Spark economic activity where it’s needed most

If you look closely at the Texas economy, you’ll discover as our state flourishes, incomes in economically distressed urban and rural communities remain low and unemployment high.

Too often we accept these areas as inner cities or sleepy small towns left behind. Rundown buildings, streets full of potholes and not a business in sight that pays a living wage are more common.

As it turns out, there are no dedicated tools in Texas that successfully spur infrastructure and job creation in our underserved communities.

For all the success of the Texas Enterprise Fund, not a dime of the $45.9 million awarded to 17 projects in the last two years has expanded economic growth in rural areas.

Half those investments are in suburban neighborhoods where families earn between 141 percent and 328 percent of the state’s median household income.

In the final weeks of this legislative session, our lawmakers have an opportunity to approve a tool that not only targets economic infusion to underserved communities, but also generates billions of dollars to the state.

It’s called New Markets Tax Credit. Congress established the federal program in 2000 to stimulate investment in low-income areas where lack of capital often prevents projects from getting off the ground. Fourteen states have approved state NMTC programs. However, Texas has not.

Without it, investors concentrate their limited credits outside Texas, where complementary programs maximize their private resources.

This state-federal combination has proven successful. Through 2014, the federal government distributed $15 billion in federal tax credits as part of nearly $75 billion in total capital invested in over 10,000 businesses and revitalization projects.

While a 5 to 1 ratio of private capital per tax credit dollar is impressive, without a state program, Texas ranks 43rd in attracting NMTC investments and continues to leave billions of dollars in private funding on the table.

A state NMTC, proposed by state Reps. Eddie Lucio III, D-Brownsville, and Senfronia Thompson, D-Houston, targets investment in urban and rural areas, near seaports, and in schools serving low-income communities.

Texas would waive $300 million in future tax revenue in exchange for receiving private investment capital for projects in these communities that otherwise would not have existed or would have taken many more years to realize. According to an independent analysis, availability of those credits would unlock $1.5 billion in private investment.

It is important to note not one dime would ever leave taxpayers’ pockets until a project is funded by private capital and begins to drive revenue back into state coffers.

The independent analysis, performed by certified public accounting firm Novogradac & Company, estimates Texas will recoup the $300 million in foregone tax revenue within six years. Within 20 years, each dollar of state tax credit invested returns $4.31 to the state’s tax base. Add the federal program and each dollar returns $5.38.

Texas’ limited use of the federal NMTC has proven transformative.

For example, in 2012 Interfaith Ministries of Houston pursued a federal NMTC to expand its Meals on Wheels facility after a loan and private donations fell short.

Today, the corner of Main and Francis is bustling with meal preparation. Food distribution has doubled. Retail and other private investment immediately sprouted on surrounding blocks.

“I believe they would still be in fundraising mode,” said Elliot Gershenson, Interfaith Ministries’ former CEO. “What I witnessed has been amazing.”

BBVA Compass Stadium, home of the Dynamo, was completed with the help of federal credits in 2011.

By 2015, it created 360 construction and nearly 600 full and part time jobs in a community that suffered from 41.5 percent poverty and 11.5 percent unemployment.

Denimburg in Edinburg secured a federal credit to close a funding gap that halted construction when the blue jeans plant was 90 percent complete.

Federal credits have also contributed to Cook Children’s Hospital in Fort Worth, Texas Tech’s school of nursing in Abilene and Harbor Wind in Corpus Christi.

When Texas tax credits are fully realized, the Novogradac analysis estimates a state NMTC program would generate 13,300 construction jobs and 9,980 operational jobs that recur annually.

Next time you’re driving through our inner cities and small towns, think of the difference that could make and why our state leaders are not willing to help revitalize all of Texas.