Rough & Ready Lumber, a family-run, 92-year-old company, announced today that it is reopening its small-diameter log mill, bringing 67 much-needed jobs back to Southern Oregon. Ecotrust CDE, a subsidiary of Ecotrust, is directing federal and Oregon New Markets Tax Credits (NMTC) resulting in net cash of about $4 million to reopen the shuttered mill. Business Oregon is providing a $1 million loan with flexible terms to aid in the refinancing and upgrade of the mill.
Citing uncertain supply from surrounding federal forestlands, Jennifer and Link Phillippi, third-generation owners of Rough & Ready, closed their conventional sawmill in April 2013. The closure put 85 people out of work in an already distressed area of Josephine County, where the poverty rate has reached at least 30% and unemployment at least 15% in recent years.
In addition, the loss of sawmilling capacity previously provided by Rough & Ready’s mills had significant impact on private and public landowners, who were forced to sell pine logs at far lower prices.
The region also has an acute need for a small-diameter mill and a cogeneration plant to support forest management plans designed for fire risk reduction and other forest health measures.
With the New Markets Tax Credit infusion, Rough & Ready will reopen its small-diameter log mill, returning 67 permanent direct jobs, spurring much needed economic stimulus throughout the region, and re-establishing the only operating sawmill in the county.
“Maintaining mill infrastructure is critical to the health of forests and communities of rural Oregon,” says Bettina von Hagen, Managing Director of Investments and Community Engagement at Ecotrust CDE. “Without local mill infrastructure to process logs, thinning of private and public forests – urgently needed to restore forest health and reduce fire risk – is not commercially viable. This new financing will allow Rough & Ready to reopen and upgrade its small diameter mill, providing infrastructure for forest management and much needed jobs now and in the future.”
Without NMTC financing, Rough & Ready planned to auction off the shuttered mill’s equipment. With this much-needed capital injection, the company will be able to modernize the mill, to make it more efficient and productive. The upgrades will allow the company to better process smaller diameter logs, an approach better aligned with the region’s wood supply and an emphasis on thinning forests for improved health.
“Our family is excited to turn a new page in our company’s history and bring back an upgraded mill,” says Rough & Ready owner Jennifer Phillippi. “Rather than avoiding risk and auctioning off the mill, we decided to analyze manufacturing opportunities and design a mill that better fits the local wood supply and political climate. Our roots in the community we treasure have driven us to pursue a revitalization of the sawmill. Significant support from Ecotrust and the Governor gave us the confidence and ability to move forward.”
She added: “The Illinois Valley community needs a lift, and by leveraging this new financing, we can get people and forests back to work.”
George McKinley, executive director of the Southern Oregon Forest Restoration Collaborative, says: “Forest restoration that reduces the risk of fire and improves forest health is a great thing. To accomplish those goals, we need viable forest products businesses like Rough & Ready. Having their improved small-log mill back online is welcomed.”
New Markets Tax Credits program delivers much needed economic stimulus to Oregon’s distressed rural communities
The federal New Markets Tax Credit program, established by Congress in 2000, promotes investment in underserved communities by allowing taxpayers to receive a 39 percent credit against federal income taxes over seven years for making equity investments in community development entities such as Ecotrust CDE, which in turn make investments in qualifying businesses. In 2012, Oregon approved a companion state NMTC program, also called the Oregon Low Income Community Jobs Initiative, providing a 39 percent tax credit against state taxes to spur investment in Oregon businesses in distressed communities. Ecotrust CDE assisted with the financing of Rough & Ready, and accessed both the federal and state programs to deliver a combined federal and state allocation, resulting in approximately $4.0 million in net proceeds for needed mill investments. JP Morgan Chase participated as the tax equity investor.
Since 2003, Ecotrust CDE has received a total of $167 million in NMTC allocations, which have been deployed throughout the Northwest in underserved communities to spur job creation and innovative new business ventures. This latest investment in Rough & Ready builds on several prior investments to improve mill infrastructure and restore a viable forest products industry across the state, including a 2010 investment in Ochoco Lumber Company to refinance and stabilize the last remaining mill in John Day, Oregon and to construct a new pellet fuel facility there. NMTC investments were also made in an affiliate of Roseburg Resources to fund mill improvements and enhance financial stability at eight of its mills during the worst of the recent downturn, which hit Northwest sawmills particularly hard.
Mill infrastructure is essential for forest health and shifting public lands management
Growing public recognition of deteriorating forest health in fire prone regions like the Illinois Valley and new proposals for actively managing public lands could mean more log supply from Oregon’s federal lands. However, forest health initiatives won’t be viable unless there is mill infrastructure to process the timber. A study completed by the Southern Oregon Forest Restoration Collaborative and commissioned by the Oregon Gov. John Kitzhaber’s office found that there is currently enough standing timber outside of environmentally sensitive areas on federal lands within two hours’ haul of the Rough & Ready site to keep it working for twenty years. That would complement the mill’s supply from private landowners.
Mill reopening earns bipartisan praise from Northwest political leaders
Senator Ron Wyden:
“It is always good news when jobs are restored in economically hard-hit areas of the state, but it is especially good news when those jobs are in the timber industry. Credit goes to Governor Kitzhaber and to Ecotrust for their efforts on this project and on behalf of the Josephine County economy. My hope is that we can create more good news with the passage of an O&C bill that will create jobs in the woods and mills of western Oregon by increasing the harvest in a sustainable way while protecting fish, wildlife, water quality and the wilderness areas Oregonians treasure.”
Governor John Kitzhaber :
“It is a great day for Southern Oregon, and for the whole state, when we can celebrate the reopening of a family-owned business that provides family-wage jobs for its employees. We must continue to find a balance between ensuring a healthy timber industry and protecting our forests for the many benefits they provide. The people of Cave Junction and Southern Oregon are willing to meet this challenge head-on. I am here to support them in any way I can.”
Congressman Greg Walden:
“Today’s announcement from Rough and Ready is good news for working families in southern Oregon. To make this last, we need to change the law and fix broken federal forest policy so that we can bring back stable, family-wage jobs, reduce the risk of wildfire, and provide certainty for local services like roads, schools, and law enforcement.”