Feds award $320 million in tax credits to St. Louis-based groups
The U.S. Treasury issued $5 billion in tax credits for urban redevelopment Friday, including $320 million to St. Louis-based organizations.
The so-called New Markets Tax Credits are usually sold by developers to raise cash for projects and are a common ingredient in financing packages for development projects in distressed areas of St. Louis. But the credits typically receive just 30 or 40 cents on the dollar on the re-sale market.
Groups with local ties that received credits are (full list here):
- Advantage Capital. $70 million.
- Habitat for Humanity, $50 million.
- McCormack Baron Salazar, $40 million.
- St. Louis Development Corp., $65 million.
- U.S. Bank Community Development Corp., $95 million.
SLDC plans to award its credits to developers working on projects in the city, as it did with $52 million it received in 2004 and $45 million last year. It will seek applications soon said St. Louis Mayor Francis Slay.
“We are ecstatic to receive this allocation,” Slay said. “The new infusion of NMTCs will help us continue momentum across the city. This is particularly important when the national economy is troubled.”
Of the $5 billion announced today, $1.5 billion came from the $787 billion federal stimulus act passed by Congress in February.
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As someone who works in the tax credit investment business, I can tell you that the New Market Tax Credits are not a dollar for dollar tax credit. The $320MM number that is being thrown out is in Qualified Equity Investments, of which a 39% tax credit is generated. Qualifying projects must invest at least $320MM in redevelopment costs, and $125MM in credits are generated. The current market for NMTC’s is anywhere from $.70 to $.80 per credit. The credits serve as a way to bridge the funding gap for many projects that are unable to obtain enough debt financing to complete a project that is perceived to be of higher risk to lenders.