National New Markets Fund LLC, an affiliate of Los Angeles-based SDS Capital Group, invested $17.5 million of its New Markets Tax Credit allocation into Chanhassen, Minn.-based Bongards Creameries.
Bongards is a farmer-owned co-op that relies on its 267 member farms (98% family farms) to provide milk for its cheese and whey products. As a result of the investment, Bongards’ milk intake capacity will increase by almost 1/3, from 4.1 million pounds per day to 5.4 million pounds per day.
The NNMF investment utilizes capital from the NMTC program, created by Congress in 2000 and administered by the U.S. Treasury Department. Investment groups, such as NNMF, compete to be selected to receive NMTC awards each year. The selected “allocatees,” in turn, sell the tax credits to institutional investors; the proceeds from the tax credit sale are then used as part of the investment into projects benefiting low-income communities, such as the Bongards’ expansion.
“The New Markets Tax Credit program has been and continues to be instrumental in our ability to provide the maximum value for the milk of our members, while ensuring we are building a cooperative that will be here for future generations,” said Bongards Chief Financial Officer, Chris Freeman. “The NMTC allocatees that have partnered with us understand the need to support our farmers and build for the future. They are wonderful partners in our mission of long-term success and service to our farmer owners.”
The Bongards project is critical to the dairy production industry in Minnesota. During the past five years, the industry’s processing capacity in the state has experienced little to no growth, while nationally the industry grew at 4.5% during the same period. Nationally, family farms have struggled to compete even with co-ops: Nearly 4 of every 10 dairy farms have disappeared in the last five years as small farms have struggled to compete with larger corporate operations, according to Agri-Pulse.
“The local economic benefit resulting from the Bongards expansion cannot be underscored enough,” said Deborah La Franchi, president, National New Markets Fund. “Family farms have truly struggled in America over the past decades. This NMTC financing enables more than 267 small and family-owned farms located in Minnesota to become more financially sustainable and to create more local employment. NNMF’s focus is to stimulate manufacturing projects, so we are proud to support Bongards’ growth through our NMTC investment.”
Bongards received the NNMF allocation as part of a complex $81 million New Markets Tax Credit financing package. Dudley Ventures is the investor purchasing the NMTCs from each of the participating NMTC allocatees: NNMF, Mascoma Community Development, Waveland Community Development, Rural Development Partners, and DV Community Investment.
