March 6, 2016
REQUEST FOR PROPOSAL FOR CHANGE IN CONTROLLING ENTITY
Dear Sir/Madam:
This document is a Request for Proposal (“RFP”) by the Michigan Magnet Fund, a Michigan
nonprofit corporation (the "MMF"), www.mmf1.org, and prior New Markets Tax Credit
("NTMC") allocatee for a change in Controlling Entity (as defined herein) currently held by the
Michigan Economic Development Corporation, a Michigan public body corporate (the
"MEDC") and/or alternate structures. Also, mentioned in this RFP is the Michigan State
Housing Development Authority, a Michigan public body corporate and politic ("MSHDA").
References to "IRC" shall mean the Internal Revenue Code of 1986, as amended.
Background
Appendix A provides additional background on NMTC Program as administered by the U.S.
Department of Treasury, Community Financial Institutions Fund (the “CDFI Fund”), the MMF
and the award by the CDFI Fund of NMTC allocation of $145,000,000 (the "NMTC
Allocation"). The MMF has invested the NMTC Allocation in 20 projects, involving a range of
community service, manufacturing, mixed use redevelopment, and commercial conversion,
community infrastructure in urban and non-Metro projects. A total of 17 of the 20 projects were
sited on vacant or abandoned properties, most in the center of town, some with serious
contamination and all meeting the CDFI severely distressed test. A listing of MMF projects is
found on the MMF’s web site. With these projects, MMF has retained 1,899 permanent jobs, and
created 1,137 new permanent jobs as well as 5,222 construction jobs – and materially improved
the quality of life for low-income communities within the State of Michigan. In addition, the
MMF has built a fund balance of about $2.0 million that is expected to grow to almost $3.0
million by the time it unwinds all existing projects in 2020. However, it has not been able to win
an allocation in the past three competitive rounds and is seeking an additional NMTC for use in
the State of Michigan.
Description of MMF's Current Controlling Entity
As the NMTC Program became more competitive and to attempt to address perceived
shortcomings in 2010, the MMF changed its Controlling Entity from MSHDA to the MEDC.
The hope was that the CDFI Fund reviewers would see a stronger link to deal flow and other
state development finance programs between the MMF and MEDC capital markets staff and
receive higher score on its’ NMTC application. Thus in 2011, the MMF submitted an
application listing the MEDC as its Controlling Entity; and the only change made to the MMF’s
Board of Directors was to make the MMF President a MEDC employee. The MEDC's core
mission is to transform Michigan’s economy by growing and attracting businesses, keeping
talented residents, and revitalizing Michigan’s urban centers. (For more information, see
www.michiganbusiness.org.) In recent years, the CDFI Fund evaluates applications based on the
key criteria of business strategy, community benefit and to a lesser extent management.
____________________________________________________________________________________________
300 N. Washington Square, Lansing, MI 48913 313 445-1843, bogdanaa@aabds.com, http://www.mmf1.org
The MMF’s project selection criteria has been to do projects that "but for" the MMF's support
the project could not be financed. Some of these projects either did not result in the projected
community benefit or ran into financial difficulty both of which the MMF could not anticipate or
control. This has made winning subsequent rounds of allocation very difficult. Another perceived
weakness of the MMF model is although MMF is a "supporting organization" for MEDC and
MSHDA, with board representation that includes a representative of MEDC, MSHDA,
Community Economic Development Association of Michigan, Saginaw Future, Inc., City of
Lansing EDC,. Invest Detroit, The Enterprise Group of Jackson, Inc., Northern Initiatives and
the City of Grand Rapids, it has no staff to provide executive direction and the full suite of
administrative services the CDFI Fund reviewers are seeking. The MMF is essentially a virtual
corporation and has no employees or permanent facilities. The MMF relies upon the services of
employees of the MEDC and outside contractors, this includes deal flow, consulting, legal,
accounting, and CDFI Fund compliance. The MMF is serviced under contract with AAB
Development Strategies, LLC providing business development services and Great Lakes Capital
Fund (now called Cinnaire) providing or managing accounting, portfolio management and
NMTC compliance services. Historically, the day-to-day management of the MMF has been
handled by a one contracted staff member.
The change from MSHDA as the Controlling Entity to the MEDC, however, did not yield an
award and the MMF Board believes that after several failed attempts it is now time to seek a new
Controlling Entity for the MMF and to seek a new approach. Relinquishment of its role as
Controlling Entity will also allow the MEDC to better focus on its core mission.
Opportunity for Further Change
The MMF is seeking a new Controlling Entity to take the MMF in a new and stronger direction
which will ultimately lead to the MMF or another affiliated CDE successfully competing for
NMTC allocation. Ideally, the new Controlling Entity would target its investments to small and
lower middle-market operating companies with revenues from $5-$100 million; typically in the
manufacturing, warehouse/distribution, logistics, food processing, transportation and enabling
technologies industries, but could also include mixed-use, service businesses and health care
industries where it drives community benefits and creates opportunities for employment for low
to moderate income people.
