Documenting the economic impact of a New Markets Tax Credit (NMTC) allocation is an important component of determining the effectiveness that project might have on the low-income communities it intends to serve. Yet oftentimes Community Development Entities (CDEs) do not have the adequate resources to accurately measure the economic impact a project might have, thereby compromising the integrity of the project and future award opportunities. In a recent article, Baker Tilly Virchow Krause, LLP addresses the importance of community impact assessments on NMTC deals. A community impact assessment “offers insight on the impact of NMTC financing for real estate and non-real estate projects in low income communities.” The firm suggests that an accurate measurement can determine if the project will deliver the maximum impact within the targeted community and can measure the value of such investments over time.
Baker Tilly also contends that a community impact assessment should cover both pre- and post-development impacts in order to effectively evaluate and predict the returns on and impact of projects on communities, taxpayers, borrowers and other stakeholders involved. Pre-development assessments allow the CDE to determine potential impact from their participation in the project, which communities are of the greatest need, and which projects have the highest potential value for impact. Ultimately, the pre-development assessment gives the CDE the best information to help shape a NMTC deal and align the project to fit with both the community’s plans and the CDE’s mission. The pre-development assessment also serves as the basis for the assessment that should be undertaken post-development. Post-development assessments should cover how/whether the NMTC investment was properly implemented to foster the maximum economic impact. The review should compare intended impact with actual outcomes to determine if the project is living up to its intended potential.
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