INTRODUCTION TO SECTION IV
12. PROJECT OUTCOME AND OUTPUT PATTERNS
It is widely recognized, and an underlying premise of the NMTC program, that different LICs have different community and economic development needs. The fact that the program was designed to be flexible with respect to the types of projects it supports is an
acknowledgment of this variety. Indeed, previous chapters have shown that NMTC projects produced different kinds of outputs and outcomes. Some involved job creation, for example, while others involved expanded community amenities or support for start-up enterprises.
Unanswered to this point is the question of whether each early-year NMTC project produced at least some beneficial result. For instance, if a particular project did not contribute to expanding the local tax base or produce jobs, did it otherwise help to make the environment cleaner, reduce neighborhood distress, or accomplish something else of value, such as property construction or rehabilitation, provision of advantageous financing, or attraction of new
investors? Asked another way, what proportion of projects, if any, failed to provide any such result?
Likewise unanswered in the previous chapters is the question of which types of projects, relative to one another, are more (or less) likely to be associated with which outputs or
outcomes. The community and economic development literature contains some hypotheses as well as some evidence regarding the types of projects that can reasonably be expected to result in particular outputs or outcomes (Abravanel, Pindus, and Theodos 2010). This evaluation provides an opportunity to empirically connect specific project types to specific results.
The above questions are easier asked than answered, for several reasons. For one, the number of different potential project outputs or outcomes is recognizably larger than could be accounted for in this evaluation. While the evaluation focused on basic outputs and outcomes that stakeholders generally associate with the NMTC program, there are likely to be somewhat less frequent or less tangible outcomes (such as community cultural enhancement) that have not been included. Moreover, some outcomes are more difficult than others to measure (such as whether a new charter school improves student morale). An equally challenging
measurement issue is that of defining an appropriate threshold for determining whether a project can be classified as having achieved a particular result. For example, what absolute number of jobs or proportionate increase in employment would have to be observed to be able to conclude that a project contributed meaningfully to the employment profile of a community?
Finally, from a practical evaluation perspective, assessing output and outcome patterns is best done with the sample of NMTC projects used for telephone interviews with project participants, since it contains more in-depth information than the online QALICB survey. A limitation is that
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the former is relatively small for purposes of disaggregation by project type, resulting in a small-numbers problem170 when comparing project types.
Ultimate resolution of the above challenges is beyond the scope of this report and, frankly, unwarranted at this stage of the NMTC program’s development. What is useful now is to produce an initial, even if more suggestive than definitive, summary accounting of the outcome patterns of NMTC projects, permitting a formative assessment of the program’s
accomplishments during its early years.
Output and outcome patterns. Evidence presented in this section speaks to the question of which outputs and outcomes occurred most frequently across early-year NMTC projects and whether each project resulted in at least one desired output or outcome, as
discussed in sections II and III. These results consist of increasing employment; developing real estate; improving the environment; reducing neighborhood distress; increasing amenities, services, or facilities; starting up or supporting businesses; attracting new investors; and
providing advantageous financing. Definitions of what constitutes achievement of these results, for purposes of the pattern analysis below, are shown in table 12.1.
170 There is considerable potential for random error when dealing with small numbers; also, with respect to small numbers, small numerical changes can result in large percentage changes.
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Table 12.1: Definitions of Basic Outputs and Outcomes for Project Pattern Analysis
Outputs and Outcomes Definition
Obtained advantageous financing
Either NMTCs were the only financing available or, compared to other available financing, NMTCs offered more favorable rates and terms, including interest rates at origination, standard origination fees, the interest-only payment period, the LTV ratio, the amortization period, the flexibility of borrower credit standards, nontraditional forms of collateral, debt service coverage, or loan loss reserves.
Attracted new investors to LICs Project investor(s) were new to investing in low-income areas.
Increased employment
One or more jobs
created or retained The number of created or retained new permanent jobs produced by the project is equal to or greater than one.
Above-average increase in employment
The project resulted in an increase in employment levels of more than 33 percent, compared with pre-NMTC levels, due to jobs created or retained as result of the respective NMTC projects.
Developed real estate The project involved the construction or rehabilitation of some amount of commercial and/or residential space.
Improved the environment The project was LEED certified or included brownfields or other environmental cleanup as a component.
Increased amenities, services, or
facilities At least one community amenity, service, or facility was created or expanded by the project.
Started up or supported businesses
The project involved either the start-up of a business or increases in business annual gross revenues or operating budgets of greater than 5 percent.
Provided increased local taxes Project participants reported that the project resulted in
increased payroll, property, sales, corporate, or other taxes for the local community.
Reduced neighborhood distress Project participants noted a positive change of at least one point on a five-point neighborhood distress scale between pre-and post-project time periods.
Table 12.2 displays the percentages of early-year NMTC projects that met the definitions for having produced each basic output or outcome.171 The most prevalent result consisted of provision of advantageous financing: The vast majority of QALICBs (93 percent) either could not otherwise have obtained financing or, compared with other available financing, received better rates and terms in conjunction with NMTCs. The second most prevalent result involved real estate development: 84 percent of projects constructed or rehabilitated either residential or
171 Note that the percentages presented in this chapter may differ from those in sections II and III because the latter included data collected through the combination of telephone interviews with project participants and the online survey of QALICBs, while the percentages in this chapter include data collected only through the telephone interviews.
