Editor’s Note: This is Part 1 of a three-part series by the Novogradac Journal of Tax Credits, looking at how community-developed entities measure impact. This first article focuses on investments related to food. Future parts will focus on environmental and health issues. Climate change considerations and racial/ethnic equity are woven into each article. New market tax credits can be used to mitigate the effects of climate change, including future food shortages in low-income communities, and to increase opportunities for communities of color.
When talking with Community Development Agency (CDE) leaders who allocate New Market Tax Credits (NMTCs) and how they measure the success of their efforts, the short answer is a complicated one: it depends.
“Every project is very different,” said Jennifer Donohue, CEO of Hampton Roads Ventures (HRV), a CDE that allocates NMTCs to rural areas across the country. “Every community is very different.”
Donohue said each investment should be measured on its own basis. Eligible and active low-income communities He finds it difficult to compare one business to the next on apples-to-apples terms, as success looks best when it is tailored to the needs and goals of the activity. As a result, it is difficult to provide a sweeping picture of how the CDE collectively measures success.
Niccolò Pinoli, a partner at Novogradak’s Portland, Oregon office, said the same applies collectively to all CDEs when measuring the impact of food and food-related quotas. Pinoli said it’s generally a bigger problem than messing with columns in a Microsoft Excel spreadsheet.
“I love a good spreadsheet as much as the next accountant, but it may seem like a simple question of who visits the grocery store, but rather than shape their lives for the rest of their lives.” It turns into a big question: “Immediately, what are the implications for improved health outcomes, such as less strain on health care systems, the ability to focus on school and work, the ability to keep working, and the economic impact of affordable health insurance? It makes you think about the impact: food, and how something as simple as affordable access to healthy food can profoundly impact nearly every aspect of our lives.
So it’s the equivalent of measuring the impact of CDEs on food and food-related initiatives. There are many factors to consider beyond what the grocery store stocks on its shelves.
Thousands of CDEs apply to NMTC each year from the Community Development Finance Institutions (CDFI) Fund. When data on applications for the latest round of credit were published in his February, the CDFI fund said nearly 200 CDEs had applied for allocations.
One CDE that is deeply familiar with this cycle is HRV. HRV has allocated funds since the first NMTC round in 2003. Towards the end of his first decade of operations, HRV realized that the majority of its allocations were concentrated in rural areas and pivoted there. as its focal point. “It was a natural progression,” said Donahue.
HRV uses Excel spreadsheets to track data. This is a common reaction among his CDEs when he speaks with Novogradac in this series. HRV also focuses on healthcare and manufacturing projects, mainly in rural areas. This means trying to get more than just the raw data of the allocation, but more broadly, a snapshot of how the impact of the allocation ripples through the community. .
“We really dug into the data and focused on the business strategies that the community felt had to be successful: accessible quality jobs, access to healthcare, and Access to healthy food has definitely been our driving force,” said Donoghue. “We believe that knowing that this Gap Financing will help reach grocery stores in severely deprived rural areas has been a driving force in bringing communities access to essential and critical services.”
An example provided by Donohue was to focus on the nature and quality of the work created.
“When we track jobs and look at living wages, we look at the types of benefits they offer. Do they train in-house for promotions?” Donahue said. . “Is it accessible for people with a high school diploma or less? do you have?”
When it comes to investing in food, Donahue said considerations for measuring impact include the number of grocery store transactions. and/or trying to measure the number of low-income people buying groceries.Donohue said HRV aims to have a catalytic effect on low-income rural communities. This means the surrounding communities as well as grocery stores and other distributions.
“I think what we’re looking at is the number of low-income people that the project will help,” said Donahue. “When it comes to grocery stores, we are focused on SNAP transactions. It is important in proving that you are providing services to
recipe for success
Understanding the context of a community is critical to a successful investment, said Sara Pietka, director of community investments at Ecotrust, a CDE primarily operating in the American West and Pacific Northwest. . The EcoTrust’s strategic plan supports activities that improve climate resilience, strengthen land and water stewardship, and build intergenerational wealth. This plan is a key driver of the company’s investment strategy. EcoTrust’s investment in NMTC must first be aligned with its strategic plan before considering how the project meets the criteria for his CDFI fund.
