4 Lessons on Funding a Community Health Center with New Markets Tax Credits

Written by: Bethany A. Bartlett and Douglas M. Henry

The process of funding community health centers is often complicated and lengthy. Combining financing from a multiple sources, such as federal and state programs and private financing, requires extensive coordination and creative thinking from clients, consultants, and their legal teams. Construction financing for the new Lowell Community Health Center was no exception. The LCHC is scheduled to open its new home in the autumn of 2012, more than doubling its square footage and increasing exam rooms from 37 to 85 at a cost of approximately $42 million.

Expanding community health centers must rely on federal grants, New Markets Tax Credits (NMTC), Federal Historic Tax Credits (FHTC), and federal construction guarantees.  The complexity of the LCHC transaction provides many lessons for future projects of this nature.

4 Lessons Learned:

• Strong leadership at sponsor community health care center is essential to drive the process
• Need for a knowledgeable and experienced leadership team of lenders, investors, CDEs, consultants, accountants, and attorneys
• Flexibility in approach to structuring regulatory, tax, and financial underwriting
• Strong commitment to the project is essential; loss of support by a single party may endanger entire transaction