JACKSON, Miss.–Hope Enterprise Corporation, an affiliate of HOPE Credit Union, is reporting its investments in projects using federal New Markets Tax Credits (NMTC), a Treasury Department program geared to increase economic development in under-resourced communities, are projected to generate $5.1 billion in private sector investment over the next 20 years.
Saying the strategy is consistent with its community development mission, HOPE said it focuses its NMTC investments on projects, such as health care and education facilities, that promote economic mobility in distressed communities, leveraging an extensive network of local relationships.
Since the NMTC program launched in 2002, HOPE has used $190 million in NMTC allocations to finance 90 projects that have created 3,700 jobs in the Deep South states of Alabama, Arkansas, Louisiana, Mississippi and Tennessee, HOPE reported.
Last week, it noted the CDFI fund announced an additional $55 million in 2020 NMTC allocations awarded to HOPE.
“The New Markets Tax Credits Program enables HOPE to attract capital to projects that fortify the backbone of our communities, such as schools, hospitals, affordable housing and nonprofit service providers,” said HOPE CEO Bill Bynum. “As a result, some of the nation’s most financially neglected communities now have resources needed to help families and children realize their potential.”
Key Findings
According to Hope, other key findings in the report include:
- Nationwide there are 395 persistent poverty counties – 126 (32%) located in the five Deep South states served by HOPE.
- Fifty-eight percent of the NMTC projects supported by HOPE are in persistent poverty counties, in contrast to only 18% for the NMTC program as a whole.
- Of HOPE’s NMTC investments, 55% have been deployed in counties with a majority of residents who are people of color.
The Issue at its ‘Core’
“Persistent poverty, at its core, is the result of the longtime, systemic exploitation and extraction of a community’s people and resources,” said Sara Miller, senior policy analyst for Hope Policy Institute. “The legacy of this reverberates today, through high unemployment, poor health outcomes and a lack of financial resources. The New Markets Tax Credit is a tool that when strategically used, helps reverse this pattern in persistent poverty communities.”
HOPE said the report identifies a significant opportunity to strengthen the NMTC program.
“Minority-owned or Minority-controlled Community Development Entities are materially underrepresented in the program,” the organization said. “Minority CDEs were awarded only 13% of the 2020 NMTC allocations announced last week. Not only have Minority-owned CDE applicants been less likely to receive NMTC awards; in every year since 2012, Minority CDEs who have received awards, on average, received significantly less than white owned or controlled CDEs. This disparity matters at the community and institutional levels.”
HOPE cited FDIC research and data showing financial service providers owned by people of color invest in communities of color at a higher rate.
‘Critical Source of Growth’
“Further, the earned revenue generated by the NMTC program has been a critical source of growth capital for CDEs,” HOPE stated. “Minority financial institutions are already undercapitalized relative to their peers. The lack of equity in NMTC allocations has widened the asset gap between minority and non-minority financial institutions and by extension, the communities they serve.”
According to HOPE, the report highlights five ways to improve NMTC access for minority-led CDEs, including urging Congress to study the racial disparities in the NMTC and solutions to address them like dedicating a portion of NMTC allocation specifically for these CDEs and assessing program application procedures to identify ways to eliminate racial disparities in funding and award decisions.
For more info: www.hopepolicy.org