EQUITABLE COMMUNITY 

DEVELOPMENT 

USING FEDERAL FINANCIAL TOOLS 

IN SUPPORT OF LOCAL SUCCESS

United States

Environmental Protection

Agency

EPA 500-F-14-001

September 2014

www.epa.gov/oswer

Office of Solid Waste and Emergency Response
2

Cover photo: 

Carrfour Supportive Housing CEO Stephanie Berman-Eisenberg cuts the ribbon at the grand opening of Harvard House, an affordable 

housing community in North Miami Beach, Florida.

(Photo courtesy of Wikimedia Commons). 
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INTRODUCTION

Any site reuse effort must address a number of 

financing gaps linked to past uses or perceptions. 

Strategies focusing on areas that may be historically 

low-income or economically disadvantaged often 

face additional financing hurdles that can foil efforts 

to assemble a complete package. These gaps typically 

involve capital shortages for three activities specific to 

site reclamation. The first activity is defining a credible 

market strategy that will provide a path for sufficient 

reuse activity (and revenue) to address early-stage 

project needs, such as site preparation and possible 

site assessment. Next, parties should define a site 

revitalization plan that enhances the prospects for 

new economic growth while maintaining critical 

elements of the community fabric. Finally, it is 

important to actually implement the components of 

this plan in a timely and complete manner. 

In addition to these types of costs, typical financing costs for conventional sites may be elevated for sites in 

environmental justice communities. Developers almost invariably have to pledge a higher rate of return to their 

investors or lenders to persuade them to assume the higher perceived risk associated with the project. Extra 

underwriting costs also can add significantly to the costs of loan processing and review procedures. And lenders 

usually require developers to have at least 25 percent equity in the project to make sure that the borrower has 

sufficient capital at risk. Thus, ensuring equitable development can be a daunting goal in many communities. 

The goal of this document is to help community leaders understand basic public sector financing tools, their 

objectives and criteria, what they can do—and suggest ways in which community development proponents 

can help to make them fit their own neighborhood project needs. Brief case examples of how these financial 

tools were used for specific projects are woven throughout this report and provide examples of successful 

implementation. These tools can be very valuable and workable, but may not be obvious, and often have to 

be driven by community leaders. It is important to remember that just because a program does not define 

“equitable development” as an objective does not mean that it cannot be used for such purposes. Equitable 

development advocates can often channel these various tools for their desired end uses that also meet other 

program goals, typically linked to creating jobs, reversing blight, or addressing economic distress.

Just because a program does not define “equitable development” as an 

objective does not mean that it cannot be used for such purposes.
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WHAT THESE TOOL TYPES ARE, AND HOW THEY CAN 

SUPPORT EQUITABLE COMMUNITY DEVELOPMENT 

Proponents of community-level equitable development need to know the distinctions between tool types: what 

elements of development they are intended to address; what types of projects they are most suited for; which 

ones have the best track record; and the potential to leverage other investment in ways that meet a community’s 

vision for what it would like to be. As equitable community development continues to grow, these types of 

markets have become more of a focus, and community development advocates have become more creative in 

piecing project financing together. In response, the public sector has deployed various types of tools that have 

played a critical role in project financing. For example, the public sector has provided resources to jumpstart 

the site assessment and cleanup process, addressed various costs needed to prepare sites and make properties 

more economically competitive, and offered “gap financing” to plug financing pro forma holes not easily filled by 

traditional capital sources. Each type of tool has a specific purpose and can play a distinct role in advancing the 

overall financing and redevelopment package at a range of brownfields properties. Typically, projects integrate a 

number of funding sources from several programs—leverage is a key aspect of equitable development finance. To 

best package and deploy these tools, and to most effectively use them to attract the types of investments that are 

needed, equitable community development advocates need to understand these distinctions. The most common 

of these tool types applicable to equitable development include the following: grants, tax incentives, loans 

(including revolving loan funds (RLFs)), and loan guarantees.

GRANTS—The direct provision of funding to an eligible recipient (public or private) for an intended use. In a 

community development context, targeted grants can provide vital up-front resources to pay for necessary 

activities such as site assessment, cleanup, demolition, or property preparation.

Grants are available for a wide range of purposes, 

and they can cover many facets of a development 

project or an effort aimed at reversing abandonment 

and blight. Grants are rarely provided directly to 

private developers or other private parties that may 

be carrying out a development project. Typically, 

grants are made to (or passed through) public or 

non-profit partners who work with the private 

parties to bring a project to fruition. This may add 

time or an extra layer of bureaucracy to the effort, 

but also brings opportunities to community-based 

organizations that might qualify for grant funding. In 

addition, grant resources are finite and subject to the 

whims of appropriators. In times of high demand or 

tight budgets, they may not be reliable sources of funding. On the other hand, the key advantage of grants 

is that they can bring immediate cash into the front end of the project. Grants can pay for critical, early stage 

project activities.

