HOPE’s Investments to Spur $5.1 Billion in Private Capital to Distressed Communities
September 8th, 2021
Hope Policy Institute Report Details How New Markets Tax Credits Generates Billions in Low-Income Communities in the Deep South
JACKSON, MS – Hope Enterprise Corporation’s (HOPE) 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. Consistent with its community development mission, HOPE 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. Last week, 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,” says 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.”
Other key findings in the report include:
- Nationwide there are 395 persistent poverty counties – 126 (32 percent) 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 percent for the NMTC program as a whole.
- Of HOPE’s NMTC investments, 55 percent have been deployed in counties with a majority of residents who are people of color.
“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.”
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. 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. According to the FDIC, financial service providers owned by people of color invest in communities of color at a higher rate. Further, the earned revenue generated by the NMTC program has been a critical source of growth capital for CDEs. Financial institutions controlled by people of color are already undercapitalized relative to their peers. The lack of equity in NMTC allocations has widened the asset gap for financial institutions led by people of color and by extension, the communities they serve.
The report highlights five ways to improve NMTC access for CDEs led by people of color, 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.