Rep. Mike Thompson, D-Calif., a senior member of the tax-writing House Ways and Means Committee, has introduced legislation to expand the New Markets Tax Credit program to provide up to $100 million a year to help distressed communities whose military installations have been either closed or realigned.
The bipartisan legislation, H.R. 3439, the New Markets Tax Credit Military Installation Act of 2013, was co-authored by Rep. Ralph Hall, R-Texas. The bill comes at a time when the Defense Department, along with other federal agencies, have been contending with the effects of the automatic spending cuts imposed by the budget sequester earlier this year, forcing many military bases to scale back on spending and some to be closed down completely.
In the aftermath of last month’s budget shutdown, a conference committee of Democrats and Republicans from the House and Senate have finally begun meeting this week to negotiate how to reconcile the vastly different budget plans passed by both chambers of Congress earlier this year in an effort to stave off the worst effects of sequestration.
The NMTC program targets low-income communities suffering from chronic unemployment and high poverty rates by providing investors with a seven-year, 39 percent federal tax credit. By expanding these high-value tax credits, the bill introduced by Thompson and Hall incentivizes private sector investments in communities that have been hit hard by the closure or realignment of local military installations.
“These tax credits are job and revenue creators that can help resurrect communities that have been devastated by military base realignments and closures,” Thompson said in a statement Thursday. “They have already proven successful, but the supply of these tax credits simply doesn’t meet the demand or the need. By expanding the New Markets Tax Credit program, we can promote private sector investment, put people back to work, and help communities grow their economy.”
The closure of military bases actually predates the budget sequester, although the impact of them has grown as the automatic spending cuts took a toll on many communities where the federal government operates facilities. Over the past several decades, hundreds of military installations around the country have been realigned or closed altogether through the Base Realignment and Closure process, as well as through other base closure laws, leaving communities scrambling to make up for the lost jobs and revenue.
Currently, when a military base is closed, the Defense Department is required to complete any necessary environmental cleanup at the former base and then transition the property to a Local Redevelopment Authority. Together, the DOD’s Office of Economic Adjustment and the LRA create a redevelopment plan for the property. The goal of this process is to lead to a timely, beneficial, revenue generating reuse of these former military bases. However, numerous military installation cleanups take much longer and cost much more than expected, significantly delaying their reuse and causing many of these communities to become or remain economically distressed.
H.R. 3439 helps address this by authorizing up to $100 million per year in additional tax credits so that communities specifically impacted by BRAC can take advantage of the NMTC program.
“Military bases are the heartbeat of defense communities they provide jobs and economic value to the local community, as well as a sense of pride and togetherness,” said Hall. “As a proud representative of a valuable defense community in Texarakana, the Red River Army Depot, I am honored to join Rep. Thompson in sponsoring this important legislation that will help people in communities affected by base realignment and closures. While I have been outspoken in my disagreement with the Department of Defense for its BRAC decisions at a time when we still have so many troops overseas and there is so much political unrest in unfriendly nations, I believe we must look for solutions to the BRAC decisions. We should do all we can to responsibly help these defense communities rebuild. Their hard work and efforts continue to help keep our troops safe, and we owe these people the same hard work and dedication.”
The NMTC program has proven effective at growing local economies and creating jobs, Thompson’s office noted. According to the Treasury Department, every $1 invested through the NMTC program generates $12 of private investment. Using the NMTC program, Brunswick, Maine has successfully redeveloped a former Naval Air Station into a $15 million, 80,000 square foot medical manufacturing facility. A second NMTC was also used in Brunswick, Maine to make $20 million in renovations to facilities now operated by a private aircraft manufacturer. However, this project could have been three times as large had additional NMTC funds been available. Combined, these two projects will bring more than 200 high-tech, high-wage jobs and other significant economic benefits to this former military community.
In the 5th Congressional District, communities such as Vallejo, where the Mare Island Naval Shipyard was closed in 1996, could be eligible for the tax credits made available in Thompson’s legislation.
“On behalf of the City of Vallejo, we strongly support adoption of the proposed bill to focus a portion of the New Markets Tax Credits Program to communities like ours that have continued to suffer from the closure of a military base,” said Mark Sawicki, community and economic development director for the City of Vallejo, in a statement. “While much progress has been made since the Mare Island Naval Shipyard was closed in 1996, the environmental clean-up is only 50 percent complete, infrastructure is only 40 percent complete, and building rehabilitation is only 30 percent complete. The City continues to struggle to find funding sources to match and leverage local public and private investment, and thereby generate even a fraction of the jobs erased with the loss of the primary employer in the region, the Navy. The NMTC Program would be an instrumental tool to facilitate new development and we urge Congress to pass this bill.”
“Every dollar invested in the New Markets Tax Credit program generates about $12 of private investment in distressed communities, promoting job growth and economic stability while providing a positive return on taxpayer dollars,"said Robert M. Murdock president of the Association of Defense Communities which has officially endorsed the legislation. "Strong competition for limited credits, however, has put redevelopment projects at a disadvantage. That’s why Congressman Thompson’s legislation providing additional New Markets Tax Credit opportunities to defense communities is so important. It’s a solution that will help many communities across the country overcome the economic challenges posed when nearby military missions are closed or realigned.”
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