Reviewer Training Presentation · • This training presentation is the final part of the Independent Study portion. You will be required to complete test questions following each

Reviewer Training Presentation

2019 New Markets Tax Credit Program

PREPARED ON

July 20, 2019The CDFI Fund is an equal opportunity employer.

• Thank You for serving as a Reviewer for the 2019 Allocation Round of the New Markets Tax Credit Program.

• Questions? Contact: – NMTC staff for training and program related questions

– CDFI Fund contact list is provided on the last slide

– F2 Solutions for personnel matters

• Please have a copy of the 2019 Phase 1 Review Form in front of you during this presentation.

• The terms “Phase 1 Review Form” and “Scorecard” will be used interchangeably.

2

Welcome

• After completing the independent study and viewing this presentation, Reviewers will understand the mechanics of the Phase 1 review process, including:

– Roles and responsibilities

– Review criteria and guidelines

– Phase 1 Review Form questions

– Other sections of the Phase 1 Review Form

3

Presentation Goals

1) Training Logistics & Legal Matters

2) Review Process and Phase 1 Review Form

3) Reviewer Tips and Schedule

4) Phase 1 Review Form – Business Strategy

5) Phase 1 Review Form – Community Outcomes

6) Summary Scoring Sheet & Panel Issues

7) Special Topics

4

Presentation Roadmap

• All training will be completed remotely• In accordance with the Phase 1 Reviewer Training Plan, at this point you

should have reviewed:Required Review:– “2019 Introduction to the NMTC Program” Presentation Slides– 2019 NMTC Program Application FAQs (particularly Qs. 25, 32, 33, 33, 34 55,

56, 58, 60, 64, 68-71, 74, and 75-79 as well supplemental FAQs E, F, I, and J)– 2019 Phase 1 Review Form– 2019 NMTC Phase 1 Reviewer Tip Sheet– Reviewer Tip Sheet: Panel Issues and Award Recommendations

Reference Materials (Recommended Review):– 2019 NMTC Allocation Application (Applicant Information, Business Strategy

and Community Outcomes sections only)– “2019 NMTC Program Application Roadmap” Presentation Slides– AMIS Online Review Form Instructions– 2019 Phase 1 Review Form Calculations & Instructions Workbook

• This presentation assumes you are already familiar with the content ofthese documents.

5

Training Materials

• This training presentation is the final part of the Independent Study portion. You will be required to complete test questions following each section of this presentation.

• You will have only 3 attempts to correctly answer all of the test questions for each section.

6

Training Logistics – Test Questions

• Make sure to read all elements of the Phase 1 Reviewer Training Plan

• Test questions after Section 1 will refer to these documents.

• If you have not done so already, stop this presentation and review these documents.

7

Training Logistics – Test Questions

• You need to complete the presentation and all related test questions by December 9th, 2019.

• You must complete the entire training program before you can access your assignments.

• A MANDATORY conference call with NMTC staff will be scheduled by a Team Leader between December 10th, 2019 and December 11th, 2019.

• You will be compensated for 10 hours of training time.

8

Training Logistics

• Please closely review the Conflict of Interest (COI) policy posted in your AMIS Reviewer Profile.

• Any reviewer that assisted in the preparation (including preparing, drafting, reviewing, collaborating or strategizing) of a 2019 NMTC application is banned from participating as a 2019 Phase 1 Reviewer.

• If you discover you have a conflict with an application assigned to you, stop work on that application and immediately inform your Team Leader, CDFI Fund Legal Counsel, and F2 Solutions.

9

Legal Matters – Conflict of Interest

• Anonymity of application reviewers

– Do not communicate with other reviewers

• Confidentiality & non-disclosure agreement

– You agree not to disclose information learned during the review process or any review materials to any third party.

– All review materials (electronic and paper) must be disposed of at the end of the review process.

• Legal Counsel Contact: Melanie Lennon

[email protected]

(202) 653-0364

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Legal Matters – Other Items




4) Phase 1 Review Form - Business Strategy



7) Special Topics

11


12

Overview of Review Process

Phase 1: Peer ReviewExternal Reviewers evaluate applications.

Phase 2: Panel ReviewApplications that meet minimum scoring thresholds in

Business Strategy and Community Outcomes are sent to a CDFI Fund staff panel for consideration in rank order.

Selection of ApplicantsSelecting Official makes Award Determinations based upon

panel recommendations.

3 Stages of the Review Process

• Application Reviewers (You)

• Team Leader

– CDFI Fund staff or

– a Federal employee (from another agency)

• NMTC Program Manager

13

Phase 1 Review Process – Key Roles

Application Reviewer:

On a timely basis, evaluate approximately 10 applications.– Quality reviews and workload balance are both important! If you

experience workload balance issues or extenuating circumstances affecting your working pace/quality, please contact your Team Leader for guidance.

– If you plan on traveling and will have limited Internet connectivity, please alert your Team Leader ASAP.

• Evaluate applications based on the criteria in the review form as well as the guidance provided by the CDFI Fund in the Reviewer training materials and by your Team Leader.

• Justify your selection (e.g. A, B, etc.) for each question with brief, thoughtful, and substantive rationale.

