SmartLam Weighing its Future in the Flathead Valley

Columbia Falls manufacturer considering other states to build world’s largest cross-laminated timber development site

By Dillon Tabish
Casey Malmquist, general manager of SmartLam, speaks with U.S. Sen. Jon Tester, left, and Columbia Falls City Manager Susan Nicosia on July 15, 2016. Greg Lindstrom | Flathead Beacon

Since emerging in Columbia Falls four years ago as the nation’s first commercial manufacturer of cross-laminated timber products, SmartLam Technologies Group has followed an exciting trajectory defined by enormous growth and even greater potential.

Last week the local company reached a sizable milestone by receiving certification for its engineered wood products from the American National Standards Institute, the leading organization that sets health and safety standards for business products and services in the U.S. The ANSI approval, achieved by subjecting SmartLam’s products and manufacturing processes to rigorous tests and analysis, further distinguishes the company as a trusted developer in a flourishing market gaining traction in the U.S.

“The validation of this certification is a point of pride among our employees, but more importantly a verification for our customers,” Casey Malmquist, president and general manager of SmartLam, said. “As CLT use continues to grow across the United States, certification underscores the viability of this material as a future mainstream construction practice.”

Yet the achievement comes at a time of increasing consternation as SmartLam wavers on its future plans in the Flathead Valley.

SmartLam’s plans to expand from its 40,000-square-foot manufacturing facility in Columbia Falls to a site upwards of 120,000 square feet have been delayed in recent months as the company weighs its options elsewhere, according to company officials.

SmartLam, which previously expressed interest in building the largest CLT manufacturing site in the world in the Flathead Valley, has attracted suitors in states across the U.S., trying to entice the rising business away from Montana. The company has hired a national firm to analyze the benefits and drawbacks of building its new facility here or in another state.

“At this point, we want it to be here. But we’re getting courted really hard to go to some other areas. We’ve had some serious inquiries to locate elsewhere,” Malmquist said.

“My heart wants us to be in Montana. This is where it started. We live here. I want Montana to be the capital of CLT. We have everything right to do it. We just have to figure out how to make it work.”

Malmquist said the company is considering building its new manufacturing site in Montana, Idaho, Washington and three states in the Southeast.

“We’re in the final selection stage right now,” he said.

Most recently, SmartLam expressed interest in developing its facility in Columbia Falls’ 110-acre industrial park, which would require the company pay for infrastructure and other costs in the largely undeveloped site. An estimated $1.2 million is needed to add sewer and utilities to the site along with roads and other infrastructure. Columbia Falls has worked to spur development at the industrial park by annexing the property along Railroad Street and establishing a targeted economic development district (TEDD) that would help with infrastructure needs.

Malmquist said finding the proper place to build a site is contingent on several factors that may or may not be more feasible in Montana.

The analysis firm is studying the characteristics of each state’s local labor force, timber supply, proximity to the national market and the business and tax climates, Malmquist said.

The U.S. Department of Agriculture awarded a $250,000 grant to SmartLam in April 2015 through the Wood Innovations Grant Program, which supports companies that use wood products as a renewable energy source and as a building material.

SmartLam has hired over 30 people and has planned to significantly boost its staffing with its planned expansion.

Yet hurdles have emerged, according to Malmquist.

“Montana has a business equipment tax, and we’re very equipment-intensive,” Malmquist said. “I’ve got $15 million of equipment on order and that’s taxed at a rate of 6 percent (roughly $900,000). There are some abatements in there.”

Malmquist said other states have made moves that increase his company’s chances of succeeding, such as Washington and Oregon, where the legislatures have passed laws that support building projects with CLT. Oregon is home to the nation’s other CLT manufacturer, D.R. Johnson Wood Innovations, which has quickly grown into a certified business gaining traction in the market. Other states have incentivized building in industrial parks by reducing startup costs, Malmquist said.

The company has also hoped to benefit from the nation’s New Market Tax Credit program, which provides tax credit incentives to investors for equity investments in low-income communities.

“We were on the track for getting an allocation from this program, then there was a delay at the federal level that pushed it back to October,” Malmquist said. “Now the announcement for the allocation won’t happen until October and we’re waiting on that.”

Through the new market tax credit program, SmartLam could receive a 20 percent subsidy to build its new facility in Columbia Falls, which would be equivalent to roughly $4 million, Malmquist said.

“That’s huge. That is the gap we’re looking at between bank financing and what my current investment group can do,” he said. “It closes that gap. Without that, it’s going to be hard to do.”

Malmquist said several other factors are in play, including timber supply. At full production, SmartLam produces more than 1 million board feet of CLT each month. The new facility would have the capability to utilize roughly 4 million board feet of lumber a month. SmartLam contracts with F.H. Stoltze Land and Lumber in Columbia Falls, as well as other regional timber companies for its wood products.

“We need to make sure we have a consistent timber supply here, which at times seems to be in question. And then the numbers have to work out; the cost, incentives, tax situation,” Malmquist said. “We’re working through it. We’re hopeful that the state can provide us some sort of pathway to make this whole. But the economics of this have to work out.”