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An investment in rurallumber processing pays off

Through the New Markets Tax Credit Program, Ecotrust invested in Ochoco Lumber Company's capacity to grow jobs and help restore the forest.

Seven years ago, in the throes of a recession and a challenging lumber market, the president of Ochoco Lumber Company, Bruce Daucsavage, knew that the company was vulnerable.

Ochoco Lumber Company’s forestry operations are located in Grant County, one of Oregon’s most economically distressed areas, with one stoplight to its name. In 2010, the county had an unemployment rate nearly twice that of the national average.

The 94-year-old company relies almost entirely on resources from national forests. In 2009, Daucsavage knew that securing a timber supply and capital to expand its product offerings would be critical to keeping Ochoco Lumber Company stable and thriving. Daucsavage’s vision was to create products and markets for every log that arrived at the mill and all of the byproducts produced by the milling process, such as sawdust and bark, to provide diversification in a challenging market and enhance profitability. While discussing Daucsavage’s vision and challenges, Ecotrust suggested funding the needed capital improvements through the federal New Markets Tax Credit Program. Daucsavage was intrigued, but initially skeptical that his small, rural company could actually benefit from a program that seemed so complex. Ecotrust worked with Daucsavage to secure technical resources to help him analyze the opportunity, and not only provided New Markets Tax Credit allocations for the project but also helped secure allocations from two other entities that collectively provided approximately $10 million of net benefit to Ochoco Lumber.

Last month, after seven years, Daucsavage and all of Ochoco Lumber celebrated the conclusion of the program’s successful investment in their company.

The New Markets Tax Credit (NMTC) Program was established by Congress in December 2000 to help economically distressed communities attract private investment capital by providing investors with federal tax credits. In essence, the program promotes investment in communities experiencing high rates of unemployment and/or below average income. The tax credits allow corporations (usually big banks) to purchase a 39 percent credit against federal income taxes over seven years with the proceeds going to qualifying businesses and projects via community development entities, such as Ecotrust CDE.

Since 2005, Ecotrust CDE has received $277 million in NMTC allocations that have been used to finance projects like Ochoco’s mill expansion that seek to create jobs and build long-term community and environmental wealth, primarily in rural communities across the Northwest. Ecotrust’s investment focus areas include support for tribal communities, forestland restoration, fiber and food processing, and converting waste into products and energy.

The common threads in Ecotrust’s work — advancing social, economic, and environmental interests — are echoed in our  NMTC transactions. The investment in Ochoco’s lumber processing facilities are helping convert dense, at-risk forests to healthier, more resilient timber stands, while bringing greater social and economic resilience to the surrounding communities.

The Ochoco project is a great example of the NMTC Program’s impact. With the $11 million influx of capital, Ochoco Lumber was able to expand its sawmill and pay off lingering timberland debts. In addition, the company was able to finish construction of a $7 million densified wood fuel (pellet) mill. The pellet mill’s fiber sources come in large part from U.S. Forest Service stewardship contracts to thin surrounding fire-prone Federal forests, and conversion to pellets reduces use of fossil fuels and associated impacts on climate. Finally, Ochoco Lumber has been able to retain all 103 of their employees, bringing on an additional 11 for the biomass facility,  and has increased employment in Grant County, indirectly, through logging contracts.

“Over the past eight years, we have had the opportunity to invest in the accelerated restoration of priority watersheds in our forests utilizing collaboration, stewardship contracts, and the removal of biomass fiber,” Daucsavage said of the partnership. “This work has improved the unhealthy, fire-prone landscapes of our national forests.”