Florence, Alabama Development Secures $9 Million in New Markets Tax Credit Financing

FLORENCE, Ala. — A major mixed-use development, anchored by a full-service grocery store, is set to move forward in Florence, Alabama, after securing a $9 million New Markets Tax Credit (NMTC) allocation, according to a June 24 announcement from UB Community Development.

The financing package, arranged by UBCD, a community development partner of United Bank, will address a critical need in an area designated by the U.S. Department of Agriculture as a food desert, providing residents with much-needed access to fresh and healthy food options.

The use of New Markets Tax Credits highlights a powerful, yet often underutilized, avenue for financing transformative projects. For businesses and developers working in qualifying areas, these credits can bridge critical funding gaps that traditional lenders might not be able to fill, turning community-focused concepts into reality.

The project is a collaborative effort involving multiple community development entities. UB Community Development worked alongside Hope Enterprise Corporation (HOPE), another certified Community Development Entity, to channel the federal tax credits into the development. This investment is part of a larger, multi-phase master development plan intended to revitalize the area and stimulate broader economic activity.

The federal New Markets Tax Credit Program was established in 2000 to spur investment and economic growth in low-income urban and rural communities. Administered by the Treasury Department’s Community Development Financial Institutions (CDFI) Fund, the program provides a tax credit to individual and corporate investors who make equity investments in certified Community Development Entities. These CDEs then use the proceeds from these investments to make loans or investments in businesses located in qualifying low-income communities.

To be eligible for NMTC financing, a project must be located in a census tract where the individual poverty rate is at least 20% or where the median family income does not exceed 80% of the area median income. The Florence project site meets these criteria, allowing the developers to access this crucial form of gap financing.

The economic impact on Florence is expected to be significant. According to the announcement from UB Community Development, the project is projected to create a substantial number of both temporary construction jobs and permanent positions once the grocery store and other retail components are operational. The introduction of a grocery store is particularly vital, as food deserts are linked to higher rates of chronic diet-related health issues and limited economic opportunity.

By providing a reliable source for fresh produce, meats, and other staples, the development aims to directly improve the quality of life for local residents. Furthermore, such an anchor project often serves as a catalyst, attracting additional investment and businesses to the surrounding neighborhood, creating a positive feedback loop of economic development.

However, navigating the NMTC landscape is a highly specialized endeavor. The application process for CDEs to receive credit allocations is intensely competitive, and the deal structures are intricate, involving multiple layers of investors, leverage lenders, and strict federal compliance requirements that last for a seven-year period. Many promising projects fail to launch not because of their merit, but because the leadership team lacks the specific financial modeling and strategic guidance needed to secure and deploy an allocation. This is precisely the kind of challenge we address through our Capital Raising and Investor Strategy services. We guide clients through the entire lifecycle, from determining eligibility to structuring the final deal. For companies considering this path, expert advisory is not a luxury but a necessity. To learn more about structuring complex financing, business owners can contact C&S Finance Group LLC at csfinancegroup.com.

The structure of an NMTC deal typically involves an investor providing cash to an investment fund in exchange for an equity stake. The investment fund then uses this cash to make a qualified equity investment in a CDE. The CDE, in turn, uses substantially all of the investment to make a qualified low-interest loan to the project developer or business. The investor can then claim a tax credit totaling 39% of their original investment, which is claimed over a seven-year period. This significant incentive is what makes it possible to finance projects that might otherwise be considered too risky for conventional capital markets.

Ultimately, our experience shows that while the upfront effort is substantial, the long-term community and economic returns from a well-executed NMTC project can be immense, creating a blueprint for sustainable growth in underserved markets.

With financing now secured, the next steps for the Florence development will involve finalizing designs and breaking ground. Project timelines and the identity of the grocery store operator have not yet been publicly released. Community stakeholders and local officials will be closely watching the project's progress, viewing it as a key test case for using federal incentive programs to drive targeted, impactful development in the region.