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May 23, 2018

New Markets Tax Credits now available through EMDC affiliates

Photo / Amber Waterman, Mainebiz archives
Photo / Amber Waterman, Mainebiz archives
Michael Aube, CEO of the Eastern Maine Development Corp., announced this week that three of its affiliates have been certified as Community Development Entitities, making them eligible for allocations through the New Markets Tax Credits program.

Eastern Maine Development Corp. learned earlier this month that three of its affiliates have become certified as Community Development Entities, a federal designation that allows them to participate either directly or indirectly in the New Markets Tax Credit Program.

The designation comes from the U.S. Department of the Treasury, which oversees the Community Development Financial Institutions Fund. The affiliates, Acadia Capital Management I Inc., Acadia Capital Management II Inc. and Acadia Capital Management III Inc., will be able to act as an intermediary for procuring loans, investments, or financial counseling in areas formally designated as "low-income communities."

Michael Aube, CEO of the Bangor-based Eastern Maine Development Corp., told Mainebiz in a telephone interview today that getting CDE certification was a four-year process.

The three affiliates were created by EMDC specifically to be able to provide New Markets Tax Credits to qualified investors. The NMTC program was created as part of the Community Renewal Tax Relief Act of 2000 with the goal of spurring revitalization efforts of low-income and impoverished communities across the United States.

New option for mill redevelopment efforts

Photo / Maureen Milliken
Photo / Maureen Milliken
Great Northern Paper mill in Millinocket.

Until EMDC's three affiliates received their CDE certification, CEI Capital Management was the only entity in Maine that could offer a 39% federal income tax credit over a seven-year investment period the federal NMTC program for investments in low-income communities.

Among the Maine projects CEI Capital Management helped finance by using the NMTC program is the St. Croix Tissue Inc. expansion in Baileyville that created a new, state-of-the art tissue paper manufacturing company next to the parent company Woodland Pulp LLC, creating new jobs and supporting the existing 320 jobs at Woodland Pulp mill.

Aube said having the ability to offer tax incentives through the federal NMTC program very much enhances EMDC's ability to assist in the redevelopment efforts at the five pulp and paper mills that closed in Maine in recent years.

"Access to flexible capital is important," he said. "This gives us opportunities to entice someone to come and invest in our region and begin to redevelop some of these mill sites. We want to be at the table [on those projects]."

Aube said one example of a project that could benefit from the NMTC program is the proposal by LignaTerra Global LLC of Charlotte, N.C., which announced in February the plans by its subsidiary LignaCLT Maine LLC to build a 300,000-square-foot cross-laminated timber manufacturing plant at the shuttered Great Northern Paper mill in Millinocket. Now owned by Our Katahdin LLC, the 1,400-acre mill site envisions LignaTerra's CLT plant as an anchor tenant that will create 100 direct jobs to the Katahdin region in the next five years.

Unlike CEI Capital Management, whose NMTC allocation and portfolio extends beyond Maine's borders into other low-income regions of the United States, Aube said EMDC's affiliates plan to keep their focus on "home-grown" development projects.

"It's our region, that's going to be our primary market," he said. "We do offer a number of traditional loan programs, but this will allow us to provide a different level of investment financing and opportunity for investors."

Beginning to vet 'impactful projects'

Aube said EMDC was already working on how it could facilitate investments to redevelop the region's shuttered mills when the closure of the Madison Paper Industries mill in 2016 spurred it to write the Maine congressional delegation, which led to the summer 2016 visit by a federal Economic Development Assessment Team to assess redevelopment opportunities at those mill communities.

The EDAT task force worked with Maine stakeholders to craft a nine-point strategy, unveiled in January 2017, to attract capital investment and develop new opportunities in the forest products sector that will sustain good-paying jobs in Maine's rural communities.

"The affiliates have already begun the process of vetting impactful projects, establishing relationships with collaborative partners and speaking with potential investors," Aube said in a news release announcing the CDE certification. "NMTCs have historically done an excellent job of spurring private investment — $8 for every $1 invested by the federal government, so this will go a long way in our region."

The benefit to developers and business owners, he said, is more flexible financing than conventional methods. EMDC also anticipates that low-income communities will see benefits, since CDEs will often select projects based on the expected community impact.

"This opens up new opportunities for Eastern Maine," said Micki Sumpter, chair of the EMDC board of directors. "We have a tremendous asset in our people, and the natural resources in this area. The CDE designation gives developers and business owners even more reason to look at this region for investments."

Brien Walton, director of the Center for Family Business and an assistant professor of entrepreneurship at Husson University, is currently facilitating coordination efforts between projects, partners and investors for EMDC's three CDE affiliates. Parties interested in opportunities that can be supported by a CDE can call him at 207-404-5699.

Aube said EMDC's affiliates will be seeking unused NMTC allocations from other CDE's around the country until it receives its own allocation through the federal program.

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