Grants generally take one of two forms: block or formula grants, in which funds are distributed to states or 

local governments according to a statutory formula, or project grants for specific activities or services (such as 

housing or small business development). In the case of the former, community-based partners have to work 

with the eligible recipient of the grant funds to secure help. For project grants, community entities may be 

eligible to apply directly. Grants may provide full funding, partial funding (with additional contributions or 

matching funds required), or take the form of “forgivable loans.” The latter mechanism often is used to channel 

financing to private sector entities. Developers are provided with loans, which need not be repaid if they meet 

specified project performance criteria (such as generating a certain number of jobs, adding certain amounts of 

open space, cleaning properties near schools or other “sensitive need” facilities, etc.). Depending on the specific 

program, terms can be structured to flexibly meet any type of need—community planning and outreach, earlystage site assessment, advantageous start-up business financing, demolition, supportive infrastructure, etc. 

Photo courtesy of EPA

Grants are available for a wide range of purposes. 
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Although virtually no federal grant programs are targeted specifically to “equitable development,” developers, 

development agencies, and community-based organizations (CBOs) have used more than a dozen different 

economic and community development grant programs—offered by U.S. Department of Housing and Urban 

Development (HUD), U.S. Department of Agriculture (USDA), U.S. Economic Development Administration (EDA), 

and others—to meet various redevelopment needs in ways that also promote equitable development goals. 

TAX INCENTIVES—tax exemptions, credits, and deductions are used to encourage redevelopment and channel 

capital investment through the use of taxation policies. In a community revitalization context, reduced, rebated, 

or offset tax levies can allow taxpayers to ultimately use the savings for the types of redevelopment purposes—

such as structural rehabilitation, investment in affordable housing or “new markets” activities in distressed areas, 

and general site preparation—that can support equitable development objectives. 

Tax incentives can take three forms: exemptions, credits, and 

deductions. An exemption provides a release from taxation. 

Credits provide dollar-for-dollar reductions in taxes owed. 

Deductions allow certain costs or expenses to be subtracted 

from income over one year (expensing), or over more than 

one year (depreciation). 

Tax incentives can be structured to flexibly meet a range 

of public sector goals—redevelopment of certain types of 

projects (e.g., affordable housing), in certain community 

areas (e.g., historic districts), or with specific public benefits 

(e.g., bringing grocery stores or health clinics to underserved 

areas). Around the country, redevelopment advocates 

promote the use of all types of tax incentives to achieve these different benefits. The downside is that tax 

incentives do not bring immediate cash into the front-end of the project. In addition, since most CBOs or 

redevelopment entities operate as non-profits, they generally are not able to take advantage of tax incentives; 

they must either find a private sector partner able to use them, or they will need to structure projects in a way 

that allows them to transfer or sell tax incentives if they are to be of value.

Tax incentives can take three forms: 

exemptions, credits, and deductions.

LOANS—A range of private, non-profit/quasi-public, and public sector agencies and institutions lend money for 

specific real estate acquisition, construction, and improvement activities, including site redevelopment projects. 

Public-private financing partnerships are often the key to equitable development success in many communities. 

At the federal level, USDA, HUD, and the Small Business 

Administration (SBA) make some development loan resources 

available (although in most cases, these agencies deliver 

more assistance via loan guarantees). Some loans are made 

available through partnerships with private banks, as well as 

economic development agencies, authorities, or corporations. 

Loan programs do not necessarily target the specific financing 

needs of projects focusing on equitable development. It is 

up to the developer or entity spearheading the project to 

identify a viable public or private loan source and structure 

the loan application to meet specific project needs. CBOs and 

their partner organizations have played an essential facilitator 

or “matchmaking” role in many communities, linking program 

resources to equitable development needs. This role has 

At the federal level, loan resources are available through 

partnerships with private banks, as well as economic 

development agencies, authorities, or corporations.
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proven especially critical for efforts that involve small business start-ups or site assessment, cleanup, and 

preparation to “shovel ready” status. Private financing for these activities remains incredibly difficult to secure, 

especially in the current credit climate. 

REVOLVING LOAN FUNDS (RLFs)—Pools of capital from which individual project loans are made. RLFs can be 

pulled together from a wide range of public- and private-sector sources, including: appropriated capitalization, bank 

donations (for example, to help lenders meet Community Reinvestment Act requirements), state/local Community 

Development Block Grant (CDBG) allocations or program income, earmarked fees or fines, or foundation/

philanthropic donations. Depending on the requirements of the capitalization sources, RLFs can be designed to 

target any type of project, in any defined area, and promote any desired community development outcome. 

