Wisconsin gov: Kestrel relocating to Superior

Aircraft company to locate in Wisconsin, not Maine|
Wisconsin Gov. Scott Walker announced Monday that Kestrel Aircraft Corp. has agreed to establish its manufacturing operations and headquarters in Superior, creating up to 600 new jobs there that had once been envisioned for Maine.

Kestrel began talks with other states last year when the company was not able to procure the amount of financing it needed.

“I am pleased with the aggressive package we have put forth in conjunction with strong local support to make this major job creation contribution to Superior,” said Walker in a release. “This relocation will be a huge boost to the Superior-area economy.”

Company officials did not respond to a call for comments.

George Gervais, Maine’s commissioner of the Department of Economic and Community Development, said Monday that state officials had been working for about five months to help Kestrel close a gap in financing it had identified.

Gervais noted that while Kestrel envisions growing a majority of its manufacturing jobs in Wisconsin, the company will maintain the finishing of the planes at Brunswick Landing, with up to 100 jobs in Maine. The planes will be delivered here for the final part of the manufacturing process, he said, and the people buying them will travel to Maine to pick them up.

And the state will be looking for opportunities to grow more Kestrel jobs here, he said.

“We’ll still be here if Wisconsin has a misstep,” Gervais said.

Kestrel’s decision to go with Wisconsin illustrates the increasingly intense competition between states for jobs, with a range of incentive packages being floated to attract business across state lines.

According to the release, the Wisconsin Economic Development Corp. and the Wisconsin Housing and Economic Development Authority worked with local officials to bring Kestrel’s expansion to Superior.

The WEDC will create an “Enterprise Zone” in Superior to provide $18 million in tax credits to Kestrel, will provide a $2 million loan and is working with the housing and economic development authority to secure a $2 million State Small Business Credit Initiative program loan. The repayment of the WEDC loan and eligibility of tax credits are based on the capital investment, worker training and job creation by the company.

In addition, the housing and economic development agency will work with Kestrel to obtain a $30 million allocation of federal New Markets Tax Credits for the Superior project.

“This combined effort by Wisconsin Economic Development Corporation, Wisconsin Housing Economic Development Authority, the city and county shows how serious we are about Wisconsin’s commitment to supporting business development and the creation of good-paying jobs,” said Paul Jadin, CEO of the WEDC.

Kestrel already has some strong Wisconsin ties. Company founder Alan Klapmeier is a native of the state and co-founded Cirrus Design there and served as its chairman from its start in 1984 to 2009.

But the company appeared interested in Maine — in particular with the facilities at the former Brunswick Naval Air Station, now known as Brunswick Landing.

As late as last week, Maine’s Gov. Paul LePage stressed that the state and officials with the Midcoast Regional Redevelopment Authority were still working to land the deal.

“The administration, state agencies, and Midcoast Regional Redevelopment Authority have been steadfast in their commitment to provide the available resources for this project. The Maine team has put forth a very comprehensive and competitive financial package for Kestrel. We are ready to make this happen and have been for many months,” LePage said in a press release on Friday.

The package offered by Maine included:

• A $300,000 Community Development Block Grant already in the hands of Kestrel.

• A lease write-down rate worth $250,000 per year.

• Exemption of local property taxes worth $105,000 per year.

• Commitment of $750,000 in direct building improvements — $117,000 of that already has been invested.

• Commitment from the Midcoast Regional Redevelopment Authority to issue $10 million in tax revenue bonds.

• Deferring rent payments until New Markets Tax Credits become available.

Kestrel had signed a 10-year lease for part of a hangar at Brunswick Landing, and has about 25 employed in Brunswick. Last May, the company learned it would only receive $20 million in New Market Tax Credits from CEI Capital Management, though it had hoped for approximately $80 million in the credits.

That wouldn’t be $80 million cash-in-hand. Rather, the sale of the credits to companies seeking tax breaks would result in about $22 million in cash, and the remaining $60 million would be covered through some form of debt, such as bank loans or equity from other sources.

The DECD’s Gervais said that when he learned of the gap in financing, he began looking at other ways to fill it. The DECD lined up loans for Kestral that would be backed by the Finance Authority of Maine, but was never able to move ahead on that part of the deal because Kestrel never provided the state with up-to-date financials and applications for those loans, said Gervais.

The state also found out-of-state groups that could and would allocated New Markets Tax Credits to Kestrel, when they became available early this year, said Gervais.
In the end, said Gervais, Kestrel chose not to wait.

“The company is looking for what it needs to help the company move forward,” he said. “It’s just how quickly things can move.”

Gervais said one big difference is in Maine, the organization that has been allocating the federal New Markets tax credits is CEI, and state government has no control over that non-profit. In Wisconsin, he said, a quasi-state agency whose head is directly appointed by the governor allocates those credits, so the financing work they do is more aligned with where the state’s goals. In this case, Wisconsin Housing and Economic Development Authority will work with Kestrel to obtain a $30 million allocation of federal New Markets Tax Credits.

If an organization that Maine state government had more control over could allocate some of the New Market Tax Credits, it might be easier to put together details in areas that are critical, said Gervais.That’s something the administration is discussing, he said.

Tom Thieding, communications manager for Wisconsin Economic Development Corp., noted in an earlier report that Wisconsin has become more aggressive in incentive programs. In the current budget, lawmakers added $40 million to economic development support programs, doubling the previous amount to $80 million. The state uses income tax credits, refundable tax credits and loans, some of which are forgivable if job targets are met.