Tuesday, February 22, 2011

City Seeks Projects for New Markets Tax Credit Area (City of Sun Prairie Office of Economic Development)

In 2000, Congress passed legislation encouraging investment in income qualified census tracts. This included the New Markets Tax Credit (NMTC) program, which is operated through the Community Development Financial Institution (CDFI) Fund, a division of the U.S. Department of the Treasury. The program provides investors a credit against federal income tax liability for a qualified investment. The credit provided to the investor totals 39% of the cost of the investment and is claimed over a 7-year credit allowance period.

Eligible projects include:

  • Loans and investments in operating businesses located qualified census tracts
  • Development of commercial, industrial and retail real estate in qualified census tracts
  • Mixed-use projects are okay where commercial income exceeds 20 percent of the gross income of the property

Potential benefits to businesses include:

  • Provides gap financing for projects that would otherwise not be able to move forward
  • The weighted average interest rate paid by the borrower is below market rate
  • Advance rates on collateral exceeds market rate
  • Business receives patient capital with some interest-only payments and longer than market amortization period.
  • Some forgiveness of the “B Note” (net tax credit equity)likely depending on economic impact of project
The area in Sun Prairie that is eligible for this program is a triangle that has U.S. 151 to the north, Bristol St to east, and Main St. to the south (see below).

Note that a significant portion of this area is also a part of the City's TIF 10, so additional incentives may be available for qualified projects.

For additional information or assistance in evaluating New Market Tax Credits for a project in this area, contact either of these financial consultants familiar with the qualified Sun Prairie tract:

Kate Crowley, Manager
Baker Tilly


Carol Maria, President
Wisconsin Business Growth Fund, Inc.

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