By Leah B. Thibault, Director of Operations, CEI Capital Management LLC
As a steward of the federal New Markets Tax Credit program, our firm vets hundreds of proposed community development projects from around the country every year, all vying for a portion of this limited pool of credits. Each potential project is evaluated on the extent to which it will directly benefit the economically-distressed communities and residents where it’s sited: Will it create jobs? Is it an economically and environmentally sustainable enterprise? Does it make business sense?
While these projects stand on their own merits, it often takes more than one new development to shift the overall economic trends in a community. However, being the first “out of the gate” in these historically under-invested areas can serve a catalytic role by attracting additional development and creating other positive ripple effects.
The Hanover Theatre for the Performing Arts in Worcester, Mass., is a prime example of a project supported in part by New Markets Tax Credits that spurred local investment and served as the foundation for additional development in the community. The $33 million renovation of this historic theatre received $30.15 million in New Markets Tax Credit allocation in 2007. Today, the Hanover Theatre hosts more than 180,000 visitors annually.
The success of the Hanover Theatre resonates well beyond its walls. As a popular arts and entertainment destination, it is driving more customers to local restaurants and hotels. Beyond the obvious, it also prompted the development of a five-acre solar farm in nearby Leicester, Mass., which provides nearly 80 percent of the theatre’s electricity. The project has also been instrumental in catalyzing the CitySquare development in downtown Worcester, which includes an $85 million development by the Hanover Insurance Group and a $21 million, 40,000-square-foot cancer treatment center. All of this unfolding in a portion of the city that once was in a prolonged and steep decline. Ann Tripp, president of Hanover Insurance Group subsidiary Opus Investments/City Square, noted that:
“The Hanover Theatre’s tremendous success and its great potential influenced our decision to invest in CitySquare. The theatre is driving economic development in Worcester’s downtown district, and we have confidence that it will continue. It is helping to create the kind of favorable environment where other ambitious development projects can thrive. Successful developments such as the theatre serve as catalysts for other development projects, where each adds critical momentum — bringing positive change and creating new opportunities for economic revitalization.”
The Hanover Theatre is also at the center of a proposed 30-acre Theatre District, under development by the Worcester Business Development Corp. (WBDC), which includes the $15 million expansion of a local community college in a former newspaper office and printing facility. The new campus will support more than 1,200 students and administrators and will deliver an expanded selection of health science, adult education and workforce training programs. According to WBDC president David Forsberg, the Hanover Theatre made “a huge difference in that area, and that’s the foundation we want to build around.”
Another gateway project funded with the help of New Markets Tax Credits is spurring economic development in a Rochester, N.Y. neighborhood. As recently as 10 years ago, the Brooks Landing area was home to a number of derelict buildings. But a public-private collaboration helped to begin the transition of this neighborhood into a welcoming community for both students and permanent residents.
Construction of Staybridge Suites at the University of Rochester is serving as the cornerstone for this neighborhood’s redevelopment. The success of this project encouraged the original developer to begin work on a second project in the area: a $20 million, 11-story, mixed-use building that will include university housing, a restaurant and a credit union. It will house approximately 170 students, and the university is expected to complete construction this fall. The new structure has also triggered the development by others of 29 residential housing units — bringing another $5.2 million of investment to a long economically distressed and under-invested neighborhood.
As the expression goes, it takes a village. The project would not have gotten out of the gate but for the New Markets Tax Credit, along with support from the university, Christensen Development Corp., the city of Rochester, and various community groups and business associations.
The positive ripple effect of community development funding is not limited to urban environments. This is evidenced by the impact of the Presque Isle Hampton Inn in far northern Aroostook County, Maine. Presque Isle, with a population of less than 9,700, is the largest city in this rural county which has been hit by more than 10 percent loss of its population over the last two decades as younger people have moved on to find better economic opportunities. Though the commercial center of Maine’s northernmost county, it lacked any kind of “flagged” or nationally branded hotel to accommodate business visitors and recreational travelers, limiting the number of overnight visitors to the area.
Since opening in 2009, the Hampton Inn hotel has accommodated a steady pace of guests and become a significant driver in the local economy. It was a deciding factor in helping the local Nordic Heritage Ski Center and the Maine Winter Sports Center secure the hosting rights to the 2014 IBU World Youth/Junior Biathlon Championships and the U.S. Biathlon Association’s World Cup in 2011 and 2016.
Both of these events bring hundreds of athletes and supporters to town, generating excitement for the event and revenue for local businesses. The availability and quality of accommodations were vital in securing these world-class sporting events, as the organizing committees must ensure that there are sufficient housing and dining facilities for athletes, coaches and support staff. According to Jane Towle, event director for the 2014 IBU World Junior Biathlon Championships, “The local service-based business community plays a critical role in our ability to host a successful event.”
In each of these cases the New Markets Tax Credit encouraged private sector capital to support successful business outcomes in highly distressed communities. This obvious success created for the developers and investors has helped create the confidence for others to invest and support more sustainable businesses. Once “out of the gate,” the positive ripples from these projects are felt by the communities, as they help support more jobs that lead to economic independence for the people who live there.