The New Markets Tax Credit already has a ready made lobby of accountants and lawyers pushing for its renewal. For example, a handful of accounting firms, including the Reznick Group in Baltimore, which helped structure DiFranco’s deal, have together, spent hundreds of thousands of dollars hosting conferences. They are already reminding the CDEs about the need to push Congress to reauthorize the credits in 2007.
“We’re getting capital for businesses that need it to survive,” enthuses David Hoffman, former president and founder of for-profit Alaska Growth Capital, which got a $2 million New Markets allocation in 2003 and used $390,000 of it to help Tyonek Native Corp. an Indian owned business in a village of 150 expand. A Tyonek subsidiary, Envirotech, removes the toxic elements from oilfield mud through a chemical process that requires pumps, vacuums, conveyor belts and other equipment. “The first year was sort of a Flintstones operation,” says Bart K. Garber, chief executive of Tyonek. He wanted to invest in better equipment but got rejected by two banks.
Then Alaska Growth dangled its credits in front of Wells Fargo, and the bank agreed to invest in Alaska Growth, which made the $1 million loan to Tyonek and transferred $390,000 in tax credits to Wells Fargo. The capital paid for new equipment. Six months later payroll has increased from 3 to 12. “We couldn’t have grown without a loan, and the loan wouldn’t have been made if it weren’t for the tax credits,” Garber says.