detailing how these proceeds were invested. The most recent data through the FY 2006 reporting period shows that CDEs disbursed nearly $5.6 billion to over 1,100 different operating businesses and real estate projects. Financed projects are projected to create or maintain 20,000 full-time equivalent jobs at businesses in low-income communities, and to develop or rehabilitate 46 million square feet of commercial real estate, generating 146,000 construction jobs. These investments have occurred in 47 different states across the nation, as well as the District of Columbia and Puerto Rico.

Data also suggest that CDEs are efficiently using their NMTC allocations to raise investments, more quickly than required! As you know, a CDE that is awarded an allocation has five years from the date of notification to close Qualified Equity Investments (QEIs) with its investors. The CDE then has 12 months to place “substantially all” of the proceeds from the QEIs into Qualified Low Income Community Investments, which generally are: 1) loans to, or investments in, qualifying businesses 2) loans to, or investments in, other CDEs; 3) the purchase of qualifying loans originated by other CDEs; and 4) counseling to low-income community businesses.

As of today, over $11.5 billion in QEIs has been issued by CDEs, representing 72 percent of the $16 billion of allocations issued to date.

The ability to raise QEIs associated with later award rounds is progressing as well. In less than two years since receiving their allocation agreements, Round 4 (or 2006) allocatees have now finalized over $3 billion in QEIs, over 75 percent of the total NMTC allocation of $4.1 billion. All but one of these allocatees have begun receiving QEIs from investors, and 35 percent have now issued all of their QEIs.

I would now like to address how NMTC-financed projects are taking place in communities of higher distress.

A NMTC eligible low-income community is generally defined as a census tract with a poverty rate of not less than 20 percent and/or a median family income not greater than 80 percent of the area median family income. The Fund structured the competition of NMTC allocations to reward those CDEs that commit to investing in transactions located in areas of greater economic distress. Approximately 95 percent of all NMTC transactions have been made in census tracts characterized by at least one Fund-identified criteria of "higher distress."

• Over 75 percent of investments were directed to areas characterized by one or more of the following conditions: Unemployment greater than 1.5 times the national average, poverty rates in excess of 30 percent, or median income of 60 percent or less of area median income.
• More than 50 percent of the transactions are located in areas with median incomes of less than 60 percent of area median income.
• More than 40 percent went to areas with poverty rates greater than 30 percent.

We are also looking to see that allocatees continue to raise the bar in terms of: 1) the level of economic distress in the areas that they invest in; 2) the amount of QEI proceeds that they intend to invest in low-income communities; and 3) the innovativeness and flexibility of their products, compared with others in the marketplace.

Beyond the Data

As you are all aware, behind every data point there is an impact story at a personal level. Last month. the CDFI Fund’s Community Development Advisory Board met in Washington, DC to discuss a wide range of important issues. Following the meeting, I accompanied the Advisory Board members on a tour of local NMTC-financed projects across the Potomac River in the nation’s Capitol in the highly distressed Congress Heights and Anacostia neighborhoods. It’s important to see firsthand the impact of the NMTC Program - the tour highlights were powerful.

• Thurgood Marshall Academy Public Charter High School – NMTC investment proceeds provided $14 million in permanent financing for the District’s first law-themed public charter high school, the Thurgood Marshall Academy Public Charter High School (TMA) located in Ward 8. TMA combines a comprehensive, standards-based curriculum with education about law, democracy, and human rights. The school serves 360 students in grades nine through twelve. Recent key achievements include a 100 percent graduation rate and a 100 percent college acceptance rate. The first three graduating classes and student test scores have remained six to seven times higher than those of students in surrounding public high schools.
• The Shops at Park Village (Camp Simms) – NMTC investment proceeds provided $18.6 million to finance construction of this retail shopping center in the Congress Heights community. Anchored by a 65,000 square foot Giant Grocery store that opened in December 2007, The Shops at Park Village brings the only grocery store and sit-down restaurant to the entire Ward 8. Owner-occupied homes in Ward 8 are at 21.4 percent, the lowest of all wards, vs. 40.8 percent citywide. Over 36 percent of the population in the Ward is below poverty level, citywide the number is 20 percent, and the Median household income is $25,017, but $40,127 citywide. The Shops at Park Village will serve as a cornerstone to begin the transformation of this community.
• Town Hall Education, Arts and Recreation Campus (THEARC) - $9.4 million in NMTC-financing was provided to provide permanent financing for THEARC, a 110,000 sq. ft. mixed tenant and mixed use complex in Ward 8. THEARC is a “home away from home” for the many underserved children and adults, enabling them to participate in classes, music instruction, fine arts, academics, continuing education, mentoring, tutoring, recreation, and medical and dental care.

This year I also attended in Washington, DC the opening of Jubilee Housing’s new mixed-use rehabilitation of a building in Adams Morgan that once completed will create 27 affordable homes and a 24 hour/7-day child care facility for low- and moderate income families. The childcare facility will serve 46 children with full-day educational and recreational activities and offering night and weekend care to assist parents who are employed in shift work. The rehabilitation was financed with $8.6 million in NMTC enhanced loans from Enterprise Community Investment.

Across the nation, the NMTC Program is being used in innovative public-private partnerships to transform communities. I recently visited the culturally diverse Diamond neighborhoods of southeastern San Diego. This community had previously endured decades of under-investment, but the NMTC Program has proven to be a powerful tool for change.

• The Market Creek Plaza - $15 million in capital was raised through the NMTC Program for the Market Creek Plaza, located on what was the site of a 20-acre abandoned aerospace factory. NMTC financing allowed for the construction of the Joe & Vi Jacobs Community Center. The Center is a three-story, 78,000-square foot building providing a state-of-the-arts venue that will provide training to build the capacity of individuals and local micro- and small businesses. The Village at Market Creek will bring a total of 150,000 square feet in new commercial space, over 200 new jobs and potentially 415 affordable housing units. The new Center will also become the heart of the Village where organizations and individuals across the nation can come to learn and share in the areas of community building, community development and asset building.
• Finance New Mexico – Headquartered in Santa Fe, Finance New Mexico recently received an allocation of $110,000,000 million in tax credit authority to provide capital to qualifying businesses and commercial and mixed-use real estate developments. The organization will also use its NMTC allocation in collaboration with the State of New Mexico’s “Smart Money” bank participation program and with targeted industry tax credits, in order to pass along considerable economic benefits to borrowers.

The types of impacts that the investments I have mentioned today are what makes me proud to lead the CDFI Fund. I want to work with our staff to continually improve our program design to ensure that more and more, these are the types of impacts all successful allocates will be achieving with their NMTC investments.

I encourage all of you to share your impact stories and impact data with the Fund. On the homepage of the Fund’s website you can submit a project profile or feel free to contact the Fund’s Public and Legislative Affairs office.

Closing

Thank you for inviting me to speak to you today about the NMTC Program. I hope this information was helpful to you and I want thank you all for your support of the NMTC Program. Your commitment to providing affordable housing is the reason we are here, working together for a better future. Thank you.

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