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State audit questions tax credit awards to Friendly Kitchen, Boys and Girls Club, Red River Theatres

In a new report, state auditors concluded that 15 of the 28 projects the Community Development Finance Authority supported with tax credits last year, including the Friendly Kitchen and Red River Theatres, do not appear to qualify for the financial assistance under state law largely because they did not target unemployment or housing shortages.

The CDFA, which was created by the Legislature in 1983 but is not a state department, vehemently disagrees, said spokesman Kevin Flynn. He said the audit was prompted by an anonymous complaint from someone turned down for financial assistance and that auditors misinterpreted the state laws governing the authority. The relevant state laws do not limit assistance for only housing and employment projects, Flynn said. The laws also mention economic development and give the CDFA discretion to interpret the statute requirements “liberally,” Flynn said.

“We feel we awarded the right projects,” he said. “We feel very confident about the awards we gave.”

A call to the auditing division of the Legislative Budget Assistant, which released the audit Jan. 10, was not returned. The auditors presented their findings, which are advisory, not binding, to lawmakers with this footnote: “While none of our observations make recommendations which might require legislative action, several issues including . . . the scope of and limits on its authority manifested themselves throughout our audit work and may require legislative action to address.”

The spokesman for the state auditing division was not available for comment.

The CDFA supports municipal and nonprofit projects by granting them state tax credits they can sell to businesses through its Community Development Investment Program. (The CDFA also administers a similar program paid for with federal money called Community Development Block Grants, but auditors did not take issue with those awards.)

The state program works this way: If a business buys $10,000 of tax credits from a local project, the project keeps the $10,000 and the business can deduct 75 percent of that amount – $7,250 – from what it owes the state in business taxes. The CDFA relies on a few sources for revenue: It gets $170,000 a year from the state’s general fund and charges the businesses that purchase the tax credits a 20 percent program fee to run the state-award program. It receives federal dollars for the federal Community Development Block Grants.

In fiscal year 2013, the CDFA awarded 28 projects worth $6.5 million through the state program. In their report, state auditors said 15 of those projects, which were worth $4.3 million in tax credits, “did not appear to fit within (CDFA’s) purpose.” Four local projects fell into that category:

∎ The CDFA gave the Boys & Girls Club of Concord $700,000 in tax credits to expand and renovate its property on Bradley Street and to increase the amount of affordable child care it provides for low- and moderate-income families. Flynn said the tax credits helped parents obtain jobs because without affordable child care, they could not work.

The auditors concluded the project did not increase housing or employment and therefore may not have been an appropriate use of the tax credits.

∎ After the Friendly Kitchen burned, its directors and volunteers struggled to raise enough money to rebuild in a new location. The CDFA awarded the project $300,000 in tax credits. The auditors said there was also insufficient evidence that the financial award to the kitchen increased employment or housing.

In its response, the CDFA said rebuilding the soup kitchen reduced demands on local public assistance because the kitchen serves an average of 133 meals a day to homeless and low-income people.

∎ In 2002, the CDFA approved Early Learning NH for $268,750 in tax credits toward a pilot project to increase the amount of affordable child care across the state. The tax credits were awarded in the last fiscal year and included in the audit. Auditors found the project did not increase housing or employment opportunities.

The CDFA argued this project also reduced reliance on public assistance and contributed to the well-being of the low- and middle-income population it is supposed to serve.

∎ The fourth project questioned by the auditors involved $125,000 in tax credits awarded to Red River Theatres for its upgrade to digital projection equipment. The theater also did its own fundraising and had said it needed the upgrade to remain viable because movies were going digital.

The CDFA defended this award in its response to the audit, saying the theater has a record of sparking economic activity and retained four full-time jobs and 13 part-time jobs by staying open.

Auditors also questioned the CDFA’s decision around 2000 to buy the Dixon Avenue property it had been renting, saying state law does not give the CDFA that kind of authority. “Owning real property and operating a business does not appear to conform to the CDFA’s original purpose of increasing the number of development projects, providing capital to business ventures and stimulating private investment in areas where primary employment is threatened and housing is inadequate,” auditors wrote.

Flynn said the CDFA disagrees. The authority bought the building after learning its rent was going to increase 10 percent, he said. “It was a smart financial move to, instead of paying rent, to purchase the building,” he said. The CDFA uses part of the property and rents the rest to a kids vaccination organization, accountants and lawyers. In the past, nonprofits have rented the space, Flynn said.

(Annmarie Timmins can be reached at 369-3323 or atimmins@cmonitor.com or on Twitter @annmarietimmins.)

