Title
RESOLUTION AUTHORIZING A DEVELOPMENT AGREEMENT WITH CIRRUS DESIGN CORPORATION RELATED TO THE CIRRUS COMPLETION CENTER EXPANSION.
Body
CITY PROPOSAL:
WHEREAS, Cirrus Design Corporation (“Cirrus”) wishes to expand its manufacturing and assembly capacity at the Duluth International Airport (“Airport”) to add manufacturing and painting capacity for its Vision SF50 personal jet and to expand and reconfigure its research and development facilities into its existing building facilities; and
WHEREAS, Cirrus will lease land at the Airport from the Duluth Airport Authority (“DAA”) upon which Cirrus has proposed constructing an approximately 68,000 square foot Cirrus Completion Center Expansion Project (“Project”) which is expected to be used for painting and finishing operations for Cirrus’s airplane product lines, including the new Vision SF50 personal jet; and
WHEREAS, Cirrus has requested financial assistance from the City consisting of a loan in a maximum amount of $8,150,000 which will be funded through the City’s issuance of its taxable General Obligation (“GO”) backed tax abatement bonds; and
WHEREAS, the City has determined that the interests of the citizens of the City of Duluth and the well-being and quality of life in the City of Duluth would be enhanced by nurturing and encouraging the Project.
NOW, THEREFORE, BE IT RESOLVED, that the proper City officials are hereby authorized to enter in a Development Agreement with Cirrus, substantially in the form of that attached hereto as Exhibit A hereto together with the City’s documents attached to the Development Agreement, pursuant to which the City agrees to loan Cirrus a maximum amount of $8,150,000 which will be funded through the City’s issuance of GO Tax Abatement Bonds, payable from Fund 412-030-5458 (Cirrus Building Fund, Finance, Payments to Developers).
Statement of Purpose
STATEMENT OF PURPOSE:
The Project involves construction at the Airport of a new building of approximately 68,000 square feet and related infrastructure and amenities which will be dedicated to painting and finishing operations for Cirrus’s airplane product lines, including Cirrus’s new Vision SF50 personal jet. The Project will also allow Cirrus to expand its manufacturing capacity sufficient to produce the Vision SF50 personal jet and expand and reconfigure its research and development facilities into its existing building facilities. Cirrus will be entering into a ground lease with the DAA for the building for a base term of 40 years with a 10-year option term along with 6 additional 5-year option terms. Construction will start in the spring of 2016 and is anticipated to be completed in the fall of 2016. All Project contractors will pay their workers prevailing wages, and a project labor agreement will be required for the Project.
The maximum amount of Project financing will be not more than $12,650,000 and will consist of: 1) a 15-year loan from the City which will not exceed $8,150,000 funded through proceeds of the G.O. backed tax abatement bonds; 2) a $4 million 2-year forgivable loan from the City to Cirrus funded with a DEED Minnesota Investment Fund grant which is the subject of a companion resolution; 3) a possible DEED Public Infrastructure Grant or other available grant programs which, if awarded, will reduce the amount of the City loan to the extent of the awards; 4) a $500,000 Project contribution from Cirrus; and 5) other funds of Cirrus necessary to pay for any cost overruns or change orders. Under the Development Agreement, Cirrus also commits to investing not less than $3,301,989 in fixtures and equipment for the building.
The City and DEED will take a shared first pro rata mortgage on Cirrus’s interest in the building and the ground lease until the MIF requirements have been satisfied (2 years), at which time the City will have a first priority position for the remainder of the 15-year term or until the City financing is re-paid in full if re-paid early. Under the Development Agreement, Cirrus agrees to locate and maintain its Vision SF50 personal jet production and corporate research and development facilities at the Airport and maintain its current North and South American and European production of its existing product line, as modified from time to time, in Duluth, for a period of at least 20 years. Additionally, Cirrus will provide corporate guaranties from Cirrus’s parent company and other related and affiliated entities pursuant to which the guarantors guaranty to the City the payment and performance of the debt, liability and obligations of Cirrus to the City and Cirrus’s performance under the Development Agreement.
The City’s loan to Cirrus is a business subsidy under Minnesota Statute 116J.993 et. seq. because the loan will be provided to Cirrus at a rate below those commercially available. Under the Development Agreement, 12 months after issuance of the certificate of occupancy for the building (the “CO”), Cirrus will have created 75 new jobs, 60 of which must pay a minimum of $12.37 per hour and 15 of which must pay a minimum of $14.00 per hour. Twenty-four months after issuance of the CO, Cirrus will have created 150 new jobs, 120 of which must pay a minimum of $12.37 per hour and 30 of which must pay a minimum of $14.00 per hour. The new jobs are in addition to the 675 Cirrus jobs at and near the Airport as of June 13, 2015. The new jobs must have full benefits and a benefit package (non-mandated benefits) worth a minimum of $3.50 per hour. The 150 new jobs must be maintained for a period of 3 additional years.
The public purpose of the financial assistance is the creation of new jobs that offer stable employment and high quality wages and benefits, the contribution to the economic diversity of the City by growing the City’s current aviation industry, the enhancement and diversification of the City’s tax base, the stimulation of the development of underutilized land, and the achievement of development on sites which would not be developed without business subsidies assistance.