While he was a law student at Duke University, Scott Mikkelsen enrolled in a class exploring the challenges that businesses in rural areas face in accessing capital.

The experience struck a chord with Mikkelsen, who grew up in Dike, a small town just west of Cedar Falls. An associate with the Davis Brown Law Firm in Des Moines since 2006, Mikkelsen is also the president and owner of Midwest Renewable Capital (MRC), a Grimes-based for-profit limited liability corporation that will use a federal tax credit program to spur renewable energy projects in the Midwest.

On Oct. 30, MRC received a $65 million allocation of tax credits through the New Markets Tax Credit Program. The organization is one of three community development entities (CDEs) that received allocations totaling $215 million.

Nationwide, 99 CDEs were allocated a total of $5 billion in this latest round of financing through the U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund, $1.5 billion of which was funded through the American Recovery and Reinvestment Act.

Through the tax credit program, the CDEs secure funding commitments from investors to provide funding for qualifying economic development projects; the investors in turn receive tax credits. Since the program's inception in 2000, it has helped leverage more than $14 billion in private-sector capital, Treasury officials estimate.

"It's double-bottom-line investing," said Mikkelsen, who partnered with another Duke Law School graduate, Corey Then, who currently practices law in Washington, D.C., to launch MRC. "We want businesses that have the potential for good growth, but we also want businesses that need financing and have significant job creation (potential) and community impact."

MRC, in a joint venture with Black Hawk Economic Development Inc. in Waterloo, will specialize in helping fund renewable energy businesses and "green" real estate projects in Iowa, Kansas, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota, particularly in underserved rural areas.

Partnering with Black Hawk Economic Development "was a natural fit," Mikkelsen said, "because I grew up in that area, and it wasn't far from where Corey (Then) had grown up, either. (Black Hawk Economic Development) was looking at doing this, and when we sat down with them and talked about it, they shared our same goals."

In addition to a law degree, Mikkelsen holds a master's degree in economics from the University of Manchester in England. He graduated summa cum laude with a finance degree from the University of Northern Iowa, where he was a letter winner for the Panthers football team. With Davis Brown, he specializes in business organizations and transactions, renewable energy, community and economic development law and development-related tax credits.

MRC has already obtained commitments totaling more than $200 million from private investors who are interested in providing capital to qualifying projects, Mikkelsen said. MRC will allocate anywhere from $500,000 to $10 million in tax credits per project, he said, though a microfund program it will offer may also make tax credit allocations in the $300,000 to $500,000 range.



Home-grown demand

Two other Iowa-based CDEs, Iowa Community Development LC in Johnston and Rural Development Partners LLC of Mason City, received $70 million and $80 million, respectively, in this latest round.

"I think 'home-grown' demand (for the credits) is up," said Dan Robeson, a board member of Iowa Community Development and executive vice president of Iowa Business Growth Co. in Johnston. The CDE specializes in Iowa-based projects, "just to take advantage of bringing these credits into the state," he said.

This is the third consecutive year Iowa Community Development has received New Market Tax Credit allocations; it received $40 million in 2007 and $50 million in 2008. Last year, it assisted in funding seven regional economic development projects in Iowa. (See table)

"We spent a lot of time with our partners, talking about how they can use credits," Robeson said, among them the Iowa Bankers Association and the Iowa Area Development Group.

"The main thing we will look for in each project is community impact," said John Rigler, a New Hampton bank president who chairs Iowa Community Development's board. "The fact that we've gotten three rounds suggests (the Treasury Department) must like the types of projects we're doing."

One of the requirements of this latest round of funding is that at least 40 percent of the projects must be located in rural areas, which Rigler said will "definitely slow down" the pace of funding projects.

An additional hurdle to finding suitable projects is tight credit markets, which makes it more difficult to come up with conventional sources of financing such as bank loans. "We're just a piece of the capital," Robeson said, "and those other financing sources have gotten tighter." About 80 percent of each project is conventionally financed, he said.

However, as the program matures, "we've got more projects than we've got allocations," he said. "The critical part of this is about getting the word out. I'm not worried about not allocating all the credits; I'm worried about not using it on a project I didn't hear about that I should have looked at."