Read as much as you want on BostonGlobe.com, anywhere and anytime, for just 99¢.

Turning federal tax credits into rural jobs

A Maine financial company has achieved mastery of a federal program to create jobs in communities that need them the most

One of CEI’s largest projects is nearing completion in Berlin, N.H. Converting an old paper mill into a power plant has already created 560 construction jobs. Once completed, the plant should also help keep independent loggers, truckers, and foresters afloat by giving them a new market for their scrap timber.

FRED FIELD FOR THE BOSTON GLOBE

One of CEI’s largest projects is nearing completion in Berlin, N.H. Converting an old paper mill into a power plant has already created 560 construction jobs. Once completed, the plant should also help keep independent loggers, truckers, and foresters afloat by giving them a new market for their scrap timber.

BERLIN, N.H. — Rising from the heart of this old paper-making town, a biomass-fueled power plant is reclaiming the shambles of the shuttered pulp mill, creating hundreds of construction jobs, saving hundreds more forestry jobs, and providing a reliable, low-emissions source of electricity for northland utilities.

Some 75 miles to the southeast, a new factory in Brunswick, Maine, will soon begin production of high-tech surgical dressings. The Swedish firm that owns the factory recently held its first job fair, seeking 50 maintenance technicians, production workers, and engineers for the gleaming 79,000-square-foot facility.

Continue reading below

In Vermont, meanwhile, a state-of-the-art dairy plant near Brattleboro is churning out freshly fermented Greek yogurt at a rate of 202 6-ounce cups per minute, tripling production since 2011 and more than doubling its expected employment.

Connecting these incongruent enterprises is a low-profile financial firm in Portland, Maine, that has achieved almost Zen-like mastery over the art of using an obscure federal tax credit program to spur private investment in economically distressed communities. CEI Capital Management LLC is today the nation’s largest seller of so-called New Market Tax Credits, using them to finance 76 projects across the country and create nearly 12,000 jobs in places that desperately need them.

Founded a decade ago, the profit-making company combines social and environmental responsibility with hard-nosed financial analysis and a strategy that focuses on markets with few competitors. To date, CEI Capital has allocated more than $850 million in new market tax credits to ventures ranging from a eucalyptus plantation in Hawaii to a green hotel in Maine’s remote potato country.

FRED FIELD FOR THE GLOBE

CEI Capital Management buys federal tax credits and sells them to lenders to secure financing for projects in economically distressed rural areas. Projects have included turning an old New Hampshire paper mill into a “green” power plant.

Continue reading it below

“The project has to make money and create jobs,” said chief executive Charles J. Spies III, explaining CEI’s philosophy. “It must benefit the community overall. And it must be environmentally sustainable.’’

CEI Capital was spun off by one of Maine’s best known nonprofit community development groups, Coastal Enterprises, to take advantage of new market tax credits, an economic development initiative launched by the US Treasury Department in 2000. The profits earned by CEI Capital through fees and commissions are channeled back to Coastal Enterprises to support its programs, such as loan funds for small businesses.

‘What we’re always looking for are businesses that will benefit the community at large.’

Quote Icon

The Treasury authorizes CEI Capital and roughly 300 similar entities to sell the tax credits to banks and other private investors, providing incentives to finance businesses and projects in communities where capital — and jobs — are scare. The credits reduce risk by giving investors a tax write-off.

Treasury has awarded $36.5 billion of new market tax credits over the past 13 years, most recently distributing $3.5 billion in credits to 85 organizations last month. CEI Capital once again emerged with the largest single allocation, $80 million.

One reason: While other outfits jostle over similar turf in blighted city neighborhoods, CEI Capital focuses on rural areas, where poverty is just as pernicious, but typically less visible.

One example is Vermont’s fast-growing Commonwealth Dairy, a maker of specialty yogurts, and the inspiration of two young entrepreneurs, Thomas Moffitt and Ben Johnson.

“We realized yogurt consumption was increasing but that supplies of yogurt were pretty stagnant,’’ recalled Moffitt. “It was an ‘Aha!’ moment.’’

