Capital City Properties (CCP) is the nonprofit arm of the Saint Paul Port Authority. Above all, CCP supports the Port Authority with land acquisition, commercial redevelopment, and property management. CCP returns profits to the Port Authority through grants. In fact, 25 percent of the Port Authority’s annual budget comes from CCP grants. These funds ultimately decrease the organization’s dependency on public funds.
Capital City Properties | Joint Ventures
The Saint Paul Port Authority leverages CCP to create joint ventures with private sector investors. To start, the Port Authority acquires a distressed property and turns it over to CCP. In most cases, the property has a negative value; contamination and obsolete buildings limit marketability. CCP manages the remediation process, which in turn increases the property’s value and CCP’s equity stake in the project. More importantly, eliminating risks makes the property attractive to the private sector.
From there, CCP aggressively seeks a development partner to infuse cash into the project. In most cases, development partners match CCP’s equity position, creating a 50/50 partnership. Likewise, as profits are earned, they are split between CCP and the joint venture partner. Accordingly, the city of Saint Paul realizes a boost in both jobs and taxes.
New Market Tax Credits
A second revenue stream for CCP is interest earned on New Market Tax Credit (NMTC) loans. To date, CCP has earned $4 million through the NMTC Program. To illustrate, the U.S. Department of the Treasury allocates tax credit authority to intermediaries, like CCP, who in turn select investment projects in low-income neighborhoods. To date, CCP has successfully secured NMTCs in 2008, 2010, and 2011. The intent is to apply in 2020, but the program is extremely competitive and there are no guarantees.
In recent years, CCP has put added focus on Port Consulting. Through this program, clients rely on CCP to navigate the complexities of public-private partnerships. Accordingly, focus areas include economic development, brownfield remediation, and enhanced brokerage services. The intent is to grow revenues year-over-year. Subsequently, these funds could offset NMTC revenues, should future applications be denied.
The role of the CCP board is to ensure its projects align with the Port Authority’s mission. Specifically, they must create jobs, expand the tax base, and/or advance sustainable design. For that reason, Port Authority staff and board members must hold the majority of CCP board seats. At the same time, city councilmembers do not sit on the CCP board. This protects the city from risks tied to CCP projects.
In addition, CCP has no paid staff members. This protects the Port Authority from taking on the liability of wages and benefits when entering into a joint venture agreement.
Although the Saint Paul Port Authority has the power to provide financial assistance to CCP, to ensure the success of its projects, it is not done in practice. The only exceptions are loans from the Port Authority to CCP for the sole purpose of facilitating development projects. These types of loans are also available to private sector partners and are paid back with interest. To aid in transparency, the Net Position and Activities of the Saint Paul Port Authority and CCP are included in the city of Saint Paul’s Comprehensive Annual Financial Report (CAFR) as a Discreetly Presented Component Unit.