States, communities, and non-profits such as 

community development corporations (CDCs) can 

structure RLFs (often capitalized with federal funds) to 

meet a variety of goals. They can provide loans from 

the pool for defined purposes (such as small retail 

development or environmental cleanup), in targeted 

areas (such as those suffering from abandonment), 

or to achieve certain goals (such as blight removal or 

job creation). Depending on authorizing statutes or 

governing policies, RLF managers may have enormous 

flexibility to define eligibility or performance 

standards, loan terms, and other criteria. This flexibility 

can be important to ensuring the successful financing 

of projects that promote equitable development. 

LOAN GUARANTEES—In a public program context, loan guarantees are agreements to repay all (or most 

typically, most) of a private loan made by a lender in the event that the borrower is unable to repay. Guarantees 

can expedite capital availability and minimize risks by bringing comfort to lenders, because the guaranteed 

portion of the loan is not subject to default. Some federal SBA guarantees are targeted to micro, minority, and 

women-owned businesses—often, the focus of equitable development activities in specific communities. 

Some federally-capitalized RLFs focus on equitable 

development; for example, EPA’s brownfields RLF 

program looks at proposals that focus on “equitable 

development outcomes...when intentional 

strategies are put in place to ensure that low-income 

and minority communities not only participate 

in, but benefit from, decisions that shape their 

neighborhoods and regions.” Philanthropies may 

also use this tool to focus on equitable development. 

For example, the San Francisco-based Low Income 

Investment Fund (LIIF), through its RLF, provides 

acquisition, construction, and term financing for 

affordable homes, schools, and other community 

facilities serving low-income facilities. Recent loan 

funds have focused on projects that are part of 

equitable transit-oriented developments.

Revolving Loan Funds can meet a variety of goals. 

Loan guarantees can help philanthropies focus on 

equitable development.

Photo courtesy of VA State Parks / Sikimedia Commons
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Typically for most RLFs, as loans are repaid, the money goes back into the fund and is recycled to make new 

loans. The downside to any RLF mechanism is that there may be insufficient capital to sustain a loan stream 

after the initial flurry of activity; if new capitalization is not secured, then the fund must replenish itself 

based on repayments—which often are small and accumulate only over an extended period of time. 

Loan guarantees are an alternate source of funding for private-sector borrowers who are not eligible to 

receive financing through other public programs. SBA offers more guarantees than any other agency—

more than $7.5 billion for community development corporation-assisted projects this year alone—although 

HUD and USDA also deploy this tool. Loan guarantees are somewhat easier to negotiate than pure equity 

investments because the entity guaranteeing the loan never turns over any of its own funds, unless the 

company does not perform as projected. 

In an equitable development context, loan guarantees can provide critical comfort to lenders concerned 

about the impact of collateral devaluation (for example, due to surprise contamination) or the possibility 

of competing resource needs (such as for unanticipated site preparation or initial working capital costs) 

affecting a borrower’s ability to repay. At the same time, it is important to remember that start-up businesses 

or site/facility redevelopers seeking to secure guarantees, distressed area or not, must still present creditworthy loan application packages to their banks, and must still meet underwriting criteria. 

EPA CLEANUP GRANTS AND RLF GRANTS AND LOANS 

ROBERTSON MILLS—TAUNTON, MA

•	 6.5-acre, century-old former Robertson yarn mill;

vacant 10 years 

•	 Economically distressed neighborhood;

local CDBG target area 

 Nearly 1/3 of city’s population

 51% low income households

 13.5% poverty rate

•	 EPA grants facilitated key first step — site cleanup 

demonstrated viability of local interest in redevelopment 

 $52,000 EPA cleanup grant to non-profit 

Weir Corporation

 EPA RLF support — $148,000 sub-grant, $140,000 loan 

•	 Set the stage for preparation of site for Low-Income

Housing Tax Credits (LIHTC)-supported residential 

development 

 64 affordable housing units 

 Near public transportation, recreation

 18,000 sq. ft. commercial space 

•	 Leverage—$15 million local/state/private investment

 EPA cleanup and RLF funding

 Approximately $750,000 in historic rehabilitation 

tax credits 

•	 Other funding partners include:

 Mass Development 

 Massachusetts Dept. of Housing and Community 

Development

 Massachusetts Housing Partnership

 MASS Housing

 Community Economic Development Assistance 

Corporation (CEDAC)

 Bank Of America

 Bristol County Savings Bank

Photo courtesy of EPA
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HOW PUBLIC FINANCING TOOLS CAN ENHANCE THE 

INVESTMENT CLIMATE TO SUPPORT EQUITABLE 

DEVELOPMENT IN COMMUNITIES

The most successful community development and 

revitalization efforts recognize private lender and 

developer concerns and perceived risks. The extent 

to which equitable development proponents can 

understand and overcome these risks will enhance 

their efforts to get the types of investment activity 

they would like to encourage. To this end, equitable 

development strategies can be made stronger—

and can more effectively deploy the various tools 

available, especially those noted below—if they 

aim to help private parties better manage risks by 

meeting at least one of the following objectives: 

