Federal Way city officials are in the midst of negotiations with community development entities that were awarded New Markets Tax Credits this past June.

The U.S. Treasury Department’s Community Development Financial Institutions Fund allocated $3.5 billion in tax credits to 76 organizations across the country.

While Economic Development Director Tim Johnson wouldn’t discuss negotiation details at this point, he did say the city will have a better idea of how much tax credits the Performing Arts and Events Center will get by mid-August.

Johnson said there’s been some delay because some community development entities are concerned over issues associated with federal legislation, specifically in regard to fees involved in the process. However, he anticipates an answer on that by the end of the month.

Since the allocations, the city has taken a formal, coordinated approach to applying for the tax credits.

“It’s an interesting exercise to go through because it takes a considerable amount of time to pursue,” Johnson said, adding that after the application process, community development entities would likely visit the site of the Performing Arts and Events Center, although that’s not always a given — even if the entity awards the tax credits.

Before the tax credits were allocated, Johnson said between three to four community development entities visited the site, with one, Clearing House Community Development Financial Institution, very interested.

However, Clearing House and another entity the city had communications with (called Alaska Growth Capital) received no allocations this year.

“There were a couple of organizations that were very high on our list but received no allocations,” Johnson said. “Clearing House didn’t get any allocations but they’ve been very helpful to us in that their president, CEO has been calling other community development entities making recommendations.”

While the city hoped the West Coast would see a good amount of New Markets Tax Credits allocations, there was more of a focus on the East Coast this year, Johnson said.

“You have to go through a shotgun approach to make sure you’re talking to as many organizations as you can because you do not know who will get an allocation,” Johnson said.

“There’s folks we had talked with who did receive allocations and some we didn’t get a chance to talk to who we are talking to.”

Johnson said it’s important to note that different entities have different underwriting authority, in the sense that some can award New Markets Tax Credits nationwide or to specific regions. While Johnson was disappointed to see no entities domiciled in Washington get those credits, it essentially doesn’t make a difference for the arts center.

On the backside, Johnson said there needs to be someone who buys the tax credits. The city already has two letters of interest from investors, which is appealing to the entities, Johnson said.

“One element that we delightfully identified by community development entities is that they enjoyed the fact that, they like that it’s next to a transit center and there are many organizations outside of Washington state that advocate financing projects that are adjacent to transit centers,” he said. “They’re looking for implications associated with reducing carbon footprints.”

Johnson said there hasn’t been one component of the Performing Arts and Events Center that community development entities have shied away from but the city is competing on a national level with many great projects.

What will put the city at an advantage is that the center will be shovel ready around the same time closing would occur, which is this fall.

“We have more than enough to keep us busy on a daily basis,” Johnson said. “… Financing is like playing chess on a multi-level chess board.”

But city official’s knowledge and approach compared to last year’s attempt to get New Markets Tax Credits is fine-tuned.

“We were well prepared for all of the information in advance,” Johnson said. “Preliminary, good intelligence told us what some of the questions (on the application) would be. We started working on answering those questions and it didn’t come as a surprise, we’d done our homework.”

Johnson said he will update the Mirror as soon as the city knows what deals have been closed and how many New Markets Tax Credits they’ve been awarded, if any. The city is hoping for $7.2 million in federal funding.

Congress established the New Markets Tax Credit program in 2000 during the Clinton Administration.

The aim of the program, according to the Community Development Financial Institutions Fund under the U.S. Treasury, is to “spur new or increased investments into operating businesses and real estate projects located in low-income communities.”

In a previous Mirror report, Ade Ariwoola, Federal Way’s finance director, said should the city not receive the tax credits, its $85 million-plus in-debt capacity would allow for council authorization of a bond to pay the difference for the events center project.