Focus turns toward New Markets Tax Credit

After discussions and questions in two consecutive meetings, the Denison City Council on Tuesday voted to enter into a 28E agreement with the Nishna Valley YMCA for the management of the Crawford County Wellness Center.

That decision follows last week’s announcement that the project will be getting a $1 million Community Attraction and Tourism (CAT) grant from the Enhance Iowa Board.

The motion to enter into the agreement was contingent on putting the legal description of the wellness center property in the language.

“I’m obviously supportive of this (agreement) because our city does not have a history of management and oversight of these types of facilities,” said Councilwoman Jennifer Zupp-Smith, who is also a member of the wellness center committee.

She said the management agreement with the YMCA would help to secure funding through the New Markets Tax Credit (NMTC).

Information about the NMTC program says it was established in 2000 and helps economically distressed communities attract private capital by providing investors with a federal tax credit. Under the program, tax credit authority is allocated to Community Development Entities (CDEs) through a competitive application process.

A December 14 article in The Denison Free Press mentioned the potential of $3.6 million in New Markets Tax Credits for the wellness center project.

“One of the factors that the New Markets Tax Credit CDEs look at is whether or not their investment is expected to last at least seven years,” Zupp-Smith explained at Tuesday’s city council meeting. “Obviously, with the management agreement in place, that takes care of the facility properly. That’s going to be seen as a positive.”

She added that the New Markets Tax Credit consultant the project is working with had indicated multiple times that the CDEs prefer to invest in projects where a nonprofit is involved. Having a nonprofit involved makes the investment look better to the federal government when the CDEs apply in the future to seek more New Markets Tax Credit allocations.

Zupp-Smith and City Manager Jessica Garcia pointed to the good working relationship that already exists with Dan Haynes, executive director of the Nishna Valley YMCA. Zupp-Smith also mentioned the history of success of the Nishna Valley YMCA and the longevity of the YMCA in general.

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Zupp-Smith said the consultant for the New Market Tax Credit will attend a CDE conference next week starting January 24, where the consultant plans to try to get the city a deal with one, two or maybe even three CDEs.

“If she (the consultant) can know by next week that we actually have a management plan in place, the odds that she would be able to secure a deal for us are way higher than they otherwise would be,” Zupp-Smith said.

She also pointed out that the award of the $1 million CAT grant is contingent upon raising the remaining funding for the wellness center in the next six months.

“Which means, practically speaking, we need to close the New Markets Tax Credit deal, which takes time because of a lot of legal work and real estate searches, so I feel strongly that we should go ahead and approve the YMCA management agreement tonight,” she continued. “It’s the most responsible, professional thing to do for a facility of this nature.”

After the council meeting, Tim Stuart, a member of the wellness center fundraising committee, said that the fundraising level is now at 80% of the estimated $18.9 million budget for the wellness center.

He added that he could think of two or three potential donors to the project who were waiting to see who would manage the facility before they committed money or a pledge.

One of the questions brought up at the council’s January 2 meeting was language in the management agreement that set out amounts the city would pay to the Nishna Valley YMCA for bringing the facility online – initially $200,000 - and for the operation of the facility - $10,000 per month.

These amounts will come from the budget of the Parks and Rec Department, it was pointed out on Tuesday.

KR Buck, another member of the wellness center fundraising committee, said that the committee has already started an endowment to help fund the operation and management of the wellness center. He added that someone has already anonymously pledged $300,000 toward the endowment, and the goal is to raise $2 million for the endowment.

Councilman Dustin Logan alluded to some skepticism he had expressed at a previous meeting about the YMCA management agreement but said he combed through the agreement, had a good conversation with Garcia and asked questions.

“My biggest concern was the language concerning our local clubs and programs and how they would be a priority,” he said. “I talked to some of the coaches and cleared a lot of that up. I want to be clear on that. We’re not losing our local programs at all. This is more of a pay for proper management type of thing.”

Later in the meeting, Garcia said legal counsel has to be hired for the New Markets Tax Credit program. The fee for the legal counsel is included in the New Markets Tax Credit so it’s not an additional cost incurred by the city, she added.

Garcia and Zupp-Smith reviewed all the submissions from legal firms that responded to a request for proposals and selected the top three. Garcia said she hopes to schedule a time sometime this week for Zupp-Smith and her to hear from the top three and added that the council may have a quick special meeting on Friday to approve the hiring of one of those firms.

With that hiring completed this week, when the New Markets Tax Credit consultant goes to the conference next week to obtain a CDE for the city, the consultant will have the approved YMCA management agreement as well as an agreement for legal representation.

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