New Markets Tax Credits F. Robert Wilson, CEI Capital Management LLC September 26, 2013

New Markets Tax Credits One tool in the Economic Development Finance Toolkit

New Markets Tax Credits 40,00 ft. view of 1) What they are 2) Which jobs they are appropriate for?

New Markets Tax Credits - $36.5 billion in tax credit authority - approx. $11 billion in NMTC equity - 385,000 jobs million SF of commercial real estate (manufacturing, office, and retail)

Project Finance vs. Growth Capital vs. Working Capital

NMTC DEALS ARE COMPLEX… so always hold this thought: Traditional Project Capital Stack

NMTC Project Capital Stack NMTC DEALS ARE COMPLEX… so always hold this thought:

NMTC Project Capital Stack NMTC DEALS ARE COMPLEX… so always hold this thought:

NMTC Project Capital Stack NMTCS PROVIDE APPROXIMATELY 20% OF THE PROJECT CAPITAL AS LOW/NO-COST, NON-DILUTIVE EQUITY! NMTC DEALS ARE COMPLEX… so always hold this thought:

WHO? WHERE? WHY?

WHERE?

1. GEOGRAPHY Qualified Census Tracts Per 2010 Census: –80 % of Median Family Income –20% Poverty Rate – Multiple other criteria for “Higher Distress” Mapping - /

2. Targeted Populations Project Based Employment of low income workers Ownership by low income community Revenue derived from services to low income individuals or community Multiple other criteria for “Higher Distress”

WHO / WHY?

WHY? The Answer Depends on Who You Ask

WHO / WHY US. Treasury: To drive private capital into Low Income Communities (LICs) Borrower: Low Cost, Flexible Capital Allocatee: Mission and earnings as an intermediary

WHO / WHY? US. Treasury: To drive private capital into Low Income Communities (LICs) Allocatee: Mission and earnings as an intermediary Borrower: Low Cost, Flexible Capital Investor: Adequate Risk adjusted ROI Lender: Adequate Risk adjusted ROI

Plymouth Community Health Center Plymouth, New Hampshire As of 8/01/06 (a) NMTCs $1,337,700 QEI $3,430,000 Debt Service Loan Payments Equity Investor Bank Consortium (Owns 99.99% of Pooling LLC) Franklin Savings Bank = $377, Woodsville Guaranty Savings Bank = $377, Community Guaranty Savings Bank = $251, Total Bank Consortium Equity = $1,006, Equity Investor Bank Consortium (Owns 99.99% of Pooling LLC) Franklin Savings Bank = $377, Woodsville Guaranty Savings Bank = $377, Community Guaranty Savings Bank = $251, Total Bank Consortium Equity = $1,006, Prime “A” Debt Bank Consortium Prime “A” Debt Bank Consortium CCML New Hampshire Investment Fund II LLC Investor Pooling Fund LLC Total = $3,433,600. (Owns 99.99% of CDE) CCML New Hampshire Investment Fund II LLC Investor Pooling Fund LLC Total = $3,433,600. (Owns 99.99% of CDE) Loan= $1,647,212 CCM Real Estate III LLC CDE CCM Real Estate III LLC CDE Loan $3,320,000. CRDC Plymouth Community Development Corp. QALICB CRDC Plymouth Community Development Corp. QALICB Debt Service Loan Payments CCML NMTC Mgr. (0.01%) CCML NMTC Mgr. (0.01%) Front End Fee $343 $415,000 RDLEG Loan $360,000 CCML Managing Member (0.01%) CCML Managing Member (0.01%) *Note: $3,600 held in operating expense reserve account. Equity = $1,006,388 NMTCs = $1,337,566 + $ Back-end fee (5%) $115,000 debt service CDBG Loan CDFA Loan $250,000 debt service CRDC Loan Mid-State Health Center Tenant Mid-State Health Center Tenant $101 CRDC Loan $71,100

2013 ADC BASE REDEVELOPMENT FORUM | PAGE DEAL EXAMPLES

$10MM Project with $10MM allocation ($10MM QEI) Debt: $6.97M / NMTC Equity $3.03M Tax credits on equity = $3.9M Price paid / NMTC credit = $0.776 IRR impact factors: tax rate, loss carries, earnings on reserves… EXAMPLE NMTC PROJECT

After-tax IRR: 7.52% (assumes 35% tax rate) Senior leverage loan at market rate (at 70% LTV) Borrower’s rate 180 bps below market rate (at 100% LTV) EXAMPLE NMTC PROJECT OUTCOMES

REMEMBER!!!! NMTC Project Capital Stack NMTCS PROVIDE APPROXIMATELY 20% OF THE PROJECT CAPITAL AS LOW/NO-COST, NON-DILUTIVE EQUITY!

2013 ADC BASE REDEVELOPMENT FORUM | PAGE High Capital Required Low Highest RiskLowest Risk Seed Capital Concept Planning & Verification Start-up Revenue Generation GrowthMature Growth Venture Capital Public Market Equity Earnings Debt Capital Early StageExpansion Acquisition - Buyout SOURCES OF CAPITAL FOR A GROWTH COMPANY

2013 ADC BASE REDEVELOPMENT FORUM | PAGE High Capital Required Low Highest RiskLowest Risk Seed Capital Concept Planning & Verification Start-up Revenue Generation GrowthMature Growth Venture Capital Public Market Equity Earnings Debt Capital Early StageExpansion Acquisition - Buyout SOURCES OF CAPITAL FOR A GROWTH COMPANY

RISK VERSUS BUSINESS GROWTH STAGES SOURCES OF FINANCING & REASONS FOR BORROWING RISK & SOURCES High Low Personal Savings, Relatives Personal, Venture Capital Specialized Lenders, Banks with Guarantees, Venture Capital Banks With or Without Guarantees Banks Banks - Workout