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commercial properties in LICs. The third most prevalent result consisted of additions to the local tax base: 77 percent of projects increased payroll, property, sales, corporate, or other taxes to the benefit of the local community. The fourth most prevalent result involved employment: 71 percent of projects created or retained at least one new permanent job. Using a different employment metric, 60 percent of projects saw an increase in their employment levels of more than 33 percent compared with pre-NMTC levels, due to jobs created or retained as result of their respective NMTC projects.
Except for environmental cleanup and attracting new investors to low-income areas, a majority of projects was associated with each of the outputs and outcomes listed in table 12.2.
Table 12.2: Percent of Early-Year NMTC Projects Associated with Basic Outputs and Outcomes, Based on the Telephone Interview Sample
Outputs and Outcomes
Obtained advantageous financing 93 70
Developed real estate 84 64
Provided increased local taxes 77 56
Increased
employment One or more jobs created or retained 71 63
Above-average increase in employment 60 60
Reduced neighborhood distress 68 56
Increased amenities, services, or facilities 64 70
Started up or supported businesses 53 64
Improved the environment 10 70
Attracted new investors to LICs 9 56
Source: Urban Institute telephone interviews with project participants.
These observations allow for assessing whether certain types of projects were more or less likely than others to have produced particular outputs or outcomes. In this respect, table 12.3 shows the percentages of project types associated with each result. As mentioned above, the small number of health facility/equipment and, especially, housing projects in the telephone interview sample limit the ability to compare these types with others.
The shaded cells in table 12.3 identify types of projects that are less likely (lighter gray) or more likely (black) than others to have resulted in particular outcomes or outputs.172 For example, comparing across the rows in the table:
172 Shading is not provided for housing projects because there are only two of them in the telephone interview sample.
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• Office, retail, mixed-use, and hotel projects were somewhat more likely to have developed real estate than other project types.
• Manufacturing/industrial, agricultural/forestry, and brownfields cleanup projects were somewhat more likely than others to have contributed to environmental improvement, and less likely to have resulted in an above-average increase in employment; developed real estate; or contributed to increased amenities, services, or facilities.
• Projects involving education, arts/culture, or social services were more likely than others to have resulted in increased community amenities, services, or facilities and to have reduced community distress, and less likely to provide increased local taxes.
• Taking into account the small numbers caveat noted above, health facility and
equipment projects were somewhat more likely than others to have resulted in an above-average increase in employment and less likely to have reduced neighborhood distress or received advantageous financing.
These patterns are consistent with expectations for a program like NMTCs, which supports varying project types intended to meet divergent LIC needs. The patterns confirm the utility of assessing project outputs and outcomes by reference to project types.
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Table 12.3: Percent of Projects Associated with Each Outcome or Output from the Telephone Interview Sample, by Project Type
Outputs and Outcomes
Source: Urban Institute telephone interviews with project participants.
Note: Shading identifies types of projects that are more likely (black) or less likely (gray) than others to result in each output or outcome; N = number of projects.
* Significant at the .01 level.
** Significant at the .10 level.
Following from the above analysis, there is obviously interest in the project-by-project pattern of results: What proportion of early-year projects produced at least one or more outcomes or outputs, and what proportion produced none?
Among the 70 projects for which telephone interviews with participants were completed, information for 3 of them is insufficient to allow assessment across the full spectrum of outputs and outcomes. For the remaining 67, 8 produced one outcome listed in table 12.1 and the rest produced more than one outcome. Indeed, the average project produced four outcomes, with 16 of them resulting in all seven outcomes.
Only two projects (3 percent of the sample) did not show any positive outcomes, although even they were associated with a positive output, and better rates and terms. One of these had been built without NMTCs and did produce positive outcomes. Later, the QALICB
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used NMTCs essentially to alter the project’s financial structure, which had no effect on the center’s operations, scale, or impacts on the community.173 In the second case, a business and equipment were purchased using NMTCs, but the business failed.174 These examples illustrate the relatively unique circumstances that can explain why a project would not yield any of the outputs or outcomes addressed in this the evaluation. Overall, however, NMTC projects produced multiple results that varied by project type.
173 For this project, prior to NMTC investment, a community provided tax increment financing to fund a performing arts center. When developed, the center attracted small businesses to the area, as well as new residents and additional community investment. The financial restructuring using NMTCs had no effect on the benefits that had derived from the previous financing.
174 A service-providing nonprofit organization purchased a business and equipment that was intended to generate income for the organization and provide employment opportunities for several of its clients.
Shortly thereafter, the business lost several contracts and significant amounts of money, so it had to be closed. Without anticipated income from the business, the organization was unable to repay the borrowed funds and had to sell most of its other properties where it administrated programs, lay off staff, and draw down existing assets.
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