The U.S. Department of the Treasury certified Kitsap County NMTC Facilitators I, LLC (KCNF) as a Community Development Entity (CDE) on February 24, 2003. KCNF is a wholly owned subsidiary of Kitsap County Consolidated Housing Authority (KCCHA) formed pursuant to KCCHA Board Resolution No. 2002-29 for the purpose of applying for and administering the New Markets Tax Credit Program. The Board of Directors consists of six members; no less than 20% of the Board represents the identified low-income communities per NMTC requirements. KCCHA was identified as Managing Member of KCNF.
In support of this application, local and national financial institutions have provided letters of intent to participate in the program in the amount of $118.5 million. Participating financial institutions include American Marine Bank, Bank of America, KeyBank, Kitsap Bank, Kitsap Financial Services, Westsound Bank, U.S. Bank, and a national syndicator, Meridian Investments, Inc. Potential projects with a value in excess of $300 million have been identified as potential recipients of below market rate financing resulting from the tax credit investments. The City of Bremerton has shown support for this program by facilitating comprehensive plan and zoning changes in the project areas.
In April 2004, the CDFI Fund notified KCNF that it had received a New Markets Tax Credit allocation in the amount of $40,000,000. In February 2005 the Allocation Agreement was finalized and KCNF was in business. KCNF is now authorized to provide NMTC loans to six poverty census tracts within Bremerton (803.00, 805.00, 806.00, 810.00, 811.00, and 812.00).
The New Markets Tax Credit Program works as follows:
An investor provides an equity investment to the CDE in return for tax credits in the amount of 39% of the investment. The investor may take the tax credits at the rate of 5% for each of the first three years after making the investment, and 6% per year during the subsequent four years. The investor becomes a majority owner of the CDE.
The CDE remains the managing entity through out this entire process. A portion of the equity investment will be used to cover operating costs incurred by the CDE, and 2% of the equity investment will be used for a loan loss reserve fund. A portion of the interest payments on the loan will be used by the CDE to manage the loan.
The CDE uses the equity investment to provide below market interest rate loans to businesses in the eligible census tracts. For the purposes of our program, the loans will be used for real estate projects. The loans will be combined construction/take out loans with seven-year balloons. During the seven-year NMTC required project period, interest only payments will be received by the CDE. Early principal payments are not allowed.
At the end of the seven-year loan period the principal amount of the loan will be refinanced and repaid to the CDE with the proceeds. Upon termination of each loan period, the funding CDE will be dissolved according to the Operating Agreement.
Detailed information for the Borrower
NMTC Structure
Department of the Treasury CDE Certification Letter
NMTC Low-Income Community Definition
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