Kestrel picks Wisconsin
“We’ve decided to do the manufacturing of the Kestrel aircraft in Wisconsin,” Kestrel chief executive officer Alan Klapmeier told The Times Record late Sunday night, after flying to Superior for an announcement this morning with Wisconsin Gov. Scott Walker.
But Kestrel officials said today that 28 employees already based at Hangar 6 at Brunswick Landing will remain there, and Kestrel plans to eventually expand its Brunswick work force — currently with a payroll of “over $2 million” — to 100 positions by 2014.
State and local officials said today that they were disappointed by Kestrel’s decision to manufacture its new line of airplanes in Wisconsin, in part because agreements were pending that would have provided Kestrel with the gap financing Klapmeier said he needed to operate the manufacturing plant in Brunswick.
“The last piece we needed to get to the finish line was information from Kestrel so we could rush through the financing package,” Maine Economic and Community Development Commissioner George Gervais said today. “Unfortunately, lending can’t be done without that financial information.”
However, state and local redevelopment officials remain hopeful that the jobs now in Maine and those Kestrel says will follow will provide “opportunity” at Brunswick Landing.
At a July 2010 event at the Augusta airport, Klapmeier joined then-Gov. John Baldacci to announce in $100 million project in which Kestrel would build its new turbo-prop plane in a hangar at the former Brunswick Naval Air Station, now called Brunswick Landing.
At the time, Klapmeier said he planned to create more than 300 jobs, and possibly as many as 600.
But in October 2011, Klapmeier said he’d had difficulty securing financing he expected when he chose Maine for his project. Terms of the lease include that Kestrel would attempt to secure up to $90 million to support its aircraft design, development and production operation, and that the Midcoast Regional Redevelopment Authority (MRRA) would work with Wiscasset-based CEI Capital Management and others to facilitate project financing, using the complicated federal New Markets Tax Credit Program.
In a statement released Friday, Gov. Paul LePage said although Maine had been ready “for many months” with “a very comprehensive and competitive financial package for Kestrel,” the state still had not received updated financial information from the company.
“All that is left is for our team to receive updated and thorough financial information from Kestrel,” LePage said. “As governor, it is my responsibility to ensure prudent use of Maine’s business development programs.”
On Friday, LePage outlined a financing package for Kestrel that would have included, in addition to a $ 300,000 Community Block Development Grant already granted, a commitment of $ 750,000 in direct building improvements — $117,000 of which has already been invested; a lease write-down rate valued at $ 250,000 per year; exemption from local property taxes valued at $105,000 annually; deferring rent payments until more New Market Tax Credits ( which allow a business to leverage private financing) become available; and a commitment from MRRA to issue $ 10 million in tax revenue bonds;
Klapmeier said Sunday that LePage’s statement was “very accurate,” and he added that LePage, Gervais, MRRA Executive Director Steve Levesque and Sen. Stan Gerzofsky, DBrunswick, “have been working very hard on this. They tried very hard to figure out how to make this work.”
But he said that the financing package proposed in the summer of 2010 “by various parties, all nodding their heads,” simply didn’t happen. “There was a proposal and the proposal wasn’t completed. A number of parts didn’t work out as planned.”
LePage on Friday said state officials “ have followed through with the commitments the state agreed to provide to Kestrel,” and offered additional assistance “when Kestrel’s expectations of financing from (CEI) were not met.”
Wisconsin, “where I went to school and where I started Cirrus,” ultimately offered the most attractive package, Klapmeier said.
That offer, according to Klapmeier, includes allocating $90 million worth of New Market Tax Credits, including $30 million in immediate tax credits, with $30 million more identified, “ and they will work with us to do $30 million after that.”
In addition, he said, the state of Wisconsin, city of Superior, Douglas County and a local economic development authority will make a direct loan of $ 7.15 million to Kestrel.
Terms of Kestrel’s agreement in Superior require the company to create 300 to 600 jobs there, Klapmeier said, Sunday, “I think it grows a lot bigger than this, in other places as well.”
But not all of the new jobs will be created in Wisconsin, and “ Maine ends up still being a very big part of the business,” Klapmeier said.
“I know the governor and Steve (Levesque) will be disappointed,” Klapmeier said. “Obviously, we are as well. But we recognize that this will be better than having no (Kestrel) jobs in Maine. We average more than $60,000 per job, and that should count in everybody’s book as a pretty good deal.”
“Certainly we’re disappointed,” Levesque said today. “We worked real hard to try to make this happen in Maine. I think the Maine team pulled together to try to do as much as we could do make it work, and unfortunately ... the fulfillment of the full project wasn’t realized. Hopefully, we can continue to grow them here, and there will be other opportunities down the road to work with that company and others.”
Gervais said that with 100 jobs anticipated at Brunswick Landing, “Kestrel will still have a presence. Their sales will be happening at the base, and delivery of the final product will be at the base. There’s still plenty of opportunity at the base. I hope the best for Kestrel, and I hope they see the value of operating there.”