14

Phase I Review Responsibilities

Team Leaders:

• Ensure Reviewers complete reviews on schedule

• Monitor quality and ensure consistency with guidance

• Return reviews to Reviewer if quality or consistency issues need to be addressed

• Respond to Reviewer questions and provide guidance as needed on the Phase 1 Review Form

• Do not tell Application Reviewers which responses to select, except where indicated in the guidance

• Serve as liaison to NMTC Program Manager

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NMTC Program Manager:

• Enforces evaluation standards and procedures

• Fields technical inquiries from Team Leaders on behalf of Reviewers

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• The Phase 1 Review Form will be completed & submitted online through AMIS

• Please refer to the AMIS Online Review Form Instructions for details on accessing AMIS and navigating the Phase 1 Review Form Scorecard

17

Phase I Review Form

• Reviewers must select the appropriate response option for each review question

• Review questions have a varying number of different response options.

• Some review questions have a “Note” that directs the Reviewer to consider certain elements when scoring the review question.

• Be sure to read all of the response options before selecting one.

• Select the response option to each question that best representsyour evaluation of the Applicant’s responses in the Application.

• Some review questions will be “Not Applicable (N/A)” for a particular Applicant, and the scorecard will pre-populated with this response.

• For each review question, you must write a one or two sentence justification explaining why you selected the response option for that question.

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Phase I Review Form – Questions

19

Phase I Review Form

Section Title

Review Question

Justification

Note -Additional Guidance

Response Options

Please provide at least one sentence justification.

Sub-Section

• Some review questions will be pre-populated from responses in the Application.

• You will not be able to edit any of the prepopulated responses, as they will be greyed out.

• Pre-population is primarily related to:

– A review question being Not Applicable for a particular Applicant, OR

– A review question being directly pre-populated based on responses in the Application (e.g., Review FormQuestion 5).

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Phase I Review Form –Question Pre-population

21

Phase I Review Form –Sample Pre-population

This review question was pre-populated based off of NMTC Allocation Application Data.

Remember: You will not be able to change/edit pre-populated questions; they will be greyed out. If you believe the information is incorrect, please contact your Team Leader.

Applicant selected 0% in Q. 13(b)(iii)


2) Review Process and Introduction to Phase 1 Review Form





7) Special Topics

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Getting Started:

• Review applications in specified order

• Preview/skim the application (including the executive summary) before you start answering review form questions, so you get a sense of its overall contents

• Ignore all attachments

• Contact your Team Leader if you have any questions or if any issues affecting your work arise

• Remember, Application narratives and tables work together

23

Reviewers Tips

Evaluation:

• Read the Executive Summary, Business Strategy and Community Outcomes sections of the Application before you begin your evaluation of each section

• Read each review question carefully

• Read any “Notes” under review questions for specific scoring guidance

• Carefully read all response options for each question before selecting one

Note: these steps will ensure that you address the correct evaluation criteria

24

Reviewers Tips

Evaluation:

• Each review question refers to specific application questions. You may reference information from other parts of the Business Strategy and Community Outcomes sections when selecting ratings, if the information is directly related to that review question and not specifically evaluated in another review question.

– Be sure to explain your response selection and indicate the location of the extra-sectional information in your justification comments

– If you are unsure about whether information is directly related to a specific review question, ask your Team Leader

• Only evaluate the Applicant on information presented in the Application

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Reviewers Tips

Explanation of Key Terms: Likelihood

• Many review questions (e.g., Review Question 4) ask the Reviewer to determine the likelihood of a particular outcome or expected result

• Definitions:

– Highly Likely: Reviewer feels near-certainty outcome or result will occur

– Probably: Not as confident as “Highly Likely” but greater than 50% that outcome or result will occur

– Possibly: Odds are 50/50 that outcome or result will occur

– Unlikely: Less than 50% chance outcome or result will occur

26

Reviewers Tips

Explanation of Key Terms: Extent of Narrative Quality

• Other review question types (e.g., Review Question 1) ask the Reviewer to determine the extent to which specific items are present and/or clearly explained in the application.

• Definitions:

– All : Reviewer feels that 100% of the requested information has been provided and/or clearly explained by the applicant

– Most : Not as substantive as “All”, but more than 50% of the requested information has been provided and/or clearly explained by the applicant

– Some: The applicant provided information, but to a lesser degree than the next best answer choice (e.g. “All” or “Most”)

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Reviewers Tips

Justification Comments:

• Address only the question/criteria being evaluated

• Do not compare Applicants

• Provide clear and substantive analysis

– Clearly identify the key factors that led you to the response option selected.

• For instance, if you selected “B. Probably”, you should provide evidence (e.g. missing information, inadequate supporting data, etc.) to validate why the information provided meets the criteria for your selection.

– Do not simply re-state items from the application. Focus on an ANALYSIS of the information provided

• Address any “Notes” associated with the review question.

• Write in complete sentences or bullet points

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Reviewers Tips

Here is an example of a good justification:

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Reviewers Tips

Justification: The Applicant provides a comprehensive track record and robust methodology for tracking most of the community outcomes it identified in Application Q. 25- Job Creation/Retention, Quality Jobs, Accessible Jobs, and Commercial Goods or Services to Low-Income Communities. However, the Applicant does not outline a track record or address methods for tracking community outcomes for Housing Units.

Here is an example of a bad justification:

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Reviewers Tips

Justification: The applicant’s proposed QLICIs are projected to serve 1000 students annually and 500 homeless individuals annually, therefore they are likely to achieve their projected outcomes.

