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Case Study

New Market Tax Credits Create Jobs, Keep Food Manufacturing in MA

Objective:This case study takes a detailed look at how New Market Tax Credits helped to keep a food processing company in Brockton, MA – one of the state’s poorest communities – and create more than 50 jobs for low-income residents in the process. 
 
Major Participants: 
The Life Initiative, MassDevelopment, Sovereign Bank, Massachusetts Housing and Investment Corporation, Commonwealth of Massachusetts, City of Brockton 
 
Background: Raised in Brockton, Ed and Cindy Byers were determined to invest in the local community when opening  Cindy’s Kitchen  back in 1999. The couple hired a diverse workforce, nearly all of whom are inner city residents, and provided good wages and benefits. The gourmet food purveyors (of mostly salad dressings and dips) went above and beyond for its employees: Cindy and Ed would drive employees to and from work if they did not have access to personal vehicles, offered ESL classes on site and assisted employees with childcare. So when the manufacturing company outgrew its Belmont Street location and needed to find a new home, everyone was committed to keeping Cindy’s Kitchen in Brockton—but traditional financing wasn’t enough. 
 
How it Happened: 
The Byers contacted Massachusetts-based  The Life Initiative  (TLI), a $100 million community investment fund created by local life insurance companies. TLI introduced the Byers to the New Market Tax Credits (NMTC) program—a federal program established by Congress in 2000 to spur new or increased investments in businesses or real estate projects in low-income communities. Often an underutilized resource, NMTCs permit individuals and corporate investors to receive a tax credit against their federal income tax return in exchange for making equity investments in Community Development Entities (CDE). In the case of Cindy’s Kitchen, the Massachusetts Investment Corporation was that CDE, which offered the company a $2.1 million financing package using NMTCs. Sovereign Bank and MassDevelopment provided $750,000 in low-interest loans through the use of their shared NMTC fund. With an additional $1.6 million loan from TLI, Cindy’s Kitchen was able to rehab and then relocate to a building three times larger, at 40 Industrial Boulevard in Brockton. 
 
Results for Local Economy: Since its 2007 move, the company has increased revenues from $6 million to $10 million and more than doubled its staff by adding 54 new positions. In the coming years, Cindy’s Kitchen expects to add an additional 100-200 new positions for Brockton locals. They are especially committed to hiring hard-to-hire residents, such as those with criminal backgrounds, those who were formerly homeless or those who have physical disabilities. Nearly 99% of employees are minorities. 
 
The new jobs created by Cindy’s Kitchen are helping to grow the food cluster. As ICIC research indicates, and the Cindy’s Kitchen case study confirms, the food industry is booming, accounting for about 11% of the U.S. economy and employing 17 million people. Inner cities’ central locations, access to multi-modal transportation hubs and under-utilized manufacturing and warehouse space can all be leveraged by companies in the food cluster—just like Cindy’s Kitchen in Brockton. One of the reasons Cindy’s Kitchen has been so successful is its approach to hiring: 60% of workers in the food industry have a high school diploma or less, making food cluster jobs uniquely accessible to inner city residents. By hiring local residents, Cindy’s Kitchen has created a dedicated workforce with little employee turnover. 
 
Remaining Challenges: In spite of the Great Recession, Cindy’s Kitchen has experienced another bout of growth and now needs to expand once again. This $5 million expansion project at the same site has been less smooth: Ed Byers and the Brockton Planning Board have tussled over how the project addresses storm-water flow. In September 2013, the Planning Board voted 4-1 to reject the expansion project. Just one month later, after several neighboring cities and towns expressed interest in recruiting Cindy’s Kitchen, the Planning Board changed its course and approved the expansion. Though the Byers have added a 700-square foot commercial kitchen to the site, they have put the larger 30,000 square foot expansion project on hold. 
 
Lessons Learned: Learning to be patient has been critical for the Byers. After the latest expansion project went awry with the Planning Board, the owners continued moving forward to reach a resolution with the City. Ultimately, a month after the plans were rejected, the City approved of the project. 
 
Second, the company’s commitment to hiring and investing in local residents as employees—Brockton has a poverty rate of 20%, more than 6.5% higher than the statewide average—created goodwill with the community. With all that Cindy’s Kitchen does for the community, nobody wanted risk the company leaving. When other cities expressed interest in Cindy’s Kitchen relocating, the City of Brockton ramped up efforts to keep the headquarters put. 

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