• Ensuring a minimum return: Communities 

can work with federal agencies to connect 

developers and lenders/investors with incentives 

such as loan guarantees or companion loans 

that ensure a minimum return. This can make 

projects more financially attractive, and also 

induce the developer to include elements that 

may be more in line with a community vision 

for revitalization. They also can offer support, 

such as environmental insurance, that limits the 

borrower’s exposure to unforeseen problems that 

affect the value of collateral or the borrower’s 

ability to pay. 

• Reducing the borrower’s cost of financing: Local 

leaders can work with community-based entities 

and others to subsidize the interest costs on 

project loans (for example, with tax-exempt 

financing or tax credits, or low-interest loans), 

as a way to attract capital into areas that 

might be perceived as more risky to invest in. 

Community-driven interests can also reduce 

loan underwriting and documentation costs by 

offering loan packaging assistance or technical 

support that might be available through CDCs, 

university centers, and other local institutions. In 

some cases, local governments can partner with 

CBOs and others to help cut borrowing costs by 

partnering with site users to prepare records and 

help maintain institutional controls. 

• Offering terms or incentives to ease the 

borrower’s financial situation: Tools like tax 

abatements, tax credits, or grace periods can 

improve the project’s cash flow and make the 

project numbers work. CBOs and equitable 

development advocates may be able to facilitate 

connections between prospective developers 

and the entities offering these tools, which can 

be helpful in mixed-use project scenarios that 

include open space, or in areas where start-up 

costs might be higher. Similarly, training and 

technical assistance services can offset project 

costs and reduce a site developer’s need for cash. 

•	 Offering assistance or information that provides 

investor and lender comfort: Community 

organizations, working in partnership with 

universities or even federal labs, may be able to 

facilitate connections to performance data for 

new technologies, institutional controls, or other 

tools that can help transfer or manage risk, which 

could increase the investor’s and lender’s comfort 

level with a specific project. 

Community development success is built on 

partnerships, with financing tools and strategies 

representing a crucial component of these 

efforts. Like any development activity, equitable 

development efforts can span the range of real 

estate uses—commercial, industrial, recreational, 

residential, and others. Over many years, the federal 

government has developed a range of financing 

tools (grants, loan and loan guarantee programs, 

tax incentives, equity investment, etc.) designed to 

encourage private sector participation in economic 

and community development. In recent years, 

many of these tools have been used to stimulate 

investment in the disadvantaged and emerging 

community markets. Each tool has a specific 

purpose and can play a distinct role in advancing 

the overall financing and redevelopment package 

at a range of sites, and for a variety of new uses. 

The applicability and value of these financing tools 
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has ebbed and flowed as development needs and 

requirements changed, and this is certainly true 

in the current volatile economic climate. These 

tools are constantly evolving to take advantage of 

emerging opportunities, and to address problematic 

development situations. 

These tools, which can be enormously valuable in 

promoting equitable development in communities, 

are only as good as the priorities and values of the 

local entity that is using them. Any tool, no matter 

how useful, will not help if the community has 

not defined a vision that encourages equitable 

development results. At the same time, it is important 

to remember that just because one of the tools 

described above does not directly focus on equitable 

development does not mean that it cannot be 

applied for such purposes. Equitable development 

advocates can often take advantage of these various 

tools, leveraging or packaging them to meet their 

own intended end uses.

HUD’S STATE/SMALL CITIES COMMUNITY DEVELOPMENT BLOCK GRANT 

VISITOR CENTER—ROSALIA, WA 

•	 Locally driven public-private partnerships can stimulate

innovative site financing in small communities

•	 1923 vintage Texaco gas station in downtown

Rosalia, WA (pop. 600)

•	 Abandoned 21 years; Underground Storage Tank

(UST) issues 

•	 Site vision as focus of“heritage tourism”main street

revitalization strategy 

•	 Converted to“gateway”retail, craft/farmers market,

visitor center for nearby Steptoe Nat’l Battlefield, 

National Forest 

•	 Public financing sources include:

$54,000 WA Dept. of Ecology grant 

 $45,000 Whitman County small cities CDBG grant

•	 Partner donations include:

Development grant sharing from surrounding counties 

 Rosalia Lions Club 

 Rosalia “Gifted Grannies”—quilts for auction

 Retired Texaco Executives Association— 

furnishings and memorabilia

 Pro bono legal, remedial services

 Utility incentive rates

 Community sweat equity

 Dept. of Corrections—commemorative license plates

Photo courtesy of Larry Myhre / Flickr Creative Commons
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FINDING THE BEST RELATIONS IN THE 