Review Form Submission:

• Meet the deadlines contained in the delivery schedule attached to the Training Plan

• For an assignment to be considered on-time it is due at 11:59 PM ET on the scheduled due date.

• Make sure all items are complete before submission

• Be on the lookout for comments from your Team Leader

• Reviews returned to you by your Team Leader are due for resubmission within 2 business days; all of your Team Leader’s comments should be addressed

31

Reviewers Tips

Review Form Submission:• If you know you will be unavailable for a period of time, inform

your Team Leader in advance. You may be able to work ahead.

• Team Leaders will try to either accept your review or return it within two business days but this isn’t always possible. Please be patient with us.

• Team Leaders will be taking extra time with the first few reviews to correct errors and provide feedback. There may be more significant corrections and comments at first.

– Team Leader comments or corrections on your initial reviews should inform your subsequent reviews.

• Based on your Team Leader’s assessment of your first few reviews, additional reviews will be released.

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Reviewers Tips

1) Response option selected is inconsistent with narrative justification• Example: Reviewer selects “Highly Likely” for a review

question, but supporting justification indicates Reviewer had doubts about the information presented by the Applicant

2) Inadequate analysis in scoring justifications

3) Reviewer overlooks a question Note in the review form

4) Overlooking key facts• Example: The justification states a piece of information is

missing, when that information is located somewhere in the application

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Reviewers Tips –Common Reasons for Returned Reviews




4) Phase 1 Review Form – Business Strategy



7) Special Topics

34


35

Phase 1 Review Form – Overview

Two sections of the NMTC Allocation Application are evaluated by Phase 1 Reviewers:

(1) Business Strategy, including Priority Points

(2) Community Outcomes

• Several questions within the Business Strategy and Community Outcomes sections of the scorecard (review form) will prompt you to assess Table A5 alongside the info within Application Q. 17 and Q. 25.

• Applicants were not required to list all of the details of sample transactions from Table A5 in Q. 17, however, the information within these two sections should be consistent (e.g. Total Applicant QEI).

• Please pay attention to the TIPs and instructions in the Application that appear above the applicant’s responses to Q. 17 and Table A5 (in addition to FAQs E, F, G, 44) for information on the expected consistency between these two questions.

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Q. 17 and Table A5

• Question 17:

– Single or Discrete # of Investments: Applicants are expected to provide a narrative describing the risks that may preclude the project(s) from being completed within the time-frames identified (e.g. source of leverage debt, permits, site control, etc.).

– General Pipeline: Applicants are expected to provide a narrative describing the total # of businesses identified (including the total dollar amount of QEI and QLICI financing amounts), what portion of the Applicant’s pipeline falls into different business and activity types, and the Applicant’s strategy for identifying potential borrowers. See FAQ G for information on Loan Fund entries.

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Expected Information:Question 17 vs. Table A5

• Table A5:– Applicants are expected to complete Table A5 in its entirety (Rows a-n, all

required fields) for each sample transaction it plans to where it intends to make investments in, or loans to, QALICBs with its requested NMTC Allocation.

– The sum of the Total Applicant QEIs (row g) for all transactions listed in Table A5 must correspond to the total amount of NMTC Allocation requested in Question #1.

– In cases where the Applicant anticipates investment in a small dollar (equal to or less than $4MM) and/or revolving loan or equity fund, the Applicant may, in Table A5, indicate “Small Dollar Fund” or “Revolving Loan Fund” as a single project. See FAQ Item G for more details.

Expected Information:Question 17 vs. Table A5

The purpose of this section is to evaluate the Applicant’s overall business strategy based on the following 5 sub-sections.

(1) Products, Services, and Investment Criteria

(2) Projected Business Activities

(3) Prior Performance

(4) Prior Performance and Projected Business Activity

(5) Notable Relationships

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Phase 1 Review Form –Business Strategy

Overview: Evaluate the financial products/services that the Applicant intends to offer QALICBs or other CDEs.

• Please note:

– Financial products associated with the Leverage Model are often structured with multiple financial notes (for instance, a Senior A Note and a Subordinate B Note, etc.). In this case, you should evaluate the financial notes collectively as a single financial product.

– If using the Unleveraged Model, the financial product may only have one financial note.

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Question 1:• You, as the reviewer, should be able to clearly understand the rates and

terms for the products the Applicant intends to offer with an allocation

• To score “A”, the Applicant must

– If the Applicant provides a range for any of the rates/terms (e.g., interest rates range from 2-4%) then the Applicant must specify the circumstances that would dictate the specific rates and terms to borrowers/investees AND

– For financial products structured with multiple financial notes, the Applicant must discuss the rates and terms of the financial notes on a blended basis

– Example: If a financial product is structured with an A Note with a 5% rate and a B Note with a 1% interest rate, the Applicant must discuss the blended interest rate for both the A and B notes

– Please review questions 33-36 in the 2019 NMTC Allocation Application FAQs document

41


• Question 2: If the Applicant did not compare the rates, terms, and features of its products (or its Controlling Entity’s products) to what it typically offers AND to similar financial products offered by other financial institutions in the Applicant’s service area, then the response must be “B” (some) or “C” (none). If the applicant or its Controlling Entity does not offer a similar product, it must at least provide a comparison with products offered by other financial institutions to receive an “A”.