It was also 2008, when stock markets were crashing and financing had dried up. Enter CEI Capital. The firm not only offered $3.9 million in tax credits, but also did a thorough analysis of the proposal, pronouncing it worthy of investment. That convinced banks they should pony up $10 million and helped attract additional financing from other sources.

Today, the plant employs 120 workers making nonfat, Greek yogurt and buys 125 million pounds of milk from local dairy farms.

“The tax credit in itself was critical,’’ said Moffitt, Commonwealth Dairy’s president. “But what mattered even more was that [CEI’s support ] gave us huge credibility. Lenders now took us seriously.’’

CEI Capital, with 17 employees, operates from an office overlooking Portland’s harbor. Its staff of accountants, financial analysts, and economic development specialists not only selects the projects the firm will back, but also monitors the investment for seven years to insure the businesses meet commitments to lenders and communities.

Spies, who previously led the Finance Authority of Maine and National Association of Seed and Venture Funds, brings a special expertise to CEI Capital. An entomologist by education, he began his career as a forester, but was soon drawn to projects aimed at making forest industries economically viable and environmentally sustainable.

This knowledge and experience helped CEI Capital establish its niche in rural development, since forest products are critical to so many parts of rural America. “We put 70 percent of our effort into rural regions,’’ said Spies.

One of CEI’s largest projects is nearing completion here in Berlin — “The City That Trees Built.” When more than a century of paper making ended in 2006 with the closing of the last pulp mill, “it really tore the heart out of the place,’’ recalled Carl Belanger, one of 250 employees who lost jobs then.

The stricken community rallied around a proposal to transform the mill’s few physical assets — basically, a boiler and towering smokestack — into a $275 million electrical generating station. Cate Street Capital, a Portsmouth company that invests in “green” technologies, became interested in backing the project, but hesitated at the financial risk.

Enter CEI Capital — again. CEI offered an $8.1 million tax credit that allowed banks and other investors to provide low-interest financing to Cate Street. That made the project work.

“The tax credit was make or break for us,’’ said John R. Halle, chief executive of Cate Street as he struggled to make his voice heard over the roar of heavy equipment and pneumatic drills at the plant site.

The project created 560 construction jobs, but the real payoff will come when the Burgess Biopower plant begins operating in December and consuming an annual 750,000 tons of tree scrap and slash — biomass. This new market for scrap timber will help an estimated 350 loggers, truckers, and other forest workers keep their small, independent businesses afloat.

“What we’re always looking for are businesses that will benefit the community at large,’’ said Spies. “It’s satisfying to find ways to do serious business and do some good at the same time.’’

When the Navy abandoned its air station in Brunswick, Maine, earlier in the decade, there were predictions of doom and gloom over the loss of some 6,000 civilian and military jobs and more than $100 million in economic activity. But the Midcoast Regional Redevelopment Authority pressed vigorously to entice new businesses to the sprawling site.

A prime catch was Molnlycke Health Care of Gothenberg, Sweden, the world’s second-largest maker of sophisticated surgical dressings, wound compresses, and other medical textiles.

In 2010, the company was considering whether to enlarge a plant in Finland, build a new plant in eastern Europe, or expand in Maine, where it has operations in Wiscasset. It finally chose Brunswick, in large part because of a tax credit from CEI Capital that reduced construction costs by 10 percent.

“The tax credit was never a total deal maker or breaker for us, but it was an important inducement’’ said James Detert, Molnlycke’s director of development for the Americas. “It’s a good program. We’re here partly because it works.’’

Colin Nickerson can be reached at nickerson.colin@gmail.com.
Loading comments...
Subscriber Log In

You have reached the limit of 5 free articles in a month

Stay informed with unlimited access to Boston’s trusted news source.

  • High-quality journalism from the region’s largest newsroom
  • Convenient access across all of your devices
  • Today’s Headlines daily newsletter
  • Subscriber-only access to exclusive offers, events, contests, eBooks, and more
  • Less than 25¢ a week
Marketing image of BostonGlobe.com
Marketing image of BostonGlobe.com