Bringing good things to life : New Markets Tax Credits and the opening of low-income communities to investment, including a case study of Pittsfield, Massachusetts

Abstract

The New Markets Tax Credit (NMTC) Program is designed to promote investment and economic growth in urban and rural low-income communities across the country. Created in 2000 as one of the last acts of the Clinton Administration, the NMTC program has allocated $16 billion of tax credits to date to Community Development Entities (CDEs), who in turn use the credits to make investments in target communities. Through the final authorized round of allocations, which is currently projected to be end-of-year 2008, the program will have allocated $19.5 billion in tax credit authority. This thesis investigates how NMTCs work, why they are structured as they are, and who uses them. It reviews the origins as well as the current status of the program, and investigates how one of the most active, innovative CDEs in the country, Massachusetts Housing Investment Corporation (MHIC), uses NMTCs in practice. Finally, this thesis provides a case study of Pittsfield, a small city in western Massachusetts where NMTCs have been used as part of the community's efforts to redevelop the downtown as a cultural and entertainment destination. Pittsfield, once home to a large General Electric manufacturing plant, experienced a rapid economic decline following GE's gradual closure and sale of its operations in the city over the last several decades. This thesis investigates Pittsfield's efforts to redefine itself through a combination of strong leadership, vision, and the effective use of available capital resources such as NMTCs. One of the primary questions raised about NMTCs has involved how to evaluate the impacts of the tax credit investments on their target communities. Especially in an environment in which the re-authorization of the program is not assured, understanding the impacts of NMTC investments is critical if the program is to continue.

(cont.) This project lays out an innovative evaluation framework based upon 'theory of change' logic modeling in order to offer a potential guide for NMTC impact evaluation that could be used in practice. In particular, this thesis argues that NMTC investments must be evaluated within the context of broader community redevelopment initiatives and not as stand-alone initiatives. Ultimately, the value of theory of change models both for planning community development initiatives and for evaluating NMTC impacts is demonstrated by constructing such a framework for Pittsfield, Mass.