When the Food Bank of the Rockies began exploring a $12 million expansion on the Western Slope in early 2022, Chief Financial Officer Heather MacKendrick Costa discovered a gold mine of sorts in the form of a new funding mechanism, or at least new to her.
The New Markets Tax Credit program helped the Food Bank shave a couple million dollars off the Grand Junction expansion’s price tag. That’s hard to pass up.
So, the nonprofit did three more NMTCs, including one for its new 260,000-square-foot distribution center in Aurora, slated to open later by December. The $75 million facility has room to quadruple the number of meals for kids and store 20 million more pounds of food.
The savings? About $11.5 million, Costa said.
“In the end, it’s free money to us. It’s not something that we have to repay,” Costa said. “It was really just, here’s another way that we can raise more money for this project.”
Costa tapped into the decades-old tax credit created by Congress in 2000. NMTCs encourage private investors to put cash into economically distressed communities with high unemployment and low-income households. Investors gain future federal tax credits, while the community organization gets a low-interest loan that is often forgiven after seven years.
Of course, the process is much more complex — Costa said she had to find an “NMTC whisperer” — but it’s an economic development tool with bipartisan appeal, even in the year of relentless federal cost cutting and decimation of social services and federal grant programs.
The New Markets Tax Credit Coalition has counted up 9,000 projects, 1.2 million new jobs, $76 billion in allocated tax credits and $143 billion invested in public-private partnerships nationwide since the tax credit became official 25 years ago.
Colorado is home to nearly 150 projects that have been helped along with $2.1 billion in tax credits, at least as of 2024. In the state, more than 8,700 jobs have been created and 2.6 million square feet of real estate constructed or renovated, according to Coalition data.
Funding for the program was set to expire at the end of the year. But last month, Congress made NMTCs a permanent part of the nation’s budget in Trump’s One Big Beautiful Bill Act.
“That was a big relief,” said Ceyl Prinster, president and CEO of the Colorado Enterprise Fund, a mission-minded financial service that acts as an intermediary for the tax credits between investors and projects like Food Bank of the Rockies.
Colorado Enterprise Fund had to become a certified Community Development Entity, or CDE, to participate. It has received $210 million worth of tax credits since 2020 and divvied up $176 million so far in Colorado. Projects include the renovation of Hotel St. Cloud to revitalize downtown Cañon City; the new Eagle Valley Behavioral Health medical center in Edwards; and Cleo Parker Robinson Dance’s new Center for the Healing Arts, which is set to open later this year.
If the tax credit program had expired at the end of the year, “our pipeline would be out of luck,” Prinster said.
But the NMTC program almost didn’t make it into the bill. The Senate added it in before Congress voted and sent it on to Trump.
Congress should have let it expire, said Adam N. Michel, director of Tax Policy Studies at the CATO Institute, a right-leaning libertarian think tank.
He called it a complex and costly program with negligible results for the intended communities. Other government programs, like Opportunity Zones, provide incentives to investors for work in the same low-income communities.
“(NMTCs) can help people and it can also be a waste of money,” Michel said. “As we’ve seen historically, the actual benefits of the tax credit will continue to be primarily captured by the financial industry that profits from these deals. And to the extent that the local nonprofits or businesses get some of these loans, those individual organizations may also benefit but that will come at the expense of investment that probably would have happened anyway.”
How it works
Ryan Hagerty doesn’t like to call it free money. He’s Costa’s NMTC whisperer and is a partner at SB Friedman Development Advisors in Chicago.
His job is to connect the different parties, matching investors to projects and checking to see if CDEs have tax credits available.
CDEs are the intermediaries for such deals. They also tend to be Community Development Financial Institution, a special financial service serving low-income neighborhoods that sprung up in the 1970s to address discriminatory lending. CDEs earn fees on the transactions (Colorado Enterprise Fund credited NMTC fees as a “$1M+” investor in its 2024 annual report. That money supports its mission to offer microloans and free business programs, Prinster said).
Going the NMTC route can help a nonprofit organization save up to around 20% of the project’s cost and so much more, he added.
“You may be able to speed up the project because you have additional funds, (a shorter) capital campaign (and) maybe you can do a bigger project. So instead of a six exam room health clinic, maybe an eight exam room health clinic,” Hagerty said. “Over the last couple of years (with) inflation and construction cost increases, an organization might have been able to fundraise $10 million on their own but now the project costs $12 million and they have to figure out a way to get that extra $2 million. New Markets is one tool to raise additional funds.”
There is a lot of due diligence involved, Costa said. Food Bank of the Rockies still had to take out a $23 million construction loan because “we had to be able to prove that we can fund the entire project even if we got no fundraising,” she said. The loan acts like a line of credit and is just “sitting there. We haven’t used it.”
Investors, normally large banks, provide the financial equity in exchange for tax credits worth 39% of their investment. Tax credits are claimed over seven years, or can be sold. At the end of seven years, “it is industry practice to unwind the transaction, which allows the NMTC loan to be forgiven,” Hagerty said.
It also helps banks meet credit needs of low-income communities, as encouraged by the Community Reinvestment Act. It’s not supposed to be an investment with high returns, at least not directly.
