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Novogradac Journal of Tax Credits Covers Opening of Pediatric Center in West Philadelphia

May 2, 2013

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A private donation and a new markets tax credit (NMTC) investment by the Citi New Markets Community Impact (NMCI) Fund helped finance a $27 million primary care center for The Children’s Hospital of Philadelphia (CHOP). The 52,000-square-foot Nicholas and Athena Karabots Pediatric Care Center opened earlier this year in the heart of West Philadelphia. It offers 56 examination rooms and additional rooms dedicated to radiology, hearing and vision testing and a phlebotomy laboratory. The center has 35 doctors on staff and expects to serve 64,000 children annually. It will also serve as a medical training ground for 140 of CHOP’s resident physicians each year.

Health Care Access

CHOP estimates that 78 percent of children served at the Karabots Center will have subsidized health coverage, such as Medicaid or the state Children’s Health Insurance Program. “The Center allows us to provide full access to high quality care regardless of the insurance a child may or may not have. By integrating this care with comprehensive programming available on-site, we expect to improve health outcomes for these children in a way that’s efficient and as close to home as possible,” said Peter Grollman, CHOP’s vice president of government affairs, community relations and advocacy.

Providing quality health care to a previously underinvested area was one of the main reasons why the NMCIF chose this as its first investment, said Kevin Boes, president and CEO of New Markets Support Company, the Local Initiative Support Corporation (LISC) subsidiary that manages the fund.

“Besides being a primary care center with in-house X-ray and lab facility, the center will feature behavioral health services, dental care, family planning for teenagers, counseling on domestic violence, literacy programs for children and the Early Head Start for parents and young children,” said Boes.

Andy Frishkoff, executive director of Philadelphia LISC, said that the Karabots Center provides these much-needed services that previously weren’t readily available in the area. “We have great hospitals when you’re in a crisis, but not a lot of preventative care in the neighborhood. CHOP coming into the neighborhood is significant in bringing institutional resources that are part of its continuum of care,” he said.

Frishkoff added that the four-acre site is only two miles from CHOP’s main campus and that the primary care services offered at Karabots will complement the care offered at the main hospital. “It’s a great satellite and not too far from the main hospitals. For residents, this is much closer and it’s a welcoming, community-sized facility,” he said. Existing CHOP primary care centers in South Philadelphia and Cobbs Creek will remain in their locations, but services from centers at 39th and Chestnut Streets and 3550 Market St. will be relocated to the Karabots Center.

Neighborhood Revitalization

According to a January Philadelphia City Planning Commission report, West Philadelphia had as many as 330,000 residents in 1950 but today has only 200,000. Depopulation, blighted properties and other signs of urban distress make it necessary to redevelop the neighborhood, the report stated.

The Karabots Center lies in the center of West Philadelphia’s major transportation corridor, two blocks from the historic WFIL Studio, home of the American Bandstand television show and current office of The Enterprise Center, an organization that provides capital and other resources to minority-owned enterprises. Plans to redevelop the area were reinvigorated last year when Philadelphia LISC, The Enterprise Center, community members, neighborhood businesses, nonprofits, designers and architects collaborated in a design charrette – or collaborative design session – to revitalize the area.

“That particular area was chosen because of its proximity to public transportation, the fact that the neighborhood is medically underserved and the possibility that [the center] would provide a spark for other redevelopment,” said Gina D. Nisbeth, director at Citi Community Capital, which capitalized the NMCI Fund. Frishkoff agreed that the Karabots Center could serve as a catalyst for the rest of the neighborhood. “I think what we’ll see in this area is more private, mixed-use properties,” he said, adding that other development projects are already being planned and completed in the area. The Philadelphia Department of Human
Services completed the Youth Study Center in the neighborhood and West Philadelphia High School opened a new 170,000-squarefoot building at 50th and Market streets. The Philadelphia Police Department has announced plans to move its headquarters nearby within a few years.

“This growth should foster opportunities to attract new businesses that will serve the community and create jobs,” said Grollman. Construction on the Karabots Center, which began in October 2011, created 100 construction jobs and maintained another 100 permanent jobs.

Frishkoff noted that one of the challenges in attracting investors to the neighborhood was the public’s perceptions about safety in the area, especially around the elevated transit stop at 46th and Market streets that sits one block from the Karabots Center. “It was a hot spot for criminal activity because it wasn’t well lit, so there were lots of opportunities for robberies and people just didn’t feel safe,” said Frishkoff. He said that the transit stop has since been renovated and that the Karabots Center offers lighting that extends beyond the campus, making the area safer at night. Nicholas and Athena Karabots of Fort Washington, a suburb of
Philadelphia, donated $7.5 million to the project. Citi contributed $10 million of its NMTC allocation and the NMCI Fund provided $2.9 million in equity. CHOP provided the balance of the funds needed for the project.

“Effectively, the new markets transaction allowed the project to  be that much more impactful. Were it not for the new markets component, [the center] wouldn’t be able to provide as many of the crucial community  services as it does,” said Nisbeth. The Karabots Center opened in January 2013.

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This article first appeared in the May 2013 issue of the Novogradac Journal of Tax Credits.

© Novogradac & Company LLP 2013 – All Rights Reserved

Notice pursuant to IRS regulations: Any U.S. federal tax advice contained in this article is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties under the Internal Revenue Code; nor is any such advice intended to be used to support the promotion or marketing of a transaction. Any advice expressed in this article is limited to the federal tax issues addressed in it. Additional issues may exist outside the limited scope of any advice provided – any such advice does not consider or provide a conclusion with respect to any additional issues. Taxpayers contemplating undertaking a transaction should seek advice based on their particular circumstances. This editorial material is for informational purposes only and should not be construed otherwise. Advice and interpretation regarding property compliance or any other material covered in this article can only be obtained from your tax advisor. For further information visit http://www.novoco.com.

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