Legacy Comments8

Thank you for your comments on this story and the CDFA. As it says in the article, we are a state AUTHORITY, not a state AGENCY. Our employees are not state employees with state benefits; we live off the fees from our programs; and if we don't make budget, then the lights go off....... The nonprofit Red River Theatre WOULD have closed if they couldn't upgrade to digital projectors (Hollywood is no longer using film). Losing RRT would have caused a $900,000 negative economic impact to downtown Concord. Now, if you were a member of our 11 person BOD, maybe you'd vote to award that project or maybe you'd vote for another. That's what being on a Board is all about...... CDFA's objection is the auditors' contention that these projects didn't fit our mission. Projects like the Friendly Kitchen (seriously?) or the Boys & Girls Club or emergency $ to keep Meals on Wheels and heating assistance going in the North Country or two dozen other projects that made real impacts in their communities.......The auditors overlaid a FEDERAL rubric to our STATE PROGRAM to determine eligibility. Their methodology was flawed on its face. For the federal program we run, they made suggestions that would take an Act of Congress to implement. Bureaucrats like programs that fit in round holes when, as you can see, community development programs come in all shapes and sizes ..... If you have any questions or concerns about our org, you can call me directly at 717-9107 and I will spend as much time with you as you want. - Kevin Flynn

I can't see the reed reason to give Red River anything. First of all they serve pretty much an eclectic, elite clientele who could have chipped in to buy a projector if that was so important. They show films from one perspective, seldom show anything from opposite perspective. It is not a broad draw when it comes to clientele and although many of the hoi polloi attend, it pretty much caters to snobs who feel intellectually enlightened. Not really a "needy" organization

Where's the link to the "report"? From my computer it goes to a tds page for both that and the other one of finally gets to http://www.nhcdfa.org/ of see also http://www.nh.gov/government/state.html of click State agencies under the Executive branch and it gets to http://www.nh.gov/government/agencies.html of click the letter "c" in the alphabet list to: http://www.nh.gov/government/agencies.html#c of there you find this CDFA listed but ought to have an "*" (asterisk) or a star of like to some footnote of not really a state agency, but related thereto, as FALSE ADVERTISING of there is no commissioner there as there is for like the Dept. of Revenue Admin. http://www.revenue.nh.gov/ of compare the BFA as not an agency either at: http://www.nhbfa.com/ of when I go to The Public Hearings at the G&C http://www.nh.gov/council/ and say that they ought not to reward outlaws of those companies who do pay into an un-constitutional tax [ reference: per the Supreme Court case of 1997: http://www.courts.state.nh.us/supreme/opinions/1997/school.htm "The majority holds today that the present system of taxation to provide funding to meet this constitutional duty violates part II, article 5 of the State Constitution, because it is not reasonable or proportional. " nor wholesome ] that they like tell me to "go pound sand" http://www.urbandictionary.com/define.php?term=pound+sand of even though they supposedly did "make and subscribe" their RSA Ch. 92:2 oaths to Article 84 [ or did they? (;-) ] to honor the law, they "thumb their nose"s at us who pay into "The Establishment" of us within the profit community ought to fight back by not paying this share and in fact ALL property taxes until the "advise and consent" is finally given over to the Revenue Commissioner by N.H. Article 5, Part 2 too, to then and only then be lawfully empowered to send her Tax Warrant to all the cities and towns in this state.

It was created because your legislature decided back then not to expand government with another agency. Or new staff within an existing one. What ever it "sounds like" to you is a result of your personal, in-the-darkness status as to the history of the CDFA. There is NO making people like you happy, is there? You'd complain about government being too big, as you're complaining about something you really know nothing about. Maybe you should ask instead, if the auditors who made this report thoroughly familiarized themselves with the CDFA and the purpose they were given by our legislature decades ago. Did they read and get legal interpretation of the legislation that created the CDFA before they made this report? Does the report have substance or not? Those who audited the CDFA likely were in diapers or elementary school when our legislature created it. As for the Red River, yes I agree it seems a bit off, however the Red River is a non profit agency, legally created and accepted as such by both the State and the Feds. It is not a for-profit theatre business, so like it or not the rules by which revenue flows through is going to be as it is for any other non profit. This part of the report-the assistance given to RRT- is the part that interests me the most.

Thanks, this is how they get around the expansion of government prohibition in: http://www.gencourt.state.nh.us/rsa/html/I/21-G/21-G-mrg.htm

Under the Red River rules - EVERY business in NH is eligible.....I question why the CDFA was even created. It sounds like just a middle man operation that skims 20% off the top for themselves, why is an existing state agency not doing this. The 10,000 non-profits in NH need to be looked into too.

No, the Red-uh-River-uh-Theeeeeaterrrrr is a cultural landmark and draw for the self congratulatory entlightened of our society, the hoi polloi just don't get it according to those who attend this culturally elite bastion of pretentious films. Besides that, they serve Merlot I hear, how classy. Yes, such box office milestones as "The Past", "Le Pass" about a French woman with two children having a fling. ohhhh, the culture, ooooooh the statement.....I have visited RRT, not a crowd of folks I would say believe in anything I do. Four full time jobs and 18 part time jobs. I wonder how many jobs the theater by the mall employs? Maybe they need new projection equipment. Were they asked???

So, all theaters should get tax credits to update to digital?...come on..

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