It’s not every day that a company can help a community, help the earth and help itself all at once, then win an award into the bargain. But Honeywell International pulled this feat off with its project to use federal New Market Tax Credits—designed to encourage investments in low-income communities—to upgrade a Baton Rouge, La., plant to produce a new non-ozone-depleting refrigerant.
Michael Suriano, director of structured and project finance at the $37 billion global aerospace and performance materials company, says the aging South Works facility, part of Honeywell’s performance materials and technologies division, was in danger of closing because its main product—fluorine-based refrigerants and propellants, known to be destroyers of the crucial protective ozone layer in earth’s upper atmosphere—are being phased out globally.
The company had developed a safer replacement product, HFO-1234ze, but for cost reasons had planned to produce it either abroad or in a new facility somewhere else in the U.S. The move, Suriano says, would have eliminated 200 jobs in a community where unemployment is already 4.5 times the national average and 39% of the population lives below the poverty line.
A team that included tax, procurement and legal department staffers, plus the business unit’s controller and CFO, worked to obtain tax incentives from the Baton Rouge parish, as well as a New Market Tax Credit that could then be sold to investors to raise $8 million in upfront cash and $4.5 million in net after-tax benefits to finance the retooling of the South Works plant.
It wasn’t easy. “There were a lot of roadblocks and surprises,” Suriano says. “But we learned a lot by working through this project, and now we may be able to do bigger New Market Tax Credit-funded projects in the future.”