The city of Evansville has applied for $60 million in tax credits under the federal New Markets Tax Credit program. The money could be used to attract investors for an arena to replace Roberts Stadium.
Tom Chema of the Gateway Consultants, which is studying the stadium to help city leaders decide whether to renovate or build an arena, identified New Markets Tax Credits as a potential revenue source for an arena.
The New Markets Tax Credit program permits local investors, predominantly banks and large corporations, to invest equity in exchange for tax credits, said Frank Hoffman, a partner with Indianapolis-based law firm Krieg Devault. The city hired the firm to help with the application process.
"And then that equity helps fund local economic development," Hoffman explained.
The credit provided to the investor totals 39 percent of the cost of the investment and is claimed over a seven-year credit allowance period.
Mayor Jonathan Weinzapfel said the program is "worth pursuing to see what kind of opportunities might be there."
Asked whether the application was specifically for a new arena or renovation of Roberts Stadium, Weinzapfel said: "It can be utilized for a lot of different projects. It's dependent upon private investment, investments that are made in low income census tracks that are going to produce jobs."
Weinzapfel said the city still has not made a decision about the future of Roberts Stadium.
Varied uses
The tax credits can be used only in certified areas that are either urban or rural, not suburban. The eligible areas are determined using census data. The program could be used to help fund a new arena or a renovation of the stadium, but it could also be used as an incentive for an industrial development, warehousing or housing with a retail component.
In a scenario in which a city government applies for a tax credit versus a private company, the process becomes more complicated, Chema said.
"One of the nice things about this particular tax break is that you can sell it," he said. "So the person who earns the credit doesn't have to add taxes to offset the amount of the credit, but can in fact sell the credit to some third party.
"When you sell the credit, of course, no one is going to buy it from you for 39 percent. They're going to give you your cut. So you might get 25 percent. That's what I am assuming in the numbers I used in this project."
Chema estimated the New Markets Tax Credit could generate $18 million in revenue for the stadium project. Chema said he did not know of any cities that have used the program to fund an arena, but he said Charlotte and one other city are further along in the application process than Evansville.
Common practice
It is becoming increasingly more common for cities to apply for the New Markets Tax Credit, Hoffman said.
In the last round of applications, the federal government received more than 275 applications and made around 65 allocations. The government received more than 30 government-sponsored applications.
"It was a substantial increase over prior rounds," Hoffman said. "So there has been a recent trend toward a preference for local government to participate in the program because local government can bring other economic development incentives and match them up with the federal dollars."
The city's application was submitted to the U.S. Treasury Department earlier this month by the Department of Metropolitan Development.
Redevelopment Specialist Jane Reel said the city applied for the maximum amount it could receive and should know by October whether it will receive an allocation.
Hoffman said he believes the city has a decent chance of receiving an allocation based on its investment success Downtown with Vectren, Old National Bank and American General.
"There are very few cities that have that type of track record," Hoffman said. "So I do think that will directly increase the city of Evansville's chances."
According to the Treasury Department, the government has awarded tax credits on $12.1 billion in equity investments. This has led to the development and rehabilitation of more than 46 million square feet of commercial real estate, created 146,000 full-time construction jobs and created or maintained 20,000 full-time jobs through loans or investments supporting businesses operating in low-income communities.
Public weighs in
The Roberts Stadium Advisory Board concluded its final meeting March 5 after listening to Chema and another consultant present 11 possible locations for a stadium. A public hearing is scheduled from 5:30 to 7:30 p.m. April 1 at The Centre in Locust rooms A through D.
The Advisory Board is expected to make a recommendation to city leaders in May. Several board members have spoken in favor of building a stadium Downtown, saying it makes the most sense financially.
Chema has estimated renovating the stadium with 10,000 seats would cost $38.2 million to $89.9 million. A 10,000-seat arena built somewhere else would cost $92.2 million, he estimated. Those figures assume a 6 percent contingency plan for the cost of construction.