MMCDC lands $80 million in fed tax credits
In something of a coup for the Midwest Minnesota Community Development Corp. in Detroit Lakes, the agency has been awarded $80 million in federal tax credits.
It was the only entity in Minnesota to receive an allotment of tax credits this year, and the MMCDC will focus on projects that involve sustainable energy and value-added agriculture -- such as ethanol plants, wind energy and biodiesel, according to MMCDC President Arlen Kangas.
The U.S. Treasury Department announced the award recently under its New Markets Tax Credit program, which gives private investors the chance to receive credit against federal income tax in exchange for investments in business and housing in low-income communities, including rural areas.
"This program steers private investment into areas where it is otherwise unlikely to go, providing a tremendous economic development opportunity in traditionally difficult markets," Kangas said.
This is the fourth year of the federal program, which has provided from $2 billion to $3.5 billion annually in tax credits across the country.
MMCDC didn't apply the first year, landed $35 million in tax credits the second year, and applied but failed to be funded last year, Kangas said.
MMCDC applied for $100 million in tax credits this year, and received $80 million. The average allotment per agency is $60 million, Kangas said.
MMCDC collects fees for successfully matching investors with qualified projects, "to find and close the deal," Kangas explained, and also collects per-project "lending" fees, rather like a bank. "It's paid because it's an ongoing responsibility for us to make sure it (the project) is in compliance," Kangas said.
Federal administrators are looking for agencies that can find suitable projects relatively quickly. Agencies have five years to line up projects that qualify for the tax credits, but the Treasury Department would like to see the credits distributed within 18 months, Kangas said.
"They want this money to flow in and flow out quickly," he said.
The MMCDC used its tax credits last time to help fund a plant expansion for TEAM Industries in Bagley and to help the Fergus Falls-based dock and boatlift manufacturer ShoreMaster.
Credits also went towards a high tech science incubator in St. Paul that is now up and running, and -- through a nonprofit group in Minneapolis -- about $8 million went to serve the Latino market as part of a major Sears Tower renovation project.
MMCDC tax credits also helped pay for the renovation of the Sheraton Hotel on the waterfront on Superior Street in old downtown Duluth.
"Of the five projects we funded, we tried to do a range of geography and a range of business types," Kangas said.
As for the new MMCDC focus on sustainable energy and value-added agricultural products, Kangas said his agency would like to fund projects such as ethanol plant construction, but "it all depends on how quickly they get their plans together."
Congressional supporters of the program need to be able to show results to justify its continuation after next year, which is expected to be funded at a level similar to the previous four years.
Sen. Norm Coleman and U.S. Rep. Collin Peterson have both been supporters of the program -- Coleman for its focus on low-income and Twin Cities metro development, and Peterson for its help with rural development, Kangas said.
"Supporters believe trying to spur development in low-income areas is a good way to spend federal money," he added. "We want to thank our elected representatives in Washington -- we think it is one of the most influential community development programs of our time."
Projects are not finalized until after a period of negotiation with investors and business.