• Question 3: To score “A” Applicant must provide an example of a project or business from Q. 17(d) and/or Table A5 that clearly illustrates how each financial product it intends to offer will be used to finance a projected NMTC investment

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• Question 4: will only be applicable if the Applicant plans to invest or loan to other CDEs

• Question 5: pre-populated from the Applicant’s response to Application Q. 15. THIS QUESTION WILL BE GREYED OUT. You won’t be able to make a change here.

• Question 6: will only be applicable if the Applicant plans to purchase loans from other CDEs.

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In Application Q. 14 (b), Applicant provides a narrative description of the financial product it intends to offer, characterized by subordinate debt with interest rates ranging from 1-2%, Debt Service Coverage Ratios (DSCR) as low as 1.1, and Loan-to-Value Ratios (LTVs) up to 100%. How would you evaluate the Applicant in Q. 2?

44

Case Study: Products, Services, and Investment Criteria

Justification: Applicant does not provide any comparison of the rates and terms for the products the Applicant typically offers and what products are offered by other financial institutions in its service area.

Overview: Evaluate the Applicant’s projected business activities – either a single or discrete number of investments OR a general pipeline of investments.

• Questions 7-8: Mostly pre-populated N/A. Only evaluate if “single or discrete investments” is selected by the Applicant.

• Questions 9-12: Only evaluated if “general pipeline” is selected by the Applicant.

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• Question 9: Evaluate whether the Applicant provides all necessary details for its overall pipeline of activities in Q. 17.

– The necessary details the Applicant must provide have been updated this year, and are listed in the Note before this scorecard question.

• Question 10: Evaluate the extent to which the information provided in Table A5 aligns with the narrative description in Q. 17.

– Please review the Note for Question 10 for more details.

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• Applicant NRG selected general pipeline in Q. 17(c), and described a focus on education, retail, and healthcare facilities in the narrative for Q. 17. In Table A5, Applicant NRG provided transaction details for the “CDFI Hospital”, the “NRG Charter School”, and a community arts center.

(2) Projected Business ActivitiesCase Study – Question 10

Justification: The Applicant listed 3 business types (education, retail, and healthcare facilities) and 2 activity types (Loans to QALICBs and Loan purchases) in Q. 17. The applicant did not list any retail business types or loan purchase activity types in Table A5, therefore the applicant was downgraded.

• Question 11: Evaluate whether based on the project descriptions in Table A5 and Question 17(d), the Applicant is likely to meet its deployment projections in Tables A1-A4.

• Question 12: Evaluate the likelihood that the Applicant’s business identification strategy will yield the types of business types and activity types described in its general pipeline.

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Overview: Evaluate the Applicant’s (or Controlling Entity’s) track record providing direct and indirect financing.

• Please note:– Direct financing activities are loans a/o equity investments that are financed with

the Applicant’s (or Controlling Entity’s) own at-risk capital. These activities also include investments in other CDEs, purchasing loans from other CDEs, and FCOS provided by the Applicant (or Controlling Entity).

– Indirect financing activities are loans a/o equity investments that are financed by third-parties where the Applicant (or Controlling Entity) participate, but had no capital at risk (e.g., loan packaging, project development, etc.)

– DO NOT consider any financing activities closed on or after September 4, 2019 in your evaluation of prior performance.

– Applicants were instructed not to include grants made to others as part of their financing track record, so please disregard any grant-making activity in your evaluation.

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• Question 13: Response choices include criteria for both direct and indirect financing activities. – Carefully read the Phase 1 Review Form Calculations and Instructions

Workbook to know where in Exhibit B to locate both direct and indirect financing.

– Ensure to select the highest response that aligns with the Applicant’s track record. For example, if the Applicant has less than 2 years of DIRECT financing activity, but 5 or more years of INDIRECT financing activity, then the score should be “B,” not “D.”

• Question 14: This question asks only about the Applicant’s DIRECT financing track record as presented in Tables B1-B3 and Application Question 19. DO NOT include financing in Table B4 and Application Question 20.

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• Question 15: Compare Applicant’s proposed QLICIs and business/project types to determine if its track record includes comparable financing activities

– Applicant’s Proposed QLICIs – See Application Question 13(b)

– Business/Project Type is the category of business(es) the Applicant plans to invest in, such as education, for-sale housing, office space, utilities/infrastructure, etc.

– Activity Type is the category of financing activity(ies) the applicant plans to conduct, such as loans to QALICBs, investments in CDEs, etc.

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An Applicant has a track record of providing FCOS to early childhood education centers and community health centers. The Applicant’s pipeline consists of providing debt financing for the development of new community health centers.

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Case Study: Prior Performance and Projected Business Activity

Justification: The Applicant’s pipeline consists entirely of community health centers and the Applicant demonstrates a track record of serving community health centers. However, the Applicant does not show a track record of providing debt financing.

• Question 16: Compare projected deployment in Exhibit A (all tables) with financing track record (both DIRECT and INDIRECT financing) in Exhibit B.– Carefully read the notes before Q. 16 to know what you should

take into account for total projected deployment in Exhibit A.

– Calculate % to select the highest response that aligns with the Applicant’s track record.

– Formula: • Historical Financing Percentage =

Financial Track Record ÷ Projected Deployment

• (See Phase 1 Form Q. 16 Notes and the Phase 1 Reviewer Calculations and instructions Workbook for more details)

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Justification: The Applicant’s track record of direct financing represents 30% ($18MM) of its $60MM total projected deployment in Exhibit A. However, the Applicant has a stronger track record of indirect financing that represents 70% ($42MM) of its projected deployment.

