Financial Incentives

Beyond grants and loans, a variety of financial incentives are being used to encourage the creation of healthy food projects in underserved communities. The federal government and most states and many municipalities offer incentives to attract new businesses or help existing ones to expand. The type of incentives can vary widely. Often they are structured to help offset costs related to land, construction, or business operations and may include abatements on sales taxes for equipment purchases, discounted land, expedited permitting, zoning variances, or credit on state and/or local corporate income taxes. The amount and type of incentives, the criteria for qualification, and the regulatory conditions will vary depending on the program’s goals. Incentives may not make a healthy food project financially viable, but they can reduce the costs and financial risks of the project.

Federal

One of the most important federal tax incentive programs is New Markets Tax Credit (NMTC), which provides a credit against federal income taxes to attract private investment to economically distressed rural and urban communities. Using a competitive process, the Department of Treasury CDFI Fund awards certified Community Development Entities (CDEs) an allocation of NMTC authority annually. A store operator, developer, or other qualified business must apply to a certified CDE for financial support.  To locate a certified CDE serving your community, visit the CDFI Fund’s website.

State and Local

State and local incentives can take a variety of forms, all aiming to reduce the cost of a project. Many states and local governments have created special districts, often called enterprise zones or business improvement districts, and have also used tax increment financing (TIF) methods, to stimulate business investment in depressed areas. The exact rules and details of incentive packages vary from place to place.

Enterprise zones may offer property tax abatements, reduction in corporate income taxes, tax credits for capital investment, funding for research and development, or assistance with hiring and training local workers. Business improvement districts collect fees from business owners to fund improvements in targeted areas for which healthy food retail may qualify. By issuing bonds guaranteed by future increases in property tax revenue, TIFs offer another method for local governments to raise funds for development projects. Typically, a local government establishes a TIF district where there will be a mandatory freeze in property values for up to 30 years, during which time taxes continue to be collected by local authorities. The government can choose to commit the taxes collected on the difference between the baseline property value and the rising property value generated by the new development to pay for development and infrastructure costs.