By Charlie Spies, CEO CEI Capital Management LLC

From Maine to Georgia to Arizona to Oregon, new forest-based enterprises are coming on line with financial support from New Markets Tax Credits every day. These tax credits provide incentives for private investors to fund projects that create or preserve jobs and diversify economies in distressed communities. The result is re-invention and job creation within the supply chain of an age-old industry: growing new forests, sustainably harvesting and moving the timber, and then processing it in 21st century ways by breaking down the trees into fiber and even into molecules with a variety of potential uses.

For instance, this month in rural Berlin, NH the first delivery of sustainably harvested wood to the Burgess Biomass Plant marked a milestone in the evolution of the region’s forest-based economy. On track to come online by the end of the year, it is a prime example of next generation forest utilization as an economic engine. The plant is built on the site of a defunct paper mill, where it will produce 75 megawatts of power, sustain 40 jobs in management and plant operations, plus spur hundreds more jobs in the woods associated with harvesting and transporting biomass. The project received $64 million in New Markets Tax Credits, which attracted private investors to participate.

Congress first established New Markets Tax Credits in 2000 to stimulate investment and economic growth in low-income and underserved rural and urban communities that are often overlooked by conventional capital markets. Investors receive 39 percent federal tax credit over seven years as incentive to finance businesses and economic development projects in these distressed communities.

The New Markets Tax Credits program has been the impetus for projects on the cutting edge in the forest product industry over the last decade. The program has allowed for millions of acres of timberlands to be managed as sustainable forests available for both industrial and recreational use, as well as creating jobs through continued innovation in the use of forest products from high speed lumber manufacturing, to composite material manufacturing, to cellulosic fuel. These targeted private capital investments are helping to reinvent local economies and protect their future viability using environmentally sustainable practices.

New Markets Tax Credits helped Westervelt Company to fund a new wood pellet manufacturing plant in rural Alabama, where nearly half the population lives in poverty and unemployment is greater than ten percent. The plant will produce 280,000 metric tons of wood pellets for use as an alternative fuel source around the world. This project has so far created 45 permanent jobs while assuring demand for locally produced timber and the people that harvest and transport that wood.

Alternatively, the Appalachian Mountain Club’s (AMC) Maine Woods Initiative uniquely combines recreation, natural resource protection, sustainable forestry, and community partnerships. By encouraging nature-based tourism, the project is creating jobs: logging crews are busy at work supplying local paper mills while three traditional sporting camps are staffed to welcome visitors, and professionals are employed to manage nearly 70,000 acres of timberland, not to mention the ripple effect in the local economy. The AMC’s purchase of this working forest for conservation and continued public use for both forestry and recreation was supported through New Markets Tax Credits valued at approximately $16.5 million.

Further, with cutting edge research and development at the molecular level, ZeaChem Applied Technology in Oregon is using its “know how” to produce fuel and other valuable chemicals from low value wood. The work was made possible with New Markets Tax Credits, employing chemical engineers and researchers while developing green energy.

If you believe your project is a candidate for New Markets Tax Credits, your best first step is to speak with a professional who understands the program and can help you understand how you need to structure the financing, corporate ownership and other considerations necessary to qualify. There are a variety of banks that are experienced in this sort of community development, as well as the qualified Community Development Entities (CDE’s) like CEI Capital Management, who administer the program.

Charlie Spies is CEO of CEI Capital Management which creates and preserves jobs and improves quality of life in rural, low income communities by providing access to project capital through New Markets Tax Credits. Over 10 years CEI Capital Management has placed more than $658.8 million in 74 different projects across the U.S. In addition to fiscal soundness, CEI Capital Management evaluates each project according to its benefit to the local community, economic gain and positive impact on the environment. It is a wholly owned subsidiary of CEI, the Maine-based nonprofit community development financial institution which was among the founders of this important federal economic development program. For more information, visit http://www.ceimaine.org/CCML

[image credit: JasonBrown2013: Flickr cc]