Total projected deployment in Exhibit A is $60MM. The Applicant has a track record of $18MM in direct financing and $42MM in indirect financing listed in Exhibit B.

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Case Study: Prior Performance and Projected Business Activity

Overview: Evaluate if the Applicant will have a notable relationship(s) in proposed investments and whether benefits will be passed to unaffiliated end users

• “Added value” means that notable relationships will create benefits for non-affiliated end-users. Consider the community outcomes described in Q.25 of the Application when evaluating notable relationships

• If Applicant answers “No” for Q. 23(a)-Q.23(e), select “A” for Review Form Question 17

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(5) Notable Relationships

The Applicant indicates that it will act as a “Master Tenant” in some projects for the purposes of twinning NMTCs and historic tax credits. In these instances, the Applicant indicates that the dual subsidies are necessary for the project to occur and deliver community benefits. The Applicant won’t gain any material financial benefit by being “Master Tenant”.

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Case Study #1:Notable Relationships

Justification: Notable relationship is a function of structuring the financing and does not create any material financial benefit for the Applicant or its Affiliates. Also, based on Q. 25, these projects will generate significant community outcomes, including quality jobs and healthcare services for LIPs.

The Applicant, XYZ Bank, is a subsidiary of ABC Corp (Controlling Entity). ABC Corp will provide professional services as the developer of the Youth Community Center (the QALICB). In the narrative for Q. 23(f), the applicant explains that this relationship will allow the Youth Community Center to retain the B-note from the QLICI, therefore transferring benefits to its low-income clientele.

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Case Study #2:Notable Relationships

Justification: The only benefits discussed pertain to the Youth Community Center (the QALICB) receiving the B-Note from the transaction. Specific benefits to unaffiliated end users such as Low-Income Community residents or Low-Income Persons were not discussed, therefore it is unclear how the retained B-note will translate into a concrete benefit for these groups.

• Applicants can earn up to 10 “bonus” points:

– Priority 1 (5 points): based on track record of serving Disadvantaged Businesses and Communities (DBCs)

– Priority 2 (5 points): based on a commitment to invest in unrelated entities (Application Question 22)

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Priority Points

Overview: Evaluate the number of years and percentage of dollar volume of financing that has been provided to DBCs

• Please note:– Track record of principals, board members, and other management

individuals are not relevant for this section

– If Exhibit B is Not Applicable or includes only zeros for direct financing, then the response selection for Q. 18 must be “C” and Q. 19 must be “E.”

– Reviewers must consider any financing activity listed in the column “2019 YTD” as a full year when evaluating this question.

• Question 18: Be sure to include years of financing in all four tables (B1-B4), both direct and indirect financing. Applicants may take into account the narratives in Application Questions Q.19 and Q.20. Please review the Q. 18 tab in the Calculations and instructions Workbook for more details.

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Priority Points 1: Track Record of Serving DBCs

• Question 19:

– Formula (Exhibits B1-B4): % of DIRECT financing activities provided to DBCs = Totals to Disadvantaged Businesses and Communities (2013-2019) ÷Totals (2013-2019)

– DO NOT include indirect financing in the calculation. – For this question, please use the Ph. 1 Calculations and Instructions

Workbook (“Q. 19 – DBCs” Tab) 60

Priority Points 1: Track Record of Serving DBCs

Evaluation Elements:• Based on application Q.22

• Applicant is automatically granted these Priority Points based on its response

• Reviewer cannot alter score

• If you feel these points were erroneously claimed, you should indicate this in the Panel Issues section of the review form

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Priority Points 2: Investments in Unrelated Entities







7) Special Topics

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The purpose of this section is to evaluate the Applicant’s strategy to generate community outcomes based on the following 5 sub-sections.

(1) Targeting Areas of Higher Distress


(3) Tracking Community Outcomes

(4) Community Accountability and Involvement

(5) Other Community Benefits

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Community Outcomes

Overview: Evaluate the Applicant’s strategy for prioritizing QLICIs in areas of higher distress

• Question 20: Pre-populated based on Applicant’s response in the application

• Question 21: Consider the Applicant’s strategy for prioritizing QLICIs, given limited allocation– If you have any uncertainty regarding Applicant’s strategy, you must select “B”

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(1) Targeting Areas of Higher Distress

Overview: Evaluate the Applicant’s track record and projected community outcomes.

• Please note:

– To facilitate a more in-depth review, individual community outcomes listed in Q.25 have been grouped into 4 categories. Each category is evaluated with a similar set of questions and all categories are equally weighted when determining the overall section score.

– The CDFI Fund has no preference for one outcome over another

– Reviewers will only answer review questions for a category if the Applicant has selected one or more outcomes in that category, otherwise those review questions will be pre-populated N/A.

– Reviewers should collectively evaluate the outcomes if there is more than one outcome selected in that category.

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• Other important notes:– For Application Q. 25(a), Applicants that select (1) Job

Creation/Retention as an outcome are also required to provide a response for both (2) Quality Jobs and (3) Accessible Jobs

– For the other categories, it does not matter how many outcomes they select

• For example, an Applicant should not be evaluated differently whether it selects only one or all three Goods and Services to Low-Income Communities Outcomes.

