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RESOLUTION AUTHORIZING A TAX ABATEMENT WITH CIRRUS DESIGN CORP. FOR THE REDEVELOPMENT OF THE FORMER MRO FACILITY AT 4600 STEBNER ROAD
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CITY PROPOSAL:
BE IT RESOLVED, by the City Council (the “City Council”) of the city of Duluth, St. Louis County, Minnesota (the “City”), as follows:
Section 1. Purpose and Authorization.
1.01 The City, pursuant to the provisions of Minnesota Statutes, Sections 469.1812 to 469.1815, as amended (the “Act”), is authorized to grant an abatement of a portion of the property taxes imposed by the City on a parcel of property (the “MRO Property”), which property is identified by the list of parcel identification numbers from the St. Louis County Auditor shown on Exhibit A upon which is located the MRO facility owned by the Duluth Economic Development Authority, through the adoption of a resolution approving an abatement agreement specifying the terms of the abatement if certain conditions are met.
1.02 Cirrus Aircraft proposes to lease and redevelop the MRO building located on the MRO Property at 4600 Stebner Road in Duluth, Minnesota and to redevelop the site to expand their manufacturing operations (the “Project”).
1.03 Pursuant to the Act, on the date hereof, the City Council conducted a public hearing on the desirability of granting an abatement of property taxes on the MRO Property, which abatement is expected to be benefitted the City as hereinafter set forth.
1.04 Notice of the public hearing was duly published as required by law in the Duluth News Tribune, the official newspaper of the City, on February 26th, 2022, which date is no fewer than 10 and no more than 30 days prior to the date hereof.
Section 2. Findings. On the basis of the information compiled by the City and elicited at the public hearing referred to in Section 1.04, it is hereby found, determined and declared:
2.01 The Project is in the public interest because it will increase and preserve tax base in the City, create at least 80 new jobs, and will redevelop currently underused real property.
2.02 The City expects that the benefits of the proposed abatement are not less than the costs of the proposed abatement. The public benefits that the City expects to result from the abatement are the increase in tax base created by the Project and the creation of at least 80 new well-paid jobs in the City, retention of 1,206 current positions, and will redevelop currently under used real property.
2.03 The Properties are not currently located in a tax increment financing district.
2.04 The granting of the proposed abatement will not cause the aggregate amount of abatements granted by the City under the Act in any year to exceed the greater of (i) 10% of the City’s net tax capacity for the taxes payable in the years to which the abatement applies, or (ii) $200,000.
2.05 It is in the best interests of the City to grant the tax abatement authorized in this Resolution.
2.06 Under Section 469.1813, subdivision 9 of the Act, it is not necessary for the City to obtain the consent of any owner of any of the Properties to grant an abatement.
Section 3. Granting of Tax Abatement.
3.01 The proper city officials are hereby authorized to enter into a tax abatement agreement, substantially in the form of that attached hereto as Exhibit B, with Cirrus Design Corp. for the abatement of a portion of the property taxes levied by the City on the MRO Property for 10 years, commencing with taxes payable in 2022 and concluding with taxes payable in 2032 unless the maximum amount of the abatement is provided prior to that date in which case, abatement shall thereafter cease. The Abatement will reduce all of the City’s portion of the taxes for the MRO Property, and the Abatement will not exceed $60,000 per year and a total aggregate amount of not to exceed $600,000. Abatement payments will be made only from property tax proceeds received by the City from the Project and may be reduced as outlined in the attached tax abatement agreement.
3.02 The City shall remit the Abatement amounts only to reimburse for a portion of the costs of constructing the Project.
3.03 The Abatement may be modified or terminated any time by the Council in accordance with the Act.
Statement of Purpose
STATEMENT OF PURPOSE: This resolution authorizes the abatement of taxes for the purpose of providing for a portion of the costs of the Cirrus Expansion Project. The Duluth MRO Building was designed and operated for the production, maintenance, repair and overhaul of aircraft. However, with the recent economic downturn and elimination of over 240 jobs with the departure from AAR, the DEDA owned building has remained largely vacant and underutilized. The City and DEDA have been seeking an entity that could utilize the facility and re-purpose the MRO building since ARR terminated their lease effective October of 2020. Cirrus is experiencing significant market growth and is looking to expand their production capacity on the Duluth Campus. The MRO building is not an ideal “fit” for their needs and is located on the north side of the Airport and is not adjoining their current production operations, which are all currently located on the south side of the Airport. Nevertheless, the former MRO facility it will provide the necessary space to support their expansion plans here in Duluth. However, Cirrus will need to make significant and substantial capital investments, move staff and equipment and to reconfigure their manufacturing along with investments to re-purpose the MRO facility and which will result in the retention of the current 1,206 FTE positions and will create at least 80 additional positions. The cost of the project and retrofitting the MRO building 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 total Business Subsidy is $900,000, with the remainder a $300,000 loan that will be forgivable if the Cirrus Aircraft meets all the redevelopment investment requirements including the creation of at least 80 new full-time equivalent positions. 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) loan to MN DEED 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 tax abatement along with $600,000 in Tax Abatement from St. Louis County.