April 6, 2010
Rural New York Community Receives $6.2 Million NMTC Investment
Hornell, New York, located in rural Steuben County, will soon open the doors of a brand new YMCA, thanks to the hard work and commitment of the town’s leadership, its residents, its local banks, and the community-building services of the National Development Council. The Y, a more than century-old Hornell institution and mainstay of this city of about 10,000 people, provides vital services not only for its 1,200 members but for clients of area hospitals who receive various medical and rehabilitation services at the Y, as well as for students of a Hornell parochial school that has no gym facilities of its own.
Despite the vitality of its programs and its financial well-being, the Y was constrained in its ability to meet the growing needs of the City by its obsolete, too-small and time-worn home, the only full family fitness facility in Hornell. The community envisioned a new facility that would nearly double the Y’s current space, making it possible to expand current programs and to add new ones, including art and music. The expansion will also include a community room that will be available for community group/public meetings.
With the support of local residents and businesses, the Y conducted a successful fund-raising campaign, but they were still nearly $2 million short of the total project cost of $6.2 million. This is typical of the kind of problem that NDC deals with in its client communities coast-to-coast, and Mayor Shawn Hogan, sought NDC’s assistance in securing and structuring financing to close this gap. NDC field directors Bob Sweet and Michelle Mooney provided the city with the advice and guidance it needed to advance this project, identifying the New Markets Tax Credit as the solution. NDC used part of its Round 6 $90 million NMTC allocation to raise $1.7 million in equity from JP Morgan Chase Bank, leveraged by the $4.4 million raised in the capital campaign.
“The expansion of the local YMCA was a critical community goal for the City of Hornell and the City’s faith in NDC’s ability to close the Y’s funding gap was a key reason that Hornell sought our assistance,” notes Mooney.
“Multi-year capital campaign pledges provided one of the principal challenges in structuring this project,” Mooney explained. “The amount of NMTCs that a project can generate is directly related to the amount of funds available for investment in a Qualified Equity Investment, or “QEI”, on the day a NMTC transaction closes. Proceeding with a transaction that utilized only the Y’s cash on hand would not have closed the financing gap and it would not have maximized the use of NMTC on this project. Due to the Y’s importance in the community, a consortium of local banks was willing to make a bridge loan on the pledges but it sought a collateral position that would have jeopardized the use of NMTC.” The NDC New Markets and Field team spent considerable time working with the local banking consortium to devise a structure that would satisfy local needs and still meet NMTC regulations.
Y Executive Director Mark Morrissey noted that he found NDC’s work especially helpful because it is “very technical and involved.” He is confident and encouraged about theY’s future. “Building this new YMCA is going to impact thousands of people in our area for years to come,” notes Morrissey.
For another article on the Hornell YMCA project, see the following Evening Tribune story:http://www.eveningtribune.com/news/x1031041156/Ground-broken-Friday-for-revamped-YMCA