Hampton Roads Ventures, the subsidiary of Norfolk’s housing authority, has $43 million in tax credits that have not been assigned to projects, according to a federal report.
A pandemic exception to the program’s stringent investment regulations means some of that money could go to a qualified Norfolk project, bypassing the hurdles to backing local projects that HRV representatives have detailed to city officials in recent months.
Representatives of Hampton Roads Ventures have said they were willing to consider including a Norfolk project in their next application for tax credits in early 2023. But they failed to disclose the available allocations during extensive email exchanges with the City Attorney’s office and the Department of Economic Development. Those exchanges followed a series of stories by The Virginia Mercury that detailed how Hampton Roads Ventures has won $360 million of New Markets Tax Credits, but invested only a fraction of that in Norfolk.
In an email the day after NRHA and HRV representatives met with City Council, Delphine Carnes wrote that she was familiar with the pandemic exception. She added that Norfolk businesses interested in the tax program could complete HRV’s intake form or contact the economic development department. She did not respond to a question about whether there was an opening to include a Norfolk project in HRV’s present allocations.
When asked about the exception in an email two days earlier from Jared Chalk, the city’s director of development, Jennifer Donohue, HRV’s chief executive officer, portrayed it as being more difficult to use than outlined in federal regulations.
Ronald Jackson, NRHA’s executive director, and Alphonso Albert, HRV’s board chair, did not mention the exception or the available allocations during a presentation where some City Council members prodded the community development entity to invest in Norfolk.
In a letter to council, Jackson said HRV had become a “rural” community development entity focusing on three business strategies — health care facilities, healthy food, and manufacturing — and it would be difficult to invest in Norfolk. Doing so, they added, might endanger future awards of tax credits and threaten the profits that have trickled to the housing authority. It is unclear whether Jackson knew of the available tax credits and the exception. He declined to answer questions.
The pandemic exception permits community development entities like HRV to invest up to 30 percent of their allocations outside their usual business strategies without receiving approval from the Treasury Department (it could exceed 30 percent with approval).
In short, HRV could invest anywhere in any qualifying project without endangering its eligibility for more tax credits awards. How much it has available to spend on a Norfolk project would be based upon the amount of the $100 million that has already been allocated to urban areas. It could be as much as $10 million, more if it sought permission to exceed the 30 percent threshold.
HRV has funded projects worth hundreds of millions of dollars benefiting cities and rural areas in at least 15 states, including Idaho, Texas, and Nebraska. It has backed only four projects in Norfolk, including a boat hotel near East Beach, a hotel near Old Dominion University, a medical plaza across from the Sentara Norfolk General complex, and the refinancing of the Attucks Theatre. It has not invested in a Norfolk project since 2008.
In the last two awards cycles, HRV won a total of $100 million in New Markets Tax Credits designed to spur investment in distressed or severely distressed areas that otherwise would not attract capital. The Treasury Department’s May and June reports of tax credits reveal that HRV has $6 million remaining from its 2019 allocation and $37 million from its 2020 allocation. The report also shows that HRV is only required to invest 50 percent of its allocations in non-metropolitan areas.
Chalk forwarded an email from a Mercury reporter about the exception the day before NRHA and HRV officials met with City Council. In a response obtained through a public records request, Jennifer Donohue, HRV’s chief executive officer, said the company would consider something proposed by the city and would seek permission to invest from the CDFI Fund, which administers the program, “if it is a project that addresses the impacts of COVID-19 but is not within HRV’s business strategy.”
That’s inaccurate. The exception permits a CDE to invest in any qualifying project, including ones outside its business strategy whether or not it addresses COVID impacts, according to officials expert in the policy.
In response to a question this week, Chalk said HRV had not told him about the available allocations. Delphine Carnes, the lawyer for HRV and NRHA, and Donohue have repeatedly said in emails that they want the city to propose qualifying projects. Chalk has said that Hampton Roads Ventures needs to take the lead, marketing the tax credits program to local developers, banks, and community organizations to identify opportunities.
Carnes and Donohue did not respond to an email seeking the basis for their interpretation of the exception, asking whether they called for clarification from the CDFI Fund, and asking how much would be available to immediately invest in a qualified Norfolk project.
Jackson and Donald Musacchio, chair of the board of commissioners, also declined to comment through the authority’s public relations staff.
In another development, The Mercury asked the housing authority’s public relations head if the board of commissioners would subject HRV to Virginia’s Freedom of Information Act. The NRHA board is also the board of managers of Hampton Roads Ventures. They refused.
“Chairman Musacchio has confirmed that each commissioner on the Board of NRHA is in agreement with Chairman Albert’s statement that HRV is not subject to FOIA, HRV will not voluntarily subject itself to all the implications of FOIA, and HRV and NRHA will both continue to cooperate with the City and provide relevant information and documentation to the City,” said the email reply from the authority.
After last month’s City Council meeting, Mayor Kenneth Alexander said Hampton Roads Ventures records should be subject to the act.
Since Hampton Roads Ventures last backed a Virginia project, other community development entities have invested nearly $327 million in 86 projects in the state, including one in Norfolk, one in Portsmouth, two in Newport News and seven in Richmond, according to a Treasury Department database. Meanwhile, Hampton Roads Ventures has financed more than $100 million in projects outside the state.
The Mercury has public records requests with the Treasury Department pending since August for HRV’s applications for tax credits, which would reveal what projects they have pursued over the years, and its close-out reports on projects, which would show the money trail. The Freedom of Information Act officer for the Treasury Department said recently that those requests are in the final stages of processing.
Companies like Hampton Roads Ventures are called community development entities. They may be offshoots of banks, nonprofits, public agencies or other financial institutions. They apply for new markets tax credits from the Treasury Department and, if they prevail in the highly competitive process, they match projects and investors who earn a 39 percent tax break over seven years.
The Mercury series outlined roughly $250 million in investments spurred by HRV including a mixed-use senior apartment complex in Illinois, a peanut shelling plant in Georgia, grocery stores in Ohio, Louisiana, Illinois and Ohio, a grain terminal business in Mississippi, an aluminum company in Alabama, a hair gel company in Tennessee and a cotton mill in Louisiana.
Alexander has said the city will draft a resolution requiring the housing authority’s subsidiary to focus on Norfolk while understanding that it may still invest in other areas. That resolution has not yet been prepared.
In an email to Alexander after the City Council meeting obtained through a records request, former NRHA executive director and HRV head John Kownack offered a long draft resolution. In part, it said that HRV should make “its best efforts to include qualifying Norfolk projects in future applications” and use HRV earnings to create a position within the economic development department to utilize federal, state, and local tools to attract private investment in distressed neighborhoods. Norfolk has 16 severely distressed census tracts, which would be a target for New Markets Tax Credits projects.
Kownack’s suggestions did not require HRV to include Norfolk projects in its applications nor did they make the development entities files public records. It’s not clear whether the city will adopt any of his recommendations. The mayor and some council members have called for HRV to invest in Norfolk and to make its records public.
During the council session, Albert and Jackson defended HRV, saying the funding it provides was critical to the housing authority as federal and city monies declined. According to NRHA documents, HRV has transferred $2.3 million to the housing authority, all since 2016. It’s not clear what funds, if any, were transferred between 2003, when HRV was created, and 2016