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Four Community Outcome Categories:

1. Job-Related Community Outcomes– 1. Job Creation/Retention

– 2. Quality Jobs

– 3. Accessible Jobs

2. Goods and Services for Low-Income Communities– 4. Commercial Goods or Services

– 5. Healthy Food Financing

– 6. Community Goods or Services

3. Financing Minority Businesses and/or Housing Units– 7. Financing Minority Businesses

– 8. Housing Units

4. Flexible Lease Rates and/or Environmentally Sustainable Outcomes– 9. Flexible Lease Rates

– 10. Environmentally Sustainable Outcomes

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Questions 22, 29, 35, and 40: Did the Applicant quantify the projected outcomes.

• For these questions, you should only assess whether or not the outcomes were quantified. You should not assess any qualitative aspect(s) of the outcomes (e.g. methods used, likelihood of success, etc.).

Questions 23, 30, 36, and 41: Evaluate the methods used to estimate outcomes.

• A method is the procedure the Applicant used to obtain the numbers for quantifying its projections for each selected Community Outcome.

• Examples include: – Using XYZ economic impact modeling software to estimate the number of

construction jobs;

– Calculating projections (e.g. square feet, jobs, clients served) based on similar projects previously financed by the Applicant;

– Obtaining projected outcome data from the project sponsor or business;

– Analyzing QALICB financial projections to determine future lease rates to third-party tenants;

– or Evaluating the reduction in energy or water use based on the environmental features incorporated by the QALICB

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Questions 24, 31, and 42: Evaluate the metrics used to estimate the outcomes.

• A metric is a function or ratio that the Applicant used to validate the reasonableness of the quantified projections for each selected outcome. Applicants should provide at least one metric for each targeted community outcome AND the Metric must be sourced from or informed by a third-party. See FAQ item I for examples for third party sources.

• Metrics are not evaluated for Financing Minority Businesses and Housing Units

• Examples of metrics include: – X square feet of commercial real estate development results in the creation of Y full-time

construction jobs;

– Charter schools create X Full Time Equivalent jobs for every Y students;

– X full-time primary care doctors equals Y patient visits per year;

– X% reduction in rent for an early childhood education center results in Y number of additional children enrolled; OR

– X environmental remediation costs will result in Y square feet of reusable space in a LIC.

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Using the actual jobs created from similar projects previously financed by the Applicant, the Applicant’s proposed pipeline projects are projected to create 400 jobs. To validate its projections, to Applicant provided the following data: 4 jobs are created for every 1,000 square feet in new retail, 3 jobs per 1,000 square feet in new office space, and 1.5 jobs per 1,000 square feet in new industrial development (Source: U.S. Commerce Association).

• What is the method?

– Calculating the actual jobs created from similar projects previously financed by the Applicant

• What is the Metric?

– 4 jobs for 1,000 sf retail, 3 jobs for 1,000 sf office, 1.5 jobs for 1,000 sf industrial

• What is the 3rd party verification/source for the Metric?

– U.S. Commerce Association

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Case Study: Methods/Metrics

An Applicant projects that the community health centers in its pipeline will serve 50,000 LIP patients annually. To estimate this projection, the Applicant provides a comprehensive explanation of how it conducted a market study that evaluated the medical needs of the surrounding community for each center, especially among LIPs who reside nearby.

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Justification: Applicant clearly explains how it used a market study of the medical needs of the surrounding LIC for each health center to make its projections.

Although the Applicant scored high on methods, same is not necessarily true for metrics.


Justification: The Applicant did not provide metrics for its targeted community outcome.

Questions 25, 32, 37, and 43: Evaluate the likelihood that the Applicant’s proposed QLICIs will generate the outcomes it has proposed.• Reviewers should refer to the Applicant’s proposed investments in Table A5 and/or

Application Q.17.

• Determine how likely the Applicant is to generate the proposed outcomes based onthe types of investments it has proposed.

• For instance, if the Applicant projects X number of LIP patients will receive healthcare services, does it propose community health centers or healthcare-relatedinvestments in Table A5?

• Another example: If Applicant proposes the development of X number of housingunits as an outcome, does it propose mixed-use commercial/residential or similarinvestments in Table A5?

• In evaluating this review question, please only consider Applicant’s PROPOSED QLICIsdescribed in Table A5 and Question 17. Do not consider the Applicant’s track recordof past investments as this is evaluated in a later review question

See Slide #26 more details on evaluating likelihood.

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For each outcome category, reviewers will evaluate if the community outcomes will benefit Low-Income Persons or Residents of Low-Income Communities.

• For Job-Related Community Outcomes:

– Will the created/retained jobs be quality jobs (Question 26)

• Quality jobs are jobs that provide living wages; benefits such as health insurance or retirement plans; and/or opportunities for training and advancement.

– Also, will the jobs be targeted and/or accessible to Low-Income Persons (LIPs), residents of Low-Income Communities (LICs), people with lower levels of education, or people who face other barriers to employment (e.g. longer term unemployed, ex-convicts, etc.) (Question 27)

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(2) Community Outcomes – Benefits to LIPs and LICs

For Goods and Services for Low-Income Communities:

Question 33: Will projected outcomes increase the provision and access of

– commercial goods or services, • (e.g., restaurants, retail, pharmacies),

– fresh and healthy food options (e.g. grocery stores),

– and/or community goods or services• (e.g., healthcare, social services, educational, cultural)

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• Applicant XYZ projects that the City Center Retail pipeline project will serve 50,000 new LIC residents annually. The project will develop 25,000 sq. ft. of vacant lot space to build a retail development anchored by a new grocery store within a designated Food Desert.

