The good news is that Fellowship Housing Opportunities in Concord has discovered a potentially lucrative means of raising money to support its mission of providing affordable housing for people with mental illnesses. The bad news is the nonprofit agency may not be able to raise enough money in time to save the homes of seven residents who are currently tenants of the Riverbend Mental Health Services.
“We’re diversifying our funding stream through this process,” said Page Cannon, Fellowship’s executive director. “We’re using this to educate a lot of important entities about our work.”
Fellowship Housing has been authorized by the state’s Community Development Finance Authority to raise $200,000 from businesses that will receive a credit of 75 percent of the donation against their state business tax. The contributions will go toward a $1.1 million project to purchase and rehabilitate a four-story building owned by Riverbend at the corner of Pleasant and State streets.
Fellowship would become the landlord for the building’s seven tenants and would add an additional handicap-accessible unit. The agency also would move its administrative offices into the building, freeing up space for two more bedrooms at its Fellowship House, a 24-house intensive care facility on Chesley Street.
But the purchase and sales agreement has a June deadline and the corporate pledges must be “in the door” by the end of March, said Cannon, to qualify for funding in the current fiscal year, ending June 30.
So far the agency has raised nearly half of the targeted amount.
“Our fear is that a private developer would reconfigure the units to make them larger and less affordable to our clients,” she said, noting that tenants who qualify for Section 8 subsidized housing are able to rent a one-bedroom unit for as little as $450 a month, well below market rates. Many landlords do not accept Section 8 vouchers, she said, and many of the rents in the city are too high to be eligible for the subsidy. “So we’d have more homeless people with behavioral problems. I really don’t know where these people would go in this community at this time.”
Riverbend and Fellowship Housing serve many of the same clients, Cannon said, including patients with “bipolar disorder, personality disorder, post-traumatic stress, pretty much the gamut,” she said.
Riverbend decided to sell the State Street building about two years ago to acquire a new site for its children’s behavioral health program, now spread out over two locations. The mental health services agency offered the property at a price 35 percent below market value.
“We’ve collaborated with Fellowship in the past,” Riverbend President and CEO Louis Josephson said. Since the agencies share a common “mission to serve people with illnesses, it seemed like a nice fit. We’d hate to have to sell that building and have the apartments come off the market for the mentally ill. It would increase our homeless problem,” Josephson said.
Cannon has raised the bulk of the money for the project from other sources, including a $550,000 deferred loan from the New Hampshire Housing Finance Authority and another $250,000 in Community Development Block Grant funds from Merrimack County.
But finding corporate donors to take advantage of the tax credits has been more of a challenge than she had anticipated. So far she has gained $83,000 in pledges from 11 donors since the project was authorized for CDFA funding last June.
“We’ve reached out to over 100 companies over the past several months,” she said, noting that the effort has netted a little more than a “10 percent return on our outreach. We need to do better.”
Several large projects in Concord, including the Grappone Conference Center and a new training facility for the American Red Cross, have been partially funded with CDFA tax credits in the past several years, Cannon noted. “Some companies and businesses are saying they’re not having an appetite for tax credits because they’re already pledged out,” she said. “Secondly, I think some of the smaller businesses don’t have the cash flow to make a donation now and wait for the benefit to come in the next quarter or at the end of the calendar year.”
A business contributing to a CDFA-approved project receives a tax credit equal to 75 percent of the donation against the company’s business profits tax, business enterprise tax or insurance premium tax. The same company is eligible for a tax deduction for the remaining 25 percent on its federal tax. The state tax credit may be applied over a five-year period, Cannon said. Twenty percent of the donations stay with CDFA, while the rest goes to the non-profit agency.
“I don’t know any other state that has such a generous incentive. It really leverages contributions,” said Cathy Menard, chief financial officer at CDFA.
For a company contributing $100,000, “the out-of-pocket contribution would be more like $12,000 or $13,000” with the state tax credit and federal charitable deduction, she said.
Banks also are able to use the contributions as a means of meeting their obligations under the federal Community Reinvestment Act, she said.
‘Makes good sense’
Though the program has been in effect since 1991, many businesses are still unaware of it, Menard said. “Historically, we’ve had a great deal of participation from banks. I think the program is not well known among other businesses. We’re doing something about that. We’re doing outreach with CPAs and with the New Hampshire bar. We’re doing more outreach to corporations.”
The agency is authorized to grant up to $5 million in tax credits each year. “Banks have just sort of gobbled it up in the past,” Menard said. But many banks are already pledged to various projects and some may be watching efforts in Congress to “roll back some of the requirements” of the Community Reinvestment Act before making decisions on future donations, Menard said.
“It just makes good sense to reach out” to other businesses, she said.
When the city of Concord and the Concord Regional Development Council were promoting the Grappone Conference Center, many of the business leaders in the region were unaware of the tax credits, said Greater Concord Chamber of Commerce President Tim Sink.
“Back then, we did a lot of selling. They didn’t know what we were talking about. They didn’t believe it.”
Once they realized how much they could reduce their tax liability, however, enthusiasm for the project increased, as measured by the contributions.
“We told them you can either write a check to the state of New Hampshire or you can write a check to the Community Development Finance Authority that goes to this particular project, which is good for your community,” Sink said.
Over the past 15 years, the CDFA tax credits have been used to raise $65 million for nonprofit agencies, including Canterbury Shaker Village, the Capitol Center for the Arts, the Littleton Area Learning Center and Families in Transition facilities in Concord and Manchester.
Families in Transition President Maureen Beauregard recalls how one generous donor responded to news of her agency’s Millyard II Families in Transition housing project in Manchester.
“It seemed like a daunting task,” Beauregard said about selling the $400,000 worth of authorized tax credits. “I was trying to figure out what to do when I was interviewed on New Hampshire Public Radio. Later, I got a call from someone at Weight Watchers of New Hampshire who wanted to buy all of them.”
Not all tax credits go that quickly, and not all for such a large amount. Some companies have participated at the $1,000 or $2,000 level. Hutter Construction Company of New Ipswich is one of the companies that recently made a $10,000 contribution to the Fellowship Housing project.
“We’ve had a long-term relationship with Fellowship Housing on a number of projects,” said Richard Upsall, Hutter’s vice president of finance. “We believe in corporate contributions to the area of Concord. We’ve done a lot of work in that area. The tax credits are certainly an added incentive.”
Cannon is hoping more companies will be similarly inspired to help make affordable housing available to the mentally ill residents of the Capital City, while cutting their tax bills in the process.
“I know the businesses in our community are very generous,” she said. “We will do our best to honor their participation.”
For more information about CDFA tax credits, call Christine Conlogue at 226-2170 or visit nhcdfa.org.
This article appears in the February 17 2006 issue of New Hampshire Business Review