The idea, in it's purest form, was called "community capitalism" as think tanks along with many of the nation's top economists started pushing a revolutionary idea that began to take hold in late 1990s -- the solution for economic revival in impoverished America stretched beyond traditional anti-poverty programs.
The answer, they maintained, to creating sustainable and measurable economic opportunity throughout these regions "left behind" rested in private investment.
With national unemployment at 4% and the federal surplus continuing record gains, as America had all but erased it's national debt, President Clinton signed the Community Renewal Tax Relief Act into law in December 2000 including a critical provision to help bring opportunity to severely distressed low-income urban, older suburban and rural communities which had failed to enjoy in the prosperity boom of the 1990s: The New Markets Tax Credit.
Working closely with then-Speaker Dennis Hastert and GOP Senate leadership, the Clinton administration crafted this business-based solution designed to stimulate private economic growth in neglected regions throughout the nation.
At the time of its introduction, the program marked a decidedly different and bold approach to helping "America's forgotten neighborhoods" replacing models of the past that relied exclusively on federal grants with a commercially oriented plan to direct private dollars into areas where employment was scarce; investment non-existent.
A decade later the innovation behind the "New Markets" public system/private sector approach has become a policy standard and continues to enjoy Republican and Democrat support based on its record of success as recently evidenced by the latest joint effort of Senators Jay Rockefeller (D-WV) and Olympia Snowe (R-ME) who urged Congress to renew the program last week introducing S996: a five year extension of the program.
How it Works
At its core, "New Markets" is designed to encourage private investments from corporations and individuals who might never consider buying into so-called "high-risk areas" of America where unemployment and poverty rates can soar by as much as twice the national average.
As both Senators Rockefeller and Snowe have attested, the program is geared to provide much needed capital so that all qualifying locals -- from urban to rural -- can benefit, consequently improving the quality of life and building employment opportunities for people in these areas through lasting investments in local businesses.
Administered by the Department of Treasury, investors receive a seven‐year, 39 percent federal tax credit for New Markets investments: a five percent credit in each of the first three years, six percent annually in the last four years.
These investments are made to spur community and economic revitalization. The statute requires that investments be located in census tracts where the individual poverty rate is at least 20% or median income does not exceed 80%.
Today, $50 billion of capital is flowing in under-served communities in all 50 states, the District of Columbia and Puerto Rico.
Yet unlike many other tax credit programs the "New Markets" program has required renewal during each session of Congress since its introduction.
New Markets Success
There are and will always remain those who will attempt to discredit the "New Markets" program by delving into what some call "the less than 2%" arena -- pointing to a handful of projects out of some 3,000 which, while approved and in qualified areas, may not seem worthy of recognition.
But taken on the whole, the "New Markets" program has made significant improvements in distressed communities throughout the country, creating opportunity and jobs while defraying costs to the taxpayer and federal government.
In fact, The New Markets Tax Credit Coalition conducted an independent audit of the program as it reached its 10th Anniversary. Some of the key findings include:
- Between 2003 and 2009 the New Markets Tax Credit leveraged $8.00 in private investment for every $1.00 of cost to the government.
- Demand for funds far exceeds availability. To date, community enterprises have requested a total of202 billion in allocation authority since 2003, a demand of more than seven times the credit available.
- The vast majority of "New Markets" investments (89.5%, of the dollars invested) have been made in communities with at least one factor of higher economic distress than required by law (unemployment rates at least 1.5 times the national average, poverty rates greater than 30%, median income less than 60% of area median).
And then there is this:
According to the website for the American Reinvestment and Recovery Act, the cost to taxpayers to create one job requires approximately $90,000 in federal dollars. In contrast, "New Markets" programs -- fusing public incentives with private funds -- have created nearly 500,000 jobs at a cost to the federal government of less than $12,000 per job.
By any definition the New Markets program has exceeded expectations.
Not only has it created a successful model of for-profit, business-driven expansion of investment, job creation and economic opportunities in distressed communities with government and the community partnerships playing key supportive roles -- it has done so in tough times when private capital has been hard to find due to the credit crunch and slowing economy.
Continuing this program is in the best interest of businesses, taxpayers and communities hit hard by recent economic conditions.
Let's hope Congress agrees.