Combining State and Federal NMTCs in Florida for the Glazer Childrens Museum

NEW MARKETS TAX CREDIT CONNECTION

Prepared by:

Matthew B. Wexler, Cross Sector Consulting

Summer 2011

Combining State and Federal NMTCs in Florida for the Glazer Childrens Museum
Tampa, FL: Several states have created New Markets Tax Credit (NMTC) programs modeled on the federal version, including Florida, Louisiana, Kentucky, Missouri and Illinois. Combining state and federal NMTC credits are a natural match in order to aggregate the benefits of both programs. Utilizing a $20.5 million Qualified Equity Investment (QEI), the Childrens Museum of Tampa d/b/a the Glazer Childrens Museum financed its 53,000 square foot facility in downtown Tampa through this combination. The transaction required collaboration between two Community Development Entities (CDE), one federal NMTC investor, a separate state NMTC investor, and two bridge loan providers. The capital campaign for the Glazer Childrens Museum (GCM) in Tampa, Florida began in 2007 and found many generous donors in the region, led by the Glazer Family Foundation. But in 2008, the philanthropic environment suffered a double setback with the stock market dip and the banking crisis. New donations slowed to a trickle for GCM which threatened the vision of a brilliant new facility. In the fall of 2009, with a little more than half the money raised, and another quarter pledged but not available for a few years, Al Najjar, CEO of the museum, faced a difficult decision. Pricing for construction would not stay down for much longer; the museum had executed a land lease with the City of Tampa, and the existing donors, although patient began to grow a little restless. Najjar remained undeterred and with the help of Fifth Third Bank, secured interim financing to begin construction. Yet with a permanent financing gap of about $4.5 million, the future of the GCM remained uncertain. Najjar struck upon the idea of NMTCs as a potential funding source and began to work with Cross Sector Consultants to find NMTC allocation and structure the deal. Anticipating a need for more than $20 million in NMTC allocation authority, the deal would likely require more than one CDE to participate. Stonehenge Community Development, LLC (Stonehenge) was the first to step forward with federal and state NMTC allocation, attracted to GCM chiefly by the significant impact of the museums activities on the local minority population and the museums potential to catalyze additional economic development, both hallmarks of its NMTC strategy. Florida state NMTCs were created in 2009 through the New Markets Program Act in the State of Florida (Florida Statues Section 288.9913 et. seq.) and are overseen by the Florida Governors Office of Tourism Trade and Economic Development. We were thrilled to be able to combine our allocations of federal and state NMTC for the benefit of the Glazer Childrens Museum. Beyond the projects fit within Tampas downtown revitalization plan, the museum took a purposeful approach to making its resources accessible to local Title 1 public school students, many of which are of low-income and minority backgrounds. Moreover, fun exhibits designed to increase the experience of students in the STEM fields (Science, Technology, Engineering and Mathematics), were compelling factors in our decision to support the project, said LQuentus Thomas, Director at Stonehenge. Capital Trust Agency CDE (CTA) immediately paired with Stonehenge, seeing the new museum as part of a larger initiative. The Glazer Childrens Museum joins the Tampa Museum of Art and the Straz Center for Performing Arts to complete a revitalization effort along the Hillsborough River in downtown Tampa. We are very proud to participate in this effort and to use NMTCs for such a tremendous community

benefit, exclaimed Ed Gray, III, Executive Director of CTA. With $10 million of federal allocation from CTA, the NMTC net benefits would fill the financing gap. U.S. Bank served as the state NMTC investor. Fifth Third, which had so strongly supported the museum with interim construction financing, acted as federal NMTC investor. Bruce Bryant, Vice President at the Fifth Third Community Development Corporation, remarked, Our bank already had a valuable relationship with the Glazer Childrens Museum. It only made sense to direct our NMTC equity investment into this project. With two CDEs, one federal NMTC investor, another state NMTC investor, and two bridge loan providers, the complex transaction required creative structuring that enabled the federal and state credits to work together, despite differences in qualifying criteria. Unlike federal NMTC, the state of Floridas qualification criteria include a minimum wage threshold, a defined set of eligible industries, and a leaning towards business QALICBs and owner occupied real estate projects. Ultimately, the group collaborated to develop a workable financing structure, leveraging the experience of Fifth Third Bank and U.S. Bank, the creativity of Stonehenge and CTA (the CDEs) and the support of the State of Florida. The flexibility of the NMTC programs coupled with the hard work of several dedicated organizations made the financing of the Glazer Childrens Museum a success, stated Matt Philpott, Senior Vice President of NMTC, HTC and ITC Investments for U.S. Bank. Closing the NMTC transaction enabled the GCM to close the financing gap to an amount which outstanding donor pledges will pay off within thirty months. Al Najjar praised the entire team, NMTCs have ensured the future of this facility as a community resource for the children of the Tampa Bay region and their families. On behalf of our Board, our members and all our visitors, we thank you! In its first six months of operations, the museum has received over 128,000 visitors, exceeding projections by 35 percent. In that same time, GCM has also delivered over 300 curriculum based workshops for 16,700 local students, and opened its doors for almost 22,000 free visitors. For more information, see www.glazerchildrensmuseum.org.