“FEDERAL FAMILY” — FINANCING PROGRAMS AND 

TAX INCENTIVES, AND HOW THEY CAN PROMOTE 

EQUITABLE DEVELOPMENT INVESTMENT

More than two dozen federal programs from agencies 

such as EPA, HUD, EDA, and others, have and could 

support equitable development investment and 

projects consistent with a community’s vision for its 

future, including grants, loans, loan guarantees, and 

tax incentives (such as the low-income housing and 

historic rehabilitation tax credits). Once equitable 

development advocates understand the context and 

goals, implementation, and intended results of these 

programs, they can be in a better position to fit their 

own project within the mission of these programs. 

HISTORIC REHABILITATION TAX CREDITS 

AMERICAN CAN COMPANY—

NEW ORLEANS, LA

•	 Abandoned canning facility and warehouse on 

6.6 acres

•	 Converted to 268 new apartments (20% affordable),

plus 20,000 sq. ft. of retail 

•	 $42.9 million project cost; financing included:

 $5 million HUD Section 108 loan

 $1 million city economic development loan 

 $29 million Low Income Housing Tax 

Credit allocation 

 Equity infusion from sale of approximately $7.8 

million in historic rehabilitation tax credits

Photo courtesy of Wikimedia Commons

EPA’s three basic brownfields grant programs 

described below can fill critical financing needs 

and play an important role in moving projects in 

previously developed, often abandoned areas where 

concerns over possible legacy contamination impede 

lending opportunities. Given their basic mission of 

supporting site assessment and cleanup leading to 

reuse, EPA’s brownfields programs address the critical 

first stages of the redevelopment process, and can be 

used to set the stage for equitable development once 

sites are evaluated and cleanup takes place. Data 

analysis performed by EPA’s brownfields office shows 

that the brownfields program has served low- and 

moderate-income persons, resulting in additional 

equitable development language being included in 

the most recent grant guidelines. 

Assessment grants, which provide up to 

$200,000 for site investigations to determine what 

contamination might be present and to conduct 

planning and community outreach related to 

the brownfields properties, will provide critical 

information and data for communities seeking 

to prioritize and position properties for new 

investment. Cleanup grants provide up to $200,000 

(with a 20 percent cost share typically required) 

to carry out remediation at sites owned by the 

recipient, which helps make them “shovel ready” 

and more attractive for new uses. Finally, EPA’s 

program to provide up to $1 million in capitalization 

for cleanup RLFs can bring additional sources of 

funding to address cleanup concerns that are very 

difficult to address in the private capital markets. 

RLFs can help communities, often working in 

partnership with private developers, to overcome 

initial financial hurdles through several financing 

mechanisms: low- or no-interest loans, bridge loans, 

discounted loans, and “sub-grants” to deal with key 

pre-development costs. 

In addition, EPA’s Clean Water State Revolving 

Fund has great potential to support equitable 

development projects (as part of necessary 

infrastructure preparation), but is not often used 

for this purpose. Each year, every state receives 

additional capital for these RLFs, which is used to 

make low or no-interest loans for terms of up to 
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20 years for projects with water quality impacts—

including those that deal with ameliorating 

groundwater contamination. Project priorities are 

set by the states, within broad EPA guidelines, and 

a range of redevelopment projects with a water 

connection can access these state funds if the 

state allows. State clean water RLFs can cover the 

costs of activities such as excavation and disposal 

of underground storage tanks, capping of wells, 

disposal of contaminated soil or sediments, and 

environmental assessments—activities that can fit 

well within the framework of many local site reuse 

projects. Each state determines who may use its 

revolving fund resources. EPA allows communities, 

municipalities, individuals, citizen groups, and nonprofit organizations to be loan recipients. 

HUD’s CDBG program provides direct grants to 

“entitlement” cities (those with more than 50,000 

residents) and urban counties (those with more than 

250,000 residents). Recipients have considerable 

flexibility in designing local grant or loan programs 

that meet one of three broad criteria: helping 

low- and moderate-income people, addressing 

slums and blight conditions, and addressing urgent 

community needs. CBOs and community leaders 

need to work with their local government recipients 

to ensure that their desired projects are included 

in a city’s HUD plan, and to access these resources. 

HUD addresses the needs of small jurisdictions 

through CDBG monies provided to the states. State 

allocations are then competitively re-distributed 

to small cities and towns. Community leaders will 

need to work with their county or town jurisdictions 

to secure some of these resources for projects they 

would like to pursue. 

Municipalities of all sizes can use CDBG to provide 

critical gap financing needed to carry out essential site 

prioritization, and planning and assessment activities, 

as well as to support site preparation, demolition, 

and redevelopment needs. Many of these activities, 

especially at the neighborhood level, tend to be very 

difficult to finance with private funds. CDBG, CBOs, 

non-profits, and development authorities must work 

with their municipal or state recipient agencies to 

define projects and access these funds. 

