Laura Schwartz Discusses Neighborhood Assistance Program as a Tool to Aid Most Vulnerable

In case you missed it earlier this month, check out Director of Economic Development, Laura Schwartz’s article in The Legal Intelligencer, “Neighborhood Assistance Program: Tool to Aid Most Vulnerable.”

Neighborhood Assistance Program: Tool to Aid Most Vulnerable
Laura J. Schwartz, The Legal Intelligencer
September 28, 2015
Deep-rooted and complex social problems require creative solutions that experienced advocates are best prepared to devise. That is why Regional Housing Legal Services (RHLS) wanted to work with Pennsylvania’s Department of Community and Economic Development (DCED) to improve the ability of its Neighborhood Assistance Program (NAP) not only to revitalize communities, but to enhance the lives of those who face extra challenges to stable, affordable housing.

For more than 40 years, RHLS has been dedicated to addressing the pressing issues of vulnerable populations and low-income individuals and families. Its attorneys represent nonprofit organizations creating and preserving housing for these individuals and families throughout the long and often complicated development process. In addition, RHLS attorneys are involved in crafting innovative policy solutions that create sustainable communities with decent, safe and affordable housing for low-income Pennsylvanians. RHLS tackles complicated issues and, when necessary, advocates for new policies and the creation of new programs to respond to critical needs in the commonwealth.

More than 35 years after its creation, NAP continues to incentivize Pennsylvania businesses to support community revitalization by providing credits against state tax in exchange for contributions to neighborhood nonprofit organizations. Over the last decade, RHLS has advocated for and worked with DCED in effecting key changes to NAP that are designed to both boost the program’s popularity with private investors and enhance its effectiveness in addressing the problems of Pennsylvania’s most disinvested communities and vulnerable populations.

In 1967, the Pennsylvania Legislature passed the Neighborhood Assistance Act with the intention of benefiting “impoverished areas,” i.e., neighborhoods with high concentrations of poverty, joblessness, educational disadvantage and crime. The program was modeled after the efforts of the Tasty Baking Co. to improve the northwest Philadelphia neighborhood surrounding its headquarters by creating and funding a community development organization. NAP was the first program of its kind in the nation, enabling businesses to strategically partner with nonprofit organizations in order to provide support and opportunity in distressed areas by constructing or renovating housing, rehabilitating commercial buildings, eliminating blight and conducting crime prevention programs (among other activities).

Although initially successful, over time NAP became overshadowed by other Pennsylvania tax credit programs that offered greater economic returns to businesses. Indeed, by 2006 as much as 50 percent of the $18 million in NAP tax credits available was going unused—a loss of $18 million to $24 million in potential annual investment. Over a period of nearly three years, RHLS worked with a coalition of organizations from the nonprofit and banking communities to encourage modernization of the stagnating NAP. In 2006, the state legislature passed changes to the Neighborhood Assistance Act that updated NAP by extending tax credits to “pass-through” entities such as S corporations, limited liability companies and limited partnerships (which may then transfer the credits to shareholders, members or partners), increasing the credit rates, increasing the cap on credits (enabling businesses with statewide footprints to make investments in multiple markets), and allowing the sale or transfer of unused credits. These legislative changes enabled law firms, among other “pass-through entities,” to use the NAP credits to support legal services and public interest programs.

Following implementation of these changes, DCED now receives applications each year for $36 million—double the amount of NAP tax credits available. Unfortunately, however, NAP is still largely underutilized outside of the state’s largest cities. As a result, Pennsylvania’s most impoverished citizens have not benefited as much as they could from the program’s five components: the Neighborhood Assistance Program Tax Credit, the Special Program Priorities, the Neighborhood Partnership Program, the Charitable Food Program and the Enterprise Zone Program Tax Credit. DCED’s emphasis, from the program’s inception, that projects be “neighborhood-based” and its requirement that applicants provide both physical boundaries and census data for the target neighborhood have long inhibited nonprofit organizations that do not serve specific geographically-based communities from obtaining NAP tax credits.

Nothing in the Neighborhood Assistance Act, however, precludes DCED from allocating credits to projects carried out in multiple markets throughout a county, region or even the state. Indeed, legislative amendments made in 2012 implicitly recognized this by allowing the approval of applications for charitable food programs, such as food banks, via the newly created Charitable Food Program.

Earlier this year, RHLS met with DCED to point out that food insecurity is just one of many problems that cut across community boundaries. There are other significant issues in Pennsylvania that are not neighborhood-based and therefore, incompatible with the requirements of NAP, including the unmet housing and other needs of vulnerable populations such as veterans and their families, survivors of domestic abuse, the mentally ill, people with disabilities, youth aging out of foster care and the homeless. Just as families in need of food are not typically found within a single neighborhood, homeless veterans and the mentally ill are found throughout Pennsylvania’s towns and counties.

DCED’s response has been subtle but significant. In June, the department issued guidelines for its most recent round of NAP tax credit allocations (the application window of which closed July 31). The 2015 guidelines now allow a nonprofit applicant to define the geographical area for its proposed program. In several places, “target area” or “area” has been added to or substituted for “neighborhood” and the earlier requirement to “keep the area [for the proposed project] as contained and geographically minimal as possible” has been removed entirely.

RHLS is optimistic that these changes will enable DCED to allocate tax credits to businesses that invest in projects serving the state’s most impoverished and vulnerable populations—whether creating housing for homeless veterans and persons with disabilities or providing supportive services such as counseling, job training and medical care to survivors of domestic violence. The latest NAP revisions should also give the agency the flexibility to consider projects with the potential for more strategic impact, as well as those in rural areas.

NAP offers an excellent opportunity for private sector businesses to build effective partnerships with nonprofit organizations to tackle many of the difficult problems in Pennsylvania today. RHLS looks forward to seeing the positive changes that the most recent changes to the program will make for the state’s most vulnerable citizens. •

Reprinted with permission from the 9/28/15 issue of The Legal Intelligencer ©2015 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.