Type of Responses the MMF Would Consider
The MMF does not want to be overly proscriptive in designing responses to this RFP therefore
much of the ordinary and customary questions have been omitted. Rather, the MMF will
entertain viable options which will advance the mission of the MMF and enhance MMF's
success rate in competing for future allocation awards to allow additional NMTC to be available
for the State of Michigan.
In general, the MMF is open to:
 Subject to CDFI Fund approval or non-action, authorizing the change in Controlling
Entity from MEDC to a new Controlling Entity.
 Having the new Controlling Entity prepare a new application for NTMC using their track
record and their affiliate’s track record of lending and the affiliated track record of the
MMF
 Having the new Controlling Entity propose a new MMF governance structure including
decision making which would include staff members from the MEDC.
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Staffing MMF under a contract with MMF or other appropriate structure.
Creating a MMF “small deal” loan fund utilizing MMF’s existing capital, augmented by
the partner from their or other sources. Small deal is defined as loans ranging from
$250,000 to $5 million.
Allowing the use of MMF’s fund balance for new loans and investments made by MMF.
Qualifications and Prerequisites to be considered
An ideal responder would have the following:
 A staff with an understanding of Federal and State of Michigan finance programs.
 Strong management capabilities with a proven history of financing projects in low
income communities that would appeal to the CDFI Fund and reviewers.
 A proven track record in alternative lending and/or double bottom line investing/lending.
 Has a proven track record of financing projects in low-income communities with a sound
business strategy and can demonstrate its ability to successfully apply for NMTC
allocation
 Financial resources available to augment available MMF resources to begin lending day
one.
 Be a not for profit corporation or other type entity that has a strong commitment to
economic and community development as part of its mission. i.e., a CDFI Fund funded
organization or similar community based financing organization
 An ability to generate, independently or working alongside the MEDC, a pipeline of
projects that fit the current and new MMF mission.
 A current principal place of business within the State of Michigan.
 A commitment to fund the projects in the State of Michigan.
 A willingness to work with existing MMF contractors with regard to MMF's existing
portfolio management, NMTC compliance and NMTC unwinds of prior transactions.
Proposal Requirements
You are receiving this RFP because your entity been identified as having interest in participating
in the NTMC Program. If your entity is interested in serving as Controlling Entity, please submit
an electronic PDF copy and one (1) hard copy to, to each person listed below no later than 1:00
p.m. EST on November 30, 2015 to:
Veronica Farley-Seybert,
MMF Director
C/o Michigan Economic Development Corporation.
300 N. Washington Square
Lansing, Michigan 48913
farleyv@michigan.org
At the same time, one (1) pdf copy must be submitted to:
Albert Bogdan,
MMF Assistant Director
C/o AAB Development Strategies, L.L.C.
13342 Sherwood Drive
Huntington Woods, Michigan 58070
bogdanaa@aabds.com
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A meeting describing the project and open for questions will be held on November 9, 2015 at 3
pm at the offices of MEDC at 300 N. Washington Square, Lansing, Michigan in room ________
We recommend that anyone interested in submitting a response to this RFP attend and R.S,V.P.
by November 6th, 2015.
General Questions to Be Answered
1. Name, address, and address and legal structure of your organization
2. Describe your organization and the financial services it provides to low-income
community businesses
3. Describe how your organization raises its resources and how it intends to expand said
resources available for investment in NMTC eligible projects within the State of
Michigan.
4. Describe the organization’s present business strategy and the impact it has had on low
income communities within the State of Michigan.
5. Provide biographical information for all key personnel within your organization.
6. Describe how your organization will use the Controlling Entity transfer, if selected.
7. Describe how your organization would use the MMF’s name and resources to obtain a
NMTC Allocation for investment within the State of Michigan and/or to expand
investment in the State of Michigan.
8. Describe the projected relationship you propose between your organization, the MMF,
current contractors and MEDC for the management of MMF’s current loans.
MMF's Federal Tax Status
The MMF is a tax-exempt entity under IRC 501(c)(3) and currently a public charity under
509(a)(3) as a supporting organization for MEDC and MSHDA. Reponses must include
maintaining MMF's tax-exempt status under IRC 501(c)(3) and should strive to maintain MMF's
public charity status under IRC 509(a)(3) or in the alternative be able to show that MMF could
qualify as a public charity under IRC 509(a)(2) (i.e. through loan fees and other exempt function
income). If in connection with the proposed structure, the MMF should potentially cease to
qualify as a public charity (i.e. become a private foundation), the response must include
safeguards to be established to avoid private benefit, self-dealing and other prohibited acts.
Additional Requirements
In addition to the hard copies, electronic versions of your response must be submitted to and
received by the MEDC and Albert Bogdan at the time referenced above. The email address for
Veronica Farley-Seybert is: farleyv@michigan.org. The email address for Albert A. Bogdan is
bogdannaa@aabds.com.
Proposals must answer the questions contained in this Section. Brevity in your response will be
appreciated; please limit your overall response to ten (10) pages. All responses must be
submitted on 8 ½ x 11 paper with at least 1 inch margins. Font size must be no smaller than 11point. The page count restrictions assume single side formatting and exclude appendices and a
cover letter of up to two (2) pages, which should provide an executive summary of your
proposal.