CDE provides funds to fund food hubs and other food-related businesses, including tribal and rural land. Pietka said it’s also important to understand the history of a community and how that community has changed over time.
“One of our NMTC projects is a regional food hub located in an area with a rich and industrious industrial history dating back to the mid-1800s,” says Pietka. “Many warehouses, distribution and manufacturing facilities still operate in the community, but the neighborhood has grown to include food businesses, small-batch distilleries, coffee roasters and local food retailers. This project respects our neighborhood’s roots and works to advance a more equitable, resilient and delicious local food system.”
Another EcoTrust investment in NMTC funded a tribal project that offers educational programs focused on “fast food” and related collection methods, Pietka said. Fast food represents the holistic approach taken by some tribes to health and life, with seasonal food as a pathway for nourishment in a myriad of ways, including physical, mental and cultural. Eating a complex diet that varies from
“Supporting indigenous and tribal sovereignty through this type of investment will drive meaningful action to dismantle systemic racism in ownership, control and access to land and water in our regions. That’s one way you can take it,” Pietka said.
Avoiding racial equality data to reduce discrimination does a disservice to communities.
“Until you start disaggregating the data by race/ethnicity, you can’t even fully understand the problem, and you can’t really talk about the impact,” says Pietka.
A CDE that shares The EcoTrust’s anti-racism goals is the Low Income Investment Fund (LIIF). It’s a national investor that, since 1984, has used its financial power to create and sustain equitable, opportunity-rich communities supported by affordable housing. In 2020, LIIF kicked off his decade-long effort to push $5 billion towards racial equality. Jessica Standiford, LIIF’s vice president of development and impact investing, said the $5 billion racial equality goal has enhanced how LIIF will take advantage of new market tax credit allocations.
“Our new market tax credit is a really powerful tool,” said Standiford. “We are asking ourselves now: How can we use this tool to create power and agency for people of color? Not in theory, but in practice. We have a clear impact framework centered around race equality, and we have the specific approach we are looking for.”
Beyond organizational work to make better use of this tool, the team is looking at broader investment strategies to ensure a holistic approach to community development.
Lucy Arellano Baglieri, LIIF Executive Vice President and Chief Strategy Officer, said: “We have clear intentions about our impact on the community.”
These clear intentions are defined in the launch of a framework that prioritizes project impact. That framework, coupled with the organization’s new learning and assessment practices, helps teams better analyze long-term results.
Arellano Baglieri agreed with Pietka about the value of knowing the communities CDE invests in.
“The community is very clear about what they want, what they need, what they don’t want, what they don’t need,” says Arellano Valerie. . “Organizations like LIIF can come in and figure out what our precious lane should be.”
Donohue also says that knowing the community helps us better assess the success and impact of a particular venture. As part of the focus on rural communities, Donahue said small changes in one area can lead to big changes in another.
“Rural communities measure success differently than Metro,” said Donahue. “If the project itself creates 75 jobs in his rural area of 6,500 people, that is a huge success for the community. The same 75 jobs in a metropolitan area may not have the same impact on the community itself.
The COVID-19 pandemic has complicated the process so far in the 2020s, but site visits are invaluable, Donohue said. During a visit to one grocery store, Donohue said staff hired nutritionists to prepare menus specifically to help diabetics.
“They created a program specifically for the community,” says Donohue. “They try to stay involved and go well beyond what a normal grocery store does.” This kind of equity-building program is what makes NMTC such a valuable tool.
Donohue said some efforts involve working with multiple CDEs, a proposal that can be both beneficial and complicated, she said. For HRV, that often means working with CDEs, which are locally focused.
Donohue said that if the investment is split with other CDEs, it is important for the CDE to focus on the overall project and its own part.
“If you’re measuring it in dollars invested in a project, if we put in $5 million and another CDE puts in $5 million, our impact is split.” Donohue says. “They plan to report his 50% of these jobs … We need to make sure the impact is at the same level, but proportional to the level of investment.”
Donohue said there is a gray area between working with other CDEs and acknowledging that other CDEs may compete.
“We have a lot to learn from other CDEs because we are doing the same thing and we all want to make a difference for low-income communities,” said Donohue. increase. “We are all trying to find out what works. … We all know each other. Some may be close to the best when applying, but overall, this is a tight-knit industry and I’m fortunate to be part of it.”