CDBG has proven to be a key tool in meeting a range 

of equitable development project needs, including in 

neighborhoods facing eroding economic conditions 

located in distressed areas that clearly meet CDBG’s 

mission to help low- and moderate-income people 

or eliminate slums and blight. For a number of 

entities seeking to revitalize previously used sites for 

HUD’S COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM 

CHEVY PLACE—ROCHESTER, NY

•	 2.2-acre former auto dealership, gas station, and service 

garage site, vacated in 1990 

•	 UST, gasoline, oil, and other contamination deterred 

developers 

•	 $10.6 million total investment 

•	 Role of HUD/CDBG—Critical gap financing; used for site 

assessment, partial 1st phase cleanup (including tank removal) 

•	 Developer funded 2nd phase of cleanup

•	 City $2.35 million redevelopment loan from CDBGcapitalized pool

•	 Now—77 new apartment units; renovated art deco 

former showroom into Spot Coffee house with 20 jobs 

Photo courtsy of the City of Rochester
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new community uses, a key HUD policy clarification 

related to brownfields has proven helpful. HUD, in 

its 2006 final CDBG rule, clarified how brownfields 

activities fit within CDBG eligibility and national 

objective regulations. That rule expanded CDBG’s 

“slums and blight” national objective to include 

“known and suspected contamination, as well as 

economic disinvestment.” It also broadened the 

definition of clearance to include “remediation of 

known or suspected environmental contamination.” 

Finally, the rule includes the abatement of asbestos 

and lead-based paint as eligible rehabilitation 

activities, which is of considerable help to community 

leaders and residents who want to transform 

abandoned housing or commercial brownfields 

properties into productive new uses as part of 

equitable redevelopment strategies. 

The EDA’s public works program helps finance 

infrastructure construction, expansion or upgrades, 

and site preparation activities needed for economic 

development to occur. EDA targets its investments 

to attract private capital investment by supporting 

the “back-end” or real estate development/reuse 

elements of brownfields transactions. EDA’s

economic adjustment program offers grants to 

local governments and non-profits in communities 

and regions suffering from severe economic 

distress in order to help them design and carry 

out strategies (such as planning, infrastructure 

construction, or RLF capitalization) that can support 

equitable development goals. For both programs, 

eligible applicants include cities, other recognized 

jurisdictions, and non-profit organizations acting in 

cooperation with a political subdivision. 

EDA’s goal is market-based community economic 

development. In practice, this often involves 

revitalizing unproductive real estate to beneficial new 

uses. Like other federal programs, while EDA does not 

cite “equitable development” in its project criteria, 

it does seek to foster capital investment and job 

creation—key goals of many equitable development 

strategies. The unemployment criteria in EDA’s 

project selection policy may work to the advantage 

of distressed communities seeking resources for 

revitalization. Traditionally, more than half of all EDA 

resources go to small towns and rural areas that 

often have few alternatives when trying to finance 

community revitalization projects. 

The USDA’s rural development programs provide 

a range of support to small towns (with some 

exceptions, typically those with 20,000 or fewer 

residents) needing help to stimulate business and 

economic development. Community facility loans 

and grants can support development activities 

that include industrial park sites or access ways, as 

well as critical service and safety institutions such as 

hospitals. Business and industry loans are available 

NEW MARKETS TAX CREDITS 

TIP TOP APARTMENTS—

OMAHA, NE

•	 Ford Motor factory (1916-36), bobby pin and curler

manufacturer; abandoned in 1986, 

center of blighted area 

•	 Developer concerns re: financing gaps stemming

from rehab of brownfields into affordable housing

•	 New Markets Tax Credits were key—$12 million 

allocation instrumental in attracting private capital 

from US Bank needed to close the $24.5 million deal

•	 Today—96 moderately priced apartments, ground 

floor commercial space with 138 jobs

•	 Development is spurring significant additional

private investment in surrounding area

Photo courtesy of Patrick Hawks / Wikimedia Commons
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to public, non-profit, or private organizations to 

improve the “economic and environmental climate 

in rural communities.” The intermediary re-lending

program loans money to non-profit corporations 

and public agencies to capitalize locally-managed 

RLFs that re-lend it to companies to finance business 

facilities. Rural development grants, offered through 

the Rural Business Enterprise Grant and Rural 

Business Opportunity Grant programs, provide 

operating capital and finance to emerging private 

business and industry. Related training, planning, and 

coordination activities are also eligible. 

