National New Markets Fund, LLC, an affiliate of Los Angeles-based SDS Capital Group, has invested $17.5 million of its New Markets Tax Credit allocation into Chanhassen, Minnesota-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 one-third, from 4.1 million pounds per day to 5.4 million pounds per day.
The cumulative local employment impact of the Bongards expansion is substantial. While Bongards will add an estimated 22 new full-time jobs to its existing base of 143 employees, the impact on the member farms is much more sizable. By purchasing and processing more milk from its member farms into higher profit margin products, it is anticipated that the member farms will add up to 260 full-time farm jobs to their existing 1,000 employees.
One of these 267 farm co-op members underscores the importance of this processing expansion relative to their family-farm operations.
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 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.
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.