Community Development Financial Institutions Fund
U.S. Department of the Treasury
Oral Statement - As Prepared for Delivery
June 18, 2009
Good morning, Chairman Watt, Chairman Neal, and distinguished Members of the Committee on Financial Services, and the Committee on Ways and Means. I am delighted to be here today to testify at this hearing on the U.S. Government Accountability Office’s recent report that addresses the success rates of minority entities in the New Markets Tax Credit Program.
As Director of the U.S. Department of the Treasury’s Community Development Financial Institutions Fund – or CDFI Fund - I want to assure Congress that since I became Director almost two years ago, I have been committed to expanding participation in all of our programs.
First, I would like to thank Chairman Neal and Ranking Member Tiberi for recently introducing H.R. 2628, “The New Markets Tax Credit Extension Act of 2009” that would extend the New Markets Tax Credit Program through 2013, and allow New Markets Tax Credit investments to be used as an offset against Alternative Minimum Tax liabilities for awards made in 2009.
Last month, and just 100 days after the President signed into law the Recovery Act, I had the privilege of joining Treasury Secretary Tim Geithner, Chairman Frank, Congressman Capuano, and Governor Deval Patrick in Roxbury, Massachusetts to announce that 32 organizations had been selected to receive $1.5 billion in New Markets Tax Credit allocation authority that was made available under the Recovery Act.
The event was held at the new headquarters of Project Hope, a multi-service agency that provides low-income women with children access to education, jobs, housing, and emergency services. The building is located in a predominantly African-American community and was financed with a $4.8 million investment made possible through the New Markets Tax Credit Program. The new community center will significantly increase the number of local residents that Project Hope can serve.
This is a great example of the type of story and community impact that is often undetected among the statistics and data of program evaluations but are the most important aspect of what we are trying to accomplish with programs like the New Markets Tax Credit Program.
Since 2002, the year of our first New Markets Tax Credit Program round, the CDFI Fund has allocated $21 billion in tax credit authority to Community Development Entities – or CDEs. Since September of 2008, investors have invested close to $2 billion into CDEs, demonstrating the resiliency of this program in even the most difficult of economic times.
These investments have financed a wide variety of projects, including charter schools, health care facilities, performing arts centers, manufacturing companies, alternative energy companies, business incubators, grocery-anchored shopping centers, substance abuse treatment facilities, and facilities for the homeless.
The New Markets Tax Credit Program is highly competitive. In any given application round, only about one in four applicants is selected to receive an award, and requests for tax credit authority have been between six and nine times greater than what is available to award.
The CDFI Fund agrees with the GAO’s conclusions that, within this highly competitive application environment, organizations that have identified themselves as minority-owned CDEs have not received allocation awards in proportion to their representation in the application pool. The CDFI Fund does not believe that this lower rate of success for minority CDEs, or for that matter the success rate of any other category of CDE, is attributable to biases in the application review or selection process.
Despite the application challenges that are faced by minority-owned CDEs, the CDFI Fund believes that the New Markets Tax Credit Program has been extremely successful at bringing benefits to communities with large minority populations.
Census tracts where New Markets Tax Credit investments have been made, have minority populations totaling 47 percent - almost double the overall national average of 26 percent.
Furthermore, over 45 percent of the dollars invested under the New Markets Tax Credit Program have been invested in communities where the majority of the population is comprised of minorities.
New Markets Tax Credit projects are benefiting minority communities all over the country, even in our own backyards. Here in Washington, DC, New Markets Tax Credit investments have been used to finance charter schools with populations that are 100 percent minority; minority-owned businesses; a community and cultural center in a neighborhood where 93 percent of the residents are African-American; and, in that same neighborhood, a shopping center anchored by a Giant supermarket – the first grocery store located in the community in over a decade.
Notwithstanding the great successes we have seen benefiting minority communities, we do need to work together to increase participation by minority-owned CDEs in the New Markets Tax Credit Program. To this end, the CDFI Fund will focus on the following initiatives:
- Continued outreach to minority-owned CDEs. The CDFI Fund will continue to vigorously pursue outreach and training opportunities that will ensure minority institutions are aware of the benefits of the New Markets Tax Credit Program, and are given every opportunity to apply for allocation awards.
- Solicitation of public comments. Next month the CDFI Fund will be soliciting comments pertaining to the New Markets Tax Credit application procedures, and will request comments on how it can expand the participation of minority-owned and controlled CDEs.
- Continued dialogue with Congress. The CDFI Fund has always been responsive to instructions from Congress regarding the New Markets Tax Credit Program priorities. The CDFI Fund very much looks forward to a continued dialogue with Congress on these matters.
In closing, I hope that through these initiatives, specifically the new outreach efforts, the CDFI Fund will be better able to reach a greater audience of potential awardees and also encourage greater collaboration with organizations and federal agencies that serve minority populations.
The New Markets Tax Credit Program has been a tremendous success in low-income and minority communities throughout the country, and I am confident that it will continue to be so in the future.
Thank you for inviting me here today, and I look forward to answering your questions.
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