Few towns have made the direct connection 

between equitable development and USDA, but 

it can work, and in fact, USDA can serve as a vital 

financing resource for redevelopment. For example, 

a former sewing machine factory in Delaware was 

converted into housing, and an abandoned electric 

power station in Nebraska was retrofitted as a small 

business incubator with the help of USDA’s rural 

development programs. Most USDA development 

programs can support planning for redevelopment 

or revitalization, as well as for site clearance or 

preparation. This support includes rehabilitation or 

improvement of sites or structures, which are key 

activities in many equitable development projects.

Most SBA assistance takes the form of loan 

guarantees. The key program of interest to CBOs and 

other entities interested in equitable development is 

known as the Section 504 Certified Development 

Company (CDC/504) program. Section 504 

loan guarantees are delivered either directly or 

through local economic development agencies or 

community-based corporations. While SBA retains 

much of the broad decision making authority, 

specific projects are locally determined and driven. 

SBA can prove especially helpful to new or small 

firms that usually lack access to affordable capital 

from conventional sources. 

The CDC/504 loan program is a long-term financing 

tool, designed to encourage economic development 

within a community. It accomplishes this by 

providing small businesses with long-term, fixed-rate 

financing to acquire major fixed assets for expansion 

or modernization. A Certified Development Company 

is a private, nonprofit corporation that is set up to 

contribute to economic development within its 

community. Certified Development Companies 

work with SBA and private sector lenders to provide 

financing to small businesses, which accomplishes 

the goal of community economic development. 

Typically, a CDC/504 project includes: a loan secured 

EPA CLEANUP GRANTS

EPA CLEANUP GRANT—HOUSTON, TX

• Former Jefferson Davis hospital for indigents, built 1924

•	 Last use as county storage facility, abandoned in 1980s

 Leaking UST, paint & asbestos 

•	 $200,000 EPA cleanup grant helped Avenue Community

Development Corp. prepare site for affordable artist 

live/work space 

 34 unit Elder St. Artist Lofts anchor emerging arts district 

 Occupancy later opened to the community at large 

•	 Leverage—$6.3 million in redevelopment investment;

public sources include: 

 City of Houston

 Harris County

 Texas Dept. of Housing and Community Development

Photo courtesy of Steve Hudson Photography
14

from a private sector lender with a senior lien 

covering up to 50 percent of the project cost, a loan 

secured from a Certified Development Company 

(backed by a 100 percent SBA-guaranteed debenture) 

with a junior lien covering up to 40 percent of the 

project cost, and an “equity injection” contribution 

from the borrower of at least 10 percent of the project 

cost. Many communities have used CDBG funds to 

meet the equity requirement. Proceeds from 504 

loans must be used for fixed asset projects, such as: 

land or building acquisition, improvements (including 

street improvements, utilities, and landscaping), 

the construction of new facilities or modernizing, 

renovating or converting existing facilities, and the 

purchase of long-term machinery and equipment. 

The maximum SBA debenture is $1.5 million when 

meeting the job creation criteria or a community 

development goal. Generally, a benefitting business 

must create or retain one job for every $65,000 

provided by the SBA, except for small manufacturers 

which have a $100,000 job creation or retention 

goal. The maximum SBA debenture is $2 million 

when meeting a public policy goal such as: business 

district revitalization, expansion of minority business 

development, and expansion of small business 

concerns owned and controlled by veterans 

and women. The maximum debenture for small 

manufacturers is $4 million. 

SBA also operates its basic Section 7(a) loan 

guarantee program, its largest effort, which 

typically focuses on projects needing $100,000 or 

less in financing. Most of the 7(a) program has been 

delegated to certified private lenders, who determine 

recipients (within broad SBA guidelines) and service 

the loans. 

Tax incentives. Three federal tax credits are 

good candidates for integrating into equitable 

development projects, as part of financing packages 

to spur investment (depending on the project type, 

nature and needs of private project partners, and 

site end use). These include historic rehabilitation 

tax credits, New Markets tax credits, and low-income 

housing tax credits. 

Tax incentives bring a number of advantages to 

efforts focusing on equitable development outcomes. 

They can increase a project’s internal rate of return 

due to the operational cash offsets they provide. This 

may make the project more attractive to potential 

private partners, and help attract investment capital. 

Tax incentives can also ease a borrower’s cash flow by 

freeing up cash ordinarily needed for tax payments, 

allowing it to be used for other purposes (such as 

training or providing community amenities). In 

addition, some tax credits—notably, low-income 

housing and historic rehabilitation tax credits—can 

be sold to raise up-front cash or syndicated to attract 

additional investment. Both of these strategies can 

help meet critical site preparation and property 

development activities not otherwise easily financed. 

Finally, tax credits are more reliable as an incentive 

because most of them are not subject to a 

competitive public award process. If a project (or 

developer) meets the criteria, the credit is secured. 