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Case Study: Community OutcomesBenefits to LIPs and LICs

Justification: In this grouping, the applicant selected Commercial Goods and Services and Healthy Food Financing , with a retail center as its pipeline project. Based on the Applicant’s investment type (grocery store and retail), it is likely that the applicant’s QLICI will increase the provision of healthy food and retail services for LIC residents.

• For Financing Minority Businesses and/or Housing Units and Flexible Lease Rates and/or Environmentally Sustainable Outcomes:

– Question 38: Will the projected Financing Minority Businesses and/or Housing Units Outcomes clearly benefit Low-Income Persons (LIPs) and/or residents of Low-Income Communities (LICs)?

– Question 44: Will the projected Flexible Lease Rates and/or Environmentally Sustainable Outcomes clearly benefit Low-Income Persons (LIPs) and/or residents of Low-Income Communities (LICs)?

– Location in a LIC is NOT sufficient to demonstrate benefit to LIPs/LIC residents.

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For Question 38, examples of Financing Minority Businesses and Housing Units clearly benefiting LIPs and residents of LICs includes (but not limited to):

• Financing Minority Businesses – QLICI will finance expansion of minority-owned manufacturing plant, which will result in the hiring of X number of Low-Income Persons.

• Housing Units – QLICI will finance construction of mixed-use development that will include X number of apartments, of which Y will be affordable to Low-Income Persons

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• Inadequate Versus Good Justification for Question 38

– Inadequate Justification: The new housing development will likely benefit LIPs because it will be located in a economically distressed neighborhood.

– Good Justification: The new housing development will likely benefit LIPs because X% of the units will be set aside for residents with incomes 80% or below the AMI.

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For Question 44, examples of Flexible Lease Rates and/or Environmentally Sustainable Outcomes clearly benefiting LIPs and residents of LICs includes (but not limited to):

• Flexible Lease Rates – QLICI will result in reduced rental rates for a nonprofit social service provider, and the lease savings will allow the nonprofit to serve X additional LIC residents.

• Environmentally Sustainable Outcomes – QLICI will finance remediation of a brownfield site, which will result in X number of LIC residents no longer exposed to environmental hazards.

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• Inadequate Versus Good Justification for Question 44

– Inadequate Justification: The environmental brownfield remediation will likely benefit LIPs because it will occur within an economically distressed neighborhood that has experienced persistent poverty.

– Good Justification: The environmental brownfield remediation will result in X number of LIC residents no longer being exposed to asbestos and lead, therefore the benefit to LIPs is clear.

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Questions 28, 34, 39, and 45: Evaluate the Applicant’s track record of producing similar community outcomes. A similar track record should include:• Outcomes that are similar in type (e.g., job creation, community

goods/services, flexible lease rates).

• Outcomes that are similar in quantity (e.g., number of jobs created, square feet of community facilities, percent below market rent).

• Only select “A” if the Applicant quantified the community outcomes in its track record. For example, in the last five years, the Applicant states its investments have resulted in X% reduction in energy costs for Y number of low income residents.– While outcomes with similar quantities are important, it is more significant for

you to establish whether or not the Applicant has relevant experience generating those outcomes

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• Question 46: Evaluate the Applicant’s ability to effectively track ALL projected community outcomes.– The Applicant’s response to application Q.25(b) should address how

it will track all outcomes selected in Q.25(a).

– In order to select “A”, the Applicant must describe BOTH its methodology for tracking future projected outcomes AND its track record of documenting similar outcomes in the past

• The Applicant must also address their tracking methods for all selected outcomes to score “A.”

(3) Tracking Community Outcomes

Overview: Evaluate the Applicant’s track record of community engagement and process for ensuring that future investments align with community priorities.

• Question 47: Evaluate the role of the Low Income Community (LIC) representatives on the Applicant’s Advisory and/or Governing Board in setting investment parameters.– Only Select “A” if the LIC Representatives on the Advisory Board representatives

play a significant role in all three areas listed in Scorecard Q. 47

• Question 48: Evaluate the Applicant’s process for determining whether its investments align with low income community priorities. The following elements should be considered:– The Role of LIC Representatives on the Advisory/Governing Board– The Applicant’s process for analyzing potential benefits to Disadvantaged

Businesses and Communities – The Applicant’s process for determining if investments align with community

priorities

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Question 49: Applicants are expected to describe a track record of activities beyond simply consulting with its Advisory Board. Examples may include:• Partnerships with local community or economic

development entities• Public hearings or community meetings• Support from elected officials• Community design charrettes

Note: Past community engagement activities must be clearly related to investment decisions when evaluating this question.

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• Question 50: Evaluate the extent to which the Applicant’s investments contribute to broader community and/or economic development strategies. Examples may include:

– Neighborhood revitalization plans

– Regional economic development strategic plans

– Rural county master plans

– DOES NOT INCLUDE a private facility expansion plan of a business (e.g., university capital improvement plan).

Note: If the Applicant intends to make NMTC investments in areas that do not have a formal plan or planning process, the Applicant should discuss other methods it used to ensure alignment with the community’s strategic priorities

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Overview: Evaluate the likelihood that the Applicant’s investments will attract additional private investment or the ability of operating businesses financed to attract subsequent private investment after the initial QLICI is made.

