WASHINGTON — Coastal Enterprises Inc., a Wiscasset-based community development organization, has received a federal allocation of $112 million that will allow it to help finance small businesses and development projects in low-income communities.
“Coastal Enterprises continues to provide invaluable services to communities throughout Maine,” Sens. Olympia Snowe and Susan Collins said in a joint statement on Oct. 20. “Investing in affordable housing and community development in Maine’s rural and underserved areas will provide an opportunity for economic revitalization.”
The New Markets Tax Credit program, which Congress established in 2000, is aimed at spurring revitalization efforts of low-income and impoverished communities across the United States by providing federal income tax credits to investors.
For Coastal Enterprises, a nonprofit organization that seeks to create jobs by helping to finance small businesses in primarily rural regions of Maine, this is the fifth New Markets Tax Credit allocation it has received, bringing its total to $481 million.
“We receive the tax credit allocation that can be applied to significant investment that qualifies for the program,” said Charlie Spies, the managing director at Coastal Enterprises Capital Management LLC. “We receive allocations, but we don’t actually receive dollars.”
Coastal Enterprises Capital Management, a for-profit subsidiary of Coastal Enterprises, helps attract capital to low-income areas using the federal program. Companies or individuals who invest in Coastal Enterprises’ projects that are part of the program receive a federal income tax credit of 39 percent of the amount invested. The tax credit is spread over seven years.
The tax credits provide an incentive to investors to make investments in rural small businesses and low-income communities, Spies said. Under the latest allocation, tax credits can be applied to up to $112 million of investments. If the full allocation is used, it would result in tax credits totaling $43.7 million.
Using the tax credit program, Coastal Enterprises already has helped finance 23 projects in the northeastern United States, using $235.5 million of its allocation capacity. This has triggered private capital investment in low-income communities of more than $771 million, according to the company’s Web site.
The 23 projects cover a wide range of industries, such as fishing, insurance, construction and especially sustainable timberlands development and forest conservation.
“We’re finding in our own practice that we are able to help businesses in these communities because getting projects finished, especially now with tight credit markets, is very valuable,” Spies said.
Maine Mutual Group, an insurance company, and Hampton Inn are two projects in Presque Isle that benefited from the program. The insurance company expanded its head-quarters building and upgraded its technology infrastructure, allowing the company to hire an additional 45 employees, according to the project’s summary provided by Coastal Enterprises Capital Management.
A new Hampton Inn under construction in Presque Isle will be the first “national brand” hotel in Presque Isle. Using an $11 million allocation, BLD Hospitality is building a 93-room hotel that is planned to open in July 2009. About 40 jobs are expected to be created.
Roger Beaulieu, a managing member of BLD Hospitality, said building the hotel in the current economy is a huge risk.
“With the New Markets Tax Credits, it’s worth taking that risk, because it gave us a better way to financing, which enables us to afford taking that risk,” Beaulieu said. “So if we hadn’t got the New Market Tax Credits, we probably wouldn’t have built the hotel up there.”
More projects are under consideration, Spies said. “We are working on a way to do projects for or do financing for smaller businesses at the half-million dollar range. That is a product that we’re hoping we can roll out before the end of the year.”
“That is the way we are trying to expand use of the program to allow smaller companies to take advantage of it as well,” Spies said.