The downside of many tax incentives is that if no 

income or profit is realized, there is no tax to offset 

and the credit has little immediate value. Even if the 

incentive carries forward to subsequent tax years, the 

near-term prospect of a tax credit does little to help 

with cash flow needs. In addition, non-profits that are 

not subject to taxes generally cannot take advantage 

of (or transfer) the benefits of these incentives. To 

use them most advantageously, non-profits typically 

partner with for-profit entities, and structure the 

projects so that the for-profit can take advantage of 

the tax savings. 

Historic Rehabilitation Tax Credits. Developers 

and property owners can claim a 20 percent historic 

rehabilitation tax credit against costs incurred as part 

of any project designated as a certified rehabilitation 

by a state’s historic preservation officer (SHPO). The 20 

percent credit is available for properties rehabilitated 

for income-producing commercial, industrial, 

agricultural, or rental residential purposes, but it is not 

available for properties used exclusively as the owner’s 

private residence. The credit may be taken for any 

relevant rehabilitation expenditure, including asbestos 

or lead-paint removals done in a way that is historically 

sensitive to the structure. In addition, a 10 percent 

credit is available for rehabilitation performed on nonhistoric older buildings predating 1936. These rehabs 

need not be certified by the SHPO to receive the credit. 

Numerous states have their own state historic 

rehabilitation tax credits of up to 25 percent. Some 

have aggressively marketed a tandem state-federal 
15

credit partnership as a powerful incentive to restore 

and reuse former mill sites, schools, and other 

properties for new community uses. 

A few downsides need to be taken into consideration. 

Historic rehabilitation tax credits are subject to 

recapture (for up to five years, at 20 percent per year) 

if the property is disposed of, or converted to nonincome producing purposes. They are only available 

if the rehab investment is greater than $5,000, or 

the adjusted basis of property. The latter condition 

requires a large expenditure on a big project, which 

may not be feasible. 

New Market Tax Credits (NMTC). The New Markets 

tax credit program gives taxpayers a 39 percent 

income tax credit (over seven years) for making 

equity investments in designated Community 

Development Entities (CDEs), which use those 

investments, in turn, for projects in low-income 

communities. This makes NMTCs well suited for 

communities that wish to promote investment in 

and reuse of abandoned properties. CDEs use their 

allocations to make loans or investments in “qualified 

businesses” and development activities such as: forprofit and non-profit businesses; homeownership 

projects; community facilities, such as health or child 

care; and charter schools.

Although many NMTC projects have taken the 

shape of traditional development projects (i.e., office 

buildings, retail centers), the New Markets program 

has substantial potential to support equitable 

development efforts, given its own eligibility criteria 

and location-related targets. This is a sizable program: 

$3.5 billion was allocated in June, 2014, to 87 CDEs 

headquartered in 32 states; more than $30 billion 

has been awarded since 2002. The main challenge 

is an informational one: even though they often 

deal with distressed properties in depressed areas, 

few CDEs have made the connection to equitable 

development interests. An example of one who has is 

Capital Impact Partners; they will focus on financing 

health facilities, healthy food projects, and elder care 

developments in Detroit and southeast Michigan. 

Low-Income Housing Tax Credits. The LIHTC program 

is an indirect federal subsidy used to finance the 

development of affordable rental housing for lowincome households. Credits are allocated to states 

based on population, and states award them to those 

undertaking affordable housing projects. Developers 

then sell these credits to investors to raise capital 

(or equity) for projects, which reduces the debt that 

the developer would otherwise have to borrow. This 

results in more affordable rents. Investors receive a 

dollar-for-dollar credit against their tax liability each 

year over a 10-year period. 

Because use of LIHTCs guarantees a definable 

minimum return on investment, they have proven 

to be an attractive incentive for developers seeking 

to build mixed-income or affordable housing. 

In fact, according to some experts, affordable 

housing financed in conjunction with LIHTCs is 

the only construction going on right now in some 

communities. However, a key concern that has arisen 

is that the credits are losing value on the secondary 

market in the current economic climate, making them 

less valuable to those needing up-front capital to 

proceed. This could make residential developments 

with higher site preparation costs, less attractive. 

LOW-INCOME HOUSING TAX CREDITS

MIFFLIN MILLS—LEBANON, PA

•	 PA’s first affordable “rent-to-own”townhouse

community 

•	 Former vacant, blighted city block near downtown

•	 Energy efficient construction, designed to blend into

existing residential neighborhood 

•	 20 low-income units, completed Nov. 2009

•	$1.5 million in low-income housing tax credits

key part of financing package needed to attract 

investors to rent-to-own (with 15-year escrows) 

project structure 

Photo courtesy of Lebanon County Housing and Redevelopment
16

United States

Environmental Protection

Agency

EPA 500-F-14-001

September 2014

www.epa.gov/oswer