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RESOLUTION REGARDING THE SUPPORT OF A JOB CREATION FUND APPLICATION IN CONNECTION WITH CIRRUS DESIGN CORP.
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CITY PROPOSAL:
WHEREAS, the City of Duluth, Minnesota (the “City”), desires to assist Cirrus Design Corp., a corporation, which is proposing to redevelop a facility in the City; and,
WHEREAS, the City of Duluth understands that Cirrus Design Corp. (“Cirrus”), through and with the support of the City, intends to submit to the Minnesota Department of Employment and Economic Development an application for an award and/or rebate from the Job Creation Fund Program; and,
WHEREAS, the City of Duluth held a city council meeting on February, 14th 2022, to consider this matter.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DULUTH, Minnesota, that, after due consideration, the Mayor and authorized officials of the City of Duluth, Minnesota, hereby adopts the following findings of fact related to the project proposed by Cirrus and its application for an award and/or rebate from the Job Creation Fund Program and express their approval.
The City Council hereby finds and adopts the reasons and facts supporting the following findings of fact for the approval of the Job Creation Fund Program application:
1. Finding that the project is in the public interest because it will encourage the growth of commerce and industry, prevent the movement of current or future operations to locations outside Minnesota, result in increased employment in Minnesota, and preserve or enhance the state and local tax base.
a. This project will create 80 FTE jobs and retain at least 1,206 FTE positions by redeveloping the MRO and freeing up new facilities for their current operations.
b. Cirrus has over 600 employees that currently operate in four other states (ND, TX, TN, FL), and the use of JCF will assist in encouraging the Job retention and creation of new manufacturing Jobs in Minnesota on the Duluth campus.
2. Finding that the proposed project, in the opinion of the City Council, would not reasonably expected to occur solely through private investment within the reasonably foreseeable future.
a. The MRO facility was created for a very specific purpose and use to Maintain, Repair, and Overhaul (MRO) A320 heavy commercial aircraft. Cirrus has identified that in order for the MRO facility to meet their manufacturing needs, it will require substantial redevelopment and capital investments. The cost to retrofit the building is too high to move forward without public assistance.
b. The MRO facility has remained essentially vacant following AAR closing and their ceasing of operations in Duluth since May 2020.
c. DEDA has received very few inquiries from prospective tenants during the past 20 months.
d. The MRO facility has a high operating and maintenance expense profile of approximately $57,700 per month.
e. Federal Aviation Administration (FAA) limits the types of businesses that can secure long-term leases to operate on Airport Property.
f. In 2012 DEDA and other key strategic community stakeholders needed to provide over $10M in public business subsidies (in the form of forgivable loans and favorable low interest loans) to facilitate the recruitment of AAR and secure the commitment to a to a 4-year lease of the MRO facility.
3. Finding that the proposed project conforms to the general plan for the development or redevelopment of the City as a whole.
a. The project aligns directly with principles 1, 3, 5, and 6 of the 2035 Comprehensive Plan. This is also consistent with the Duluth Airport Authority’s 2040 Vision Plan, which sees the future use and access on the taxiway for the MRO to accommodate all sizes of aircraft.
4. Finding that the proposed project will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the redevelopment or development of the project by private enterprise.
a. Cirrus will repurpose a largely vacant building.
b. The expansion of Cirrus to the MRO Building as well as their retrofitting for increased production and research will strengthen Duluth’s overall aviation economy cluster that was adversely impacted by the economic downturn from COVID-19.
c. This expansion in production capacity by Cirrus will act as a catalyst and spur addition economic growth for the broader Arrowhead Region potential for a greater economic impact on the local businesses in Cirrus’ supply pipeline.
d. The Duluth Economic Development Authority is currently maintaining the building at a cost of more than $693,000 per year. Cirrus’ use of the building, those funds can be used for other economic development strategies.
Statement of Purpose
STATEMENT OF PURPOSE: The Duluth MRO Building was designed and operated for the maintenance, repair and overhaul of wide body (A320) heavy commercial aircraft. However, with the recent economic downturn resulting from the COVID-19 pandemic, AAR decided abruptly to close the Duluth MRO operation in May of 2020 that resulted in the elimination of over 240 jobs in Duluth. The DEDA owns the MRO building that has remained largely vacant and underutilized since that time. The City and DEDA have been seeking a tenant (or buyer) that could utilize the facility and redevelop the MRO building since ARR terminated their lease which became effective October 2020. Cirrus Design Corp. (“Cirrus”) is experiencing significant market growth and demand for their products and is evaluating the potential to expand their production capacity on the Duluth Campus. The MRO facility will provide the necessary space to support the Cirrus expansion plans here in Duluth. However, Cirrus will need to make significant and substantial capital investments across multiple facilities on their Duluth Campus. Project Costs will include moving support staff, research and development personnel and equipment, and investing to reconfigure their overall manufacturing operations through the redevelopment and re-purposing the MRO facility. These investments will contribute to the retention of the current 1,206 FTE positions and the creation of at least 80 additional positions. The cost of the project and retrofitting the MRO buildings is significant, and requires substantial public assistance to make it feasible.
The total cost of the project is expected to be approximately $7,000,000. The City will seek a Minnesota Investment Fund forgivable loan (MIF) from MN DEED of up to $500,000, and support Cirrus’s application in seeking a Job Creation Fund (JCF) forgivable loan for up to $1.5 Million, and private equity in excess of $3.5 Million, and the assistance provided for under this agreement which will include up to $600,000 in City property tax abatement along with $600,000 in property tax abatement from St. Louis County. In addition, a City Forgivable Loan of up to $300,000 for disposal of the FSSS foam fire suppression system if Cirrus elects to purchase the MRO facility.