• Question 51: Additional private investment DOES NOT include how much private capital will be leveraged within the NMTC transaction structure or outside the structure during a simultaneous closing. Examples of additional private investment may include:

– X years after an NMTC investment made to an operating business, that business was able to raise private equity to fund a factory expansion.

– After an NMTC-funded project was completed, the owner of several adjoining properties financed façade improvements.

Please review FAQ #XX for additional information and examples of additional private investment.

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(5) Other Community Benefits







7) Special Topics

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• In the Award Determination, reviewers provide:

– A final YES/NO award recommendation

– Award recommendation justification

• Reviewers DO NOT recommend specific award amounts.

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Award Determination

• If you encounter information that is not scored in the reviewer form, you may record your evaluation in the Panel Issues Section

• If applicable, record your findings in one of the following factors, to be considered during the Panel Phase (Phase 2) of review:

1. Ineligible or questionable QLICI activities

2. Adjustments to allowable QLICI activities

3. Erroneously claiming Priority 2 points

4. Other critical items

• NOTE: Panel issue comments do not factor into Phase 1 scoring.

• If you do not find any issues, simply mark “No”

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Panel Issues

• Does the Applicant’s business strategy include aspects that are not clearly eligible per IRS regulations? Such as:

– Residential rental housing that is not part of a mixed-use project

– Direct provision of individual consumer loans by the Applicant (e.g., home mortgages)

• If yes:

– Provide a brief explanation

– List the question number where the ineligible activities were referenced

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Panel Issues: (1) Ineligible or Questionable QLICI Activities

• Were there activities checked in Q. 13(b) that you believe the Applicant should be prohibited from doing?

• Were there activities that were NOT checked in Q. 13(b) that you believe the Applicant should be allowed to do?

• If yes:

– Provide a brief explanation

– List the QLICI activities which should be removed and/or added

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Panel Issues: (2) Adjustments to Allowable QLICI Activities

• Priority for investing in Unrelated entities is self-reported in Application Q. 22

• You should notify the CDFI Fund if you feel that Q.22 was answered incorrectly by the Applicant

• Example: An Applicant’s sole QLICI transaction will capitalize a subsidiary entity.

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Panel Issues: (3) Erroneously Claiming Priority 2 Points

• Do not use this area for general comments about the application

• Only address issues that were not included in other areas of the review form, which you think the CDFI Fund should consider – e.g.:

– Material concerns related to the Applicant’s ability to manage and/or raise QEIs for an NMTC allocation

– Other critical areas of concern not appropriately reflected in the scoring or in any of the other required fields

– You have concerns about any prior NMTC activities discussed in the application

– You have knowledge of information not presented by the Applicant in its application that may influence the CDFI Fund’s decision

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Panel Issues: (4) Other Critical Issues


2) Overview of Review Process and Introduction to Phase 1 Review Form


4) Overview of Phase 1 Review Form - Business Strategy

5) Overview of Phase 1 Review Form – Community Outcomes


7) Special Topics

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NMTC Investment Models

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Special Topics

NMTC Investment Structures -Unleveraged Structure

CDE $10MM

QEI

QALICB

An Investor purchases the New Markets Tax Credits and funds the Qualified Equity Investment of $10 million dollars.

$3.9MM$10MM

The CDFI Fund Awards an Allocation of New Markets Tax Credits to the CDE.

Fees, Costs, and

Expenses

$500K

$9.5MMThe CDE provides a QLICI of $9.5MM to the QALICB.

Investor

The CDE receives $50K to cover the fees, costs and expenses.

NMTC Investment Structures -Leveraged Structure

Investor

CDE $10MM

QEI

QALICB

$3.9MM

The CDFI Fund Awards an Allocation of New Markets Tax Credits to the CDE.

Fees, Costs, and

Expenses

$800K

$9.2MMThe CDE provides a QLICI of $9.2MM to the QALICB.

Leverage Debt Provider

$3.1MM

Investment Fund$10MM in Capital

$6.9MM

$10MM QEI

The difference between the $3.1MM generated from the sale of the NMTCs and QEI of $10MM is provided as Leveraged Debt.

The CDE receives fees to cover the costs and expenses.

An Investor purchases the NMTCs. This assumes a credit price of about 80¢.

• The CDFI Fund does not have a preference for the Leveraged or Unleveraged Structure

• Not all Applicants will use the Leveraged Structure

• There are benefits to using either structure (e.g., providing Qualified Businesses with access to below market rate capital in Low Income Communities, etc.)

• Applicants should not be scored differently based on the structure an Applicant intends to use

• Direct any questions about NMTC Investment Structures to your Team Leader

NMTC Investment Structures - Notes

CDFI Fund Contact Information

Name Email Phone

Christopher Allison [email protected] 202-653-0357

Megan Careiro [email protected] 202-653-0384

David Fleites [email protected] 202-653-0355

Karen Leung [email protected] 202-653-0356

Rosa Martinez [email protected] 202-653-0311

Jeff Merkowitz [email protected] 202-653-0329

Mia Sowell [email protected] 202-653-0356

Joan Reid-Patrick [email protected] 202-653-0380

Adrian Russell [email protected] 202-653-0396

Julie Zavala [email protected] 202-653-0358

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mailto:[email protected]










Documents

Reviewer Training Presentation · • This training presentation is the final part of the Independent Study portion. You will be required to complete test questions following each