A potential new endeavor involving the cities of Camas and Washougal, and the Port of Camas-Washougal could provide the seed money to take part in a federal tax credit program aimed at supporting local economic development projects.
Consultant Don Mazziotti and Stephen Brooks, principal with Portland-based Pilot Management Resources, Inc., recently presented information on the New Markets Tax Credit Program to both city councils, and the port commission.
Camas-Washougal Economic Development Association Executive Director Paul Dennis said it’s a program he has been looking at for a couple of years.
“We are interested in setting up our own entity here for the Camas-Washougal area,” he said. “We are interested in doing projects primarily here, and being able to take the proceeds and reinvest them back within our community.”
Dennis has proposed hiring Mazziotti and Brooks as part of an $87,500 contract with CWEDA, an organization that exists through a partnership between the cities and the port. The port would pay half, while each city would contribute equally to the remaining 50 percent.
In addition, an agreement would be penned between Camas, Washougal, the Port and CWEDA, outlining how the money would be used.
The consultants would help with the formation of a certified “Community Development Entity,” serve as guides through the first application process, and assist with the implementation of the tax credits — if a local project is selected.
The federal NMTC Program, which was established by Congress in 2000 during the Clinton administration, empowers the United States Department of the Treasury to grant tax credits to certain projects.
“It’s a very unique program,” Mazziotti said. “Every year the U.S. Treasury goes to Congress and proposes an allocation of funds necessary to fund tax credits for eligible projects in distressed areas, which would achieve the primary goal of attracting private sector investment. While this is a government program in terms of its sponsorship, the fuel that makes it work is private sector investment.”
For every dollar contributed by a qualified investor, there is a 39 cent credit that goes back to the investor — redeemable at the end of seven years.
Projects ranging from commercial to industrial to public can qualify, but must be located in areas that meet qualification ratings based on factors including employment rate, distress level, or designation as an enterprise zone or urban renewal district.
Dennis said nearly all of Washougal and a significant portion of Camas qualify under the federal program.
“You can qualify a project for the use of New Markets Tax Credits in order to achieve a 20 percent piece of the project paid for by tax credits,” Mazzotti said. “In the world of finance, that kind of savings on a project cost is enormous. It can make the difference between feasibility and not on a given project. But more importantly, it can attract private sector investment in areas that otherwise are not receiving the level of investment that is desired by either the community or the U.S. Treasury.”
Types of projects that cannot be funded through the program include golf courses and residential rental housing.
To participate, a single Camas-Washougal headquartered Community Development Entity composed of a governing board and an advisory board must be formed. The entity receives and distributes the tax credits.
The governing board is made up of people who have a stake in investment in the area, while the advisory board represents low and middle income residents and organizations that serve this demographic.
While the process of becoming a certified CDE is considered routine, Brooks said the application process to be awarded the tax credits is highly competitive.
“Usually about 30 percent of applicants get an award,” he explained. “Last year, the allocation was $3.5 billion worth of credit authority, and there were $28 billion worth of requests.”
There are currently active CDEs in Portland and Seattle. Projects in Oregon and Washington that have used NMTC include FarWest Steel, ProLogis, Seattle Children’s Hospital and Mercy Corps World Headquarters.
“They tend to be projects which otherwise would not be accomplished by private sector, because the return would not be adequate or sufficient to make them work,” Brooks said. “With the new market tax vehicle, they can work and are working all over the country.”
Dennis said as part of the first application process, three local projects would likely be submitted — one each from Camas, Washougal and the port.
“We’ve got a lot of private sector interest,” he said.
A port project would likely involve the Steigerwald Commerce Center.
Camas Mayor Scott Higgins said the downtown core areas of Camas would be an initial target for the tax credits.
“Those are areas that would likely qualify for these kinds of projects down the road,” he said. “Where we are seeing good development, it is less likely that they would qualify. We think it could open up a lot of opportunities for downtown. I’m excited about the future that this could hold.”
Higgins added that the $87,500 local investment being requested for start-up costs could be viewed as “seed money.”
“We are talking about planting something, letting it grow, and then we’ll get to pick the fruit,” he said.
Dennis hopes to have a final decision about whether Camas, Washougal and the Port will take part in forming the CDE in April. The deadline to submit NMTC Program allocation applications is in mid-September.