“We invest in New Markets Tax Credit projects because they help bring critical resources — like health clinics, manufacturing facilities, and job training centers — to communities where we live and work,” said Laura Vowell, managing director of Community Finance Solutions at U.S. Bancorp Impact Finance, said in an email.
Her organization is a subsidiary of U.S. Bank, which has invested in more than 2,000 NMTC projects in the U.S. and 27 in Colorado, like the Stout Street Health Center in Denver.
“The investments are designed to help create jobs, economic development, and opportunities in low-income communities,” she said. “NMTCs are an important tool to help build thriving communities.”
It’s the federal government — allocating $5 billion last year and $10 billion this year — that is taking the chance. The publicly-funded program wants strategic investments in low-income communities to have positive economic impact, which could be in the form of new residents and businesses that spend money in the neighborhood and pay taxes.
Studies on the impact of NMTCs are hard to find, aside from a few reports conducted more than a decade ago.
An Urban Institute report from 2021 did find “large increases in local economic activity following NMTC projects.” Areas with projects focused on job growth saw an average of 101 more jobs. Projects focused on business growth saw an average of 18 new firms enter the community. But the study also pointed out that in some cases, some positive economic growth was already underway before a project began.
A new grocery store in Fountain
Paul Anderson, a lobbyist for New Markets Tax Credit Coalition, calls Opportunity Zones complementary. Opportunity Zones, which let investors defer paying taxes on capital gains for 10 years, are focused mainly on housing and larger investments. NMTCs are more about small businesses, like day cares, health care facilities and even grocery stores.
It’s the stuff lawmakers see in their communities, so there tends to be a good amount of bipartisan support for such programs, said Anderson, who lobbied to make NMTCs permanent.
“When I talk to representatives or senators and I say, ‘That supermarket on Third and Vine, that’s an NMTC project,’ they all know the projects and all the economic development that goes on in their state or district. But they didn’t know they were NMTC projects,” he said. “And when they see the projects, they understand that it was done by the tax credits.”
Kroger, the parent of King Soopers, has built several new grocery stores in NMTC-eligible census tracts deemed “food deserts,” or areas with limited access to fresh food. Kroger officials did not respond to questions about the credits, but the grocery chain has attracted NMTC investors in multiple states, including Ohio, Michigan, Georgia and Colorado, where the newest King Soopers opened in Fountain two weeks ago.
The Colorado Springs suburb of about 30,200 residents is packed with NMTC-eligible census tracts of low-income households.
“Our city has continued to experience a lack of grocery and retail services to meet the demand of our growing community,” Mayor Sharon Thompson said in an email. “We are appreciative that Kroger has recognized the need and are delighted that they are investing in the Fountain area to establish their premier brand of services in our community.”
A Safeway is about a mile away from the new King Soopers. There’s also a Walmart within its 22-square-mile borders. To support the new store, the city is expanding its transit system “to ensure equitable access to grocery and retail services,” Thompson added. That could be up and running by Sept. 1.
Public incentives, however, create an unfair advantage if similar businesses are already in the community, said Michel, with the Cato Institute.
“It will probably benefit but at the expense of the other store, whose business will probably suffer,” he said. “Generally, if the area can only support one grocery store and the government is putting their thumb on the scale to add an additional one that cannot be fully supported by the community in that area, then both businesses will ultimately suffer and you may end up with two failing grocery stores.”
But Prinster, with the Colorado Enterprise Fund, said incentives like NMTCs are meant to encourage economic growth in areas that corporations and investors overlook.
“It does incentivize not only the bank to invest but also companies like that to build,” she said. “And they don’t have to pay back that certain portion from the investor.”
Why do nonprofits like NFTCs? Less fundraising
Local nonprofits have benefited from NMTCs, and some of them multiple times.
In his two years as CEO of Habitat for Humanity Denver, Jaime Gomez said NMTCs have been used three times. He was already familiar with it from his old job at the Colorado Housing and Finance Authority, which established the Colorado Growth and Revitalization Fund in 2005.
“The New Markets Tax Credit provided us with that below-market financing that allowed us to receive a net benefit of nearly $4 million, which we’re pouring into our mission to create more homeownership opportunities for people throughout the Denver metro area,” Gomez said.
CHFA’s own NMTC fund is in partnership with the city of Denver. Since inception, it has deployed more than $337 million in tax credits, which have created more than 3,500 jobs in underserved communities, according to a CHFA spokesperson.
That includes Habitat’s new 46,000-square-foot headquarters on Navajo Street in Denver. The facility houses offices, as well as inventory for its retail stores. There’s also a production shop where employees can build and repair homes indoors — handy when bad weather shuts down outdoor activity. That should increase productivity by 30%, retain 96 employees and employ 20 additional workers.
The $21.7 million project was pieced together by CHFA’s Colorado Growth and Revitalization Fund and the Colorado Enterprise Fund. The cost included the buying the property, building renovation and working capital. At the end of seven years, Habitat will realize a savings of nearly $4 million. Native American Bank in Denver provided a $5 million loan, which Habitat must pay back.
Without NMTCs, “We would not have been able to do this, or certainly not to the scope (and) in anywhere close to the time frame,” Gomez said. “We would have had to undergo a capital campaign and take on more debt. It would have taken maybe two or three years longer.”