All entities responding to this RFP are advised that while MMF is not a public agency, the MMF
will treat the RFP, including statements in response to this RFP, as being available to the public.
The MMF reserves the right to retain all submitted materials; to withdraw this RFP, or any part
of this RFP; to reject any and all responses and to waive any irregularities with respect thereto; to
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waive any requirements of this RFP; to modify or amend, with the consent of the respective
entity, any statement; and to effect any agreement deemed by the MMF to be in its best interest.
The MMF reserves the right to seek additional information from any and all entities submitting
proposals and to select finalists. The MMF shall not be responsible for any costs incurred by
entities in the preparation, submission or presentation of their proposals.
Thank you for your interest in the Michigan Magnet Fund. We look forward to receiving your
proposal.
Sincerely,
Mark Morante, President
Enclosure:
cc:
Veronica Farley-Seybert
Albert Bogdan
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MICHIGAN MAGNET FUND
REQUEST FOR PROPOSALS (RFP) FOR CHANGE IN CONTROLING ENTITY
APPENDIX A -ADDITIONAL BACKGROUND
The Community Renewal Tax Relief Act of 2000, as amended ("CRTRA") established the
NMTC Program by adding a IRC Section 45. The purpose of this new IRC provision was to
attract private capital to promote economic and community development in certain specially
designated areas. The CDFI Fund allocates the NMTC to and among “qualified community
development entities” (“CDE’s”) selected by the CDFI Fund also called NMTC allocatees
through an annual application process. The purposes of the MMF are (i) to promote economic
development and creation of wealth and job opportunities in low-income communities within
the State of Michigan and among low-income persons residing in such low-income
communities consistent with requirements as set forth in the New Markets Tax Credit Program
created by the Community Renewal Tax Relief Act of 2000, as amended (the "CRTRA''); (ii)
to promote and facilitate investment of private and public capital in the form of equity or loans
and provide operational assistance (either directly or through third parties) to individuals, small
businesses and organizations located in low-income communities within the State of Michigan,
including but not limited to commercial real estate projects, retail and wholesale businesses,
service providers and business incubators in accordance with the requirements of the CRTRA;
and (iii) to maintain accountability to residents of low-income communities within the State of
Michigan through representatives on a Board of Directors or advisory board(s) which represents
low-income communities in accordance with the requirements of the CRTRA.
The MMF was incorporated on August 27, 2003 under the Michigan Nonprofit Corporation Act,
as amended. The MMF is organized on a directorship basis which allows the board to directly
elect and remove its members. . On August 7, 2004, the MMF was certified as a CDE pursuant to
a letter from the CDFI Fund. The MMF was awarded IRC 501(c)(3) tax-exempt and public
charity status on September 13, 2004. The MMF management consists of a fifteen member
Board of Directors and a six member Executive Committee. The MMF officers include a
President, Secretary and Treasurer, Director and Assistant Director. At the time of formation, the
MMF had no prior track record of NMTC financing which was perceived by the Board of
Directors as a weakness in the highly competitive NMTC Program. The CDFI Fund allows
applicants for NTMC the option of having a "Controlling Entity" and to combine with MMF's
track record (non initially but expected to develop over time) with the NMTC financing or NonNMTC financing track record of its Controlling Entity. Therefore to enhance the possibility of
receiving a NMTC Allocation the MMF opted for the use of another entity with the degree of
oversight necessary to constitute a "Controlling Entity" in compliance with the Section 45 of the
Code, the Treasury Regulations promulgated under Code Section 45 and the rules and
requirements of the CDFI Fund. The MMF satisfies this degree of control as set forth in Treasury
Regulation Section 1.45D-1(d) (6) (ii) (B) by having another entity approve a majority of its Board
of Directors. The MMF initially selected the MSHDA, a public body corporate and politic and
agency of the State of Michigan as its Controlling Entity with a track record in financing of lowincome housing.
The MMF applied for an award of NMTC commencing with the 2005 round of the NTMC
Program listing MSHDA as the Controlling Entity. The MMF's NMTC Allocation is evidenced
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by a Markets Tax Credit Allocation Agreement with effective date of December 29, 2005 (the
"CY 2005 Agreement"), a 2009 Allocation of $60.000,009 as evidenced by a Markets Tax
Credit Allocation Agreement with an effective date of January 12, 2010 (the "CY 2009
Agreement"), and a 2010 Allocation of $25,000,000, as evidenced by a New Markets Tax Credit
Allocation Agreement with an effective date of May 11, 2011 (the "CY 2010 Agreement",
which together with the CY 2005 Agreement, the CY 2009 Agreement and CY 2010 Agreement,
the "MMF Allocation Agreements". In each of the applications which resulted in a MMF
Allocation Agreement, the MMF lists MSHDA as its Controlling Entity. On April 20, 2010, in
accordance with the MMF Allocation Agreement, the MMF gave written notice of material event
by emailing a “Certificate of Material Event” to the CDFI Fund to change its Controlling Entity
from MSHDA to the MEDC. The CDFI Fund did not request any additional information or
approve or disapprove the change in the Controlling Entity, however, applications with MEDC
as Controlling Entity have been submitted without issue.
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