Friday, January 13, 2012

Maine may lose business

The top executive with Kestrel Aircraft said he's not trying to pit Maine against Wisconsin, but he will locate the company's aircraft manufacturing plant in whichever state is first to put a viable financing package in front of him.

The aircraft maker announced in 2010 that it would move to Brunswick Landing, becoming the highest-profile business at the former Brunswick Naval Air Station. The company is expected to employ as many as 600 workers building a new six- to eight-passenger turboprop plane.

But now there's a good chance that the manufacturing plant will be built in Superior, Wis., where officials are rapidly pulling together a mix of state and local financing to woo Kestrel.

Maine officials have failed to follow through on a financing plan he thought was in place in 2010, said Alan Klapmeier, chief executive officer and chairman of Kestrel.

"We did not say, 'Tell us your best offer and we'll go and play it against someone else,'" said Klapmeier. The company isn't interested, he said, in trying to "take a bunch of money from people and then go and take a bunch of money from someone else."

Klapmeier has an office in Duluth, Minn., which is across a Lake Superior bay from the Wisconsin city. In addition, some of the engineers working on the design of the plane are located in Duluth, so Superior has a geographic advantage.

Klapmeier said that the talks with Wisconsin officials are well along and he won't wait to see what Maine can do if Wisconsin puts a workable offer on the table first.

Wisconsin officials appear to be moving quickly to do that. This week, a Douglas County, Wis., committee unanimously approved selling 13.3 acres of land next to an airport to a city redevelopment agency, and the full county board is scheduled to vote on the plan next week.

Superior could then sell the land for $500,000 to Kestrel. Klapmeier said a trio of local agencies will loan the company about $3 million, and he's waiting for word from state officials on tax cuts and rebates that would help fund the project.

Calls to Superior's planning director were not returned Thursday.

"We're having a conversation about a deal that would do it," he said of his contact with officials in Wisconsin. "If there was a deal we could take in Maine, we'd take it."

Thought he had a deal

Klapmeier said he thought he had that deal when he announced that Kestrel would locate in Maine more than a year ago. He said that at a final meeting with regional and state economic development officials, he checked off the pieces of the package that Kestrel needed and asked if everyone agreed to do their part.

All the heads at that Augusta meeting nodded, he said, but the financing has not come through as he expected. Klapmeier declined to identify those he feels have failed to come up with the aid that he said Kestrel needs.

"There's no point in me talking about people who said they would do something," he said. The search for financing in Maine, Klapmeier said, "is much more complicated, which means less productive, than it ought to be."

Coastal Enterprises Inc., a private, non-profit community development and finance company, supplied part of the financing, putting together a package using federal New Markets tax credits to steer about $5 million in cash toward Kestrel. But the company was banking on about three times that amount, although CEI officials said they never indicated CEI would provide more help than that.

"We always told them we would try to get them as many of the (packages of) tax credits as we could, but it would not be all from us," said Charlie Spies, chief executive officer of CEI Capital Management, who added that the tax credit deal with Kestrel is one of the company's largest.

Klapmeier said that after the company announced the project in Brunswick, Kestrel officials were contacted by development officials from around the country, trying to woo the project from Maine before it was too far along.

The company turned away the suitors, he said, until the end of last summer.

"As my naive view that it was still going to get done in Maine waned, it became clear that we had to consider alternatives," Klapmeier said.

He said he dismissed most of the offers because they lacked specifics on the financing, but Wisconsin put together a plan that looked promising, leading the company to begin talks.

Klapmeier said no deal has been signed and officials in Maine are still trying to keep Kestrel Aircraft in Brunswick.

State still talking

Adrienne Bennett, spokeswoman for Gov. Paul LePage, said the state is still talking to Kestrel officials, but she wouldn't offer information on the discussions.

"We will continue to move forward with Kestrel, but it would be premature to discuss the negotiations," which are being conducted by George Gervais, the commissioner of the Department of Economic and Community Development, she said.

"Maine doesn't have a lot of freebies" to offer, said Steve Levesque, executive director of the Midcoast Regional Redevelopment Authority, which is in charge of redeveloping the former air base.

"I think they came here with good intentions and they want to be here," Levesque said of Kestrel. "But at the same time, I do understand that if they can't get the financing here, they will go where they can. They want to make Maine work, but if they can't make Maine work, they're going to go where it can work."

Levesque said MRRA has applied to the Treasury Department to be a New Market tax credit allocator like CEI. It has also requested the authority issue credits that could provide more than $15 million in cash for the company if it were all steered to Kestrel.

But there's no guarantee that MRRA will be approved as an allocator or get the amount it has requested and an answer isn't expected until sometime in February, Levesque said. In the meantime, he said, MRRA is trying to help Kestrel get together short-term financing to buy more time.

But Klapmeier doesn't seem interested in more time.

"This program is starved for cash and we are constantly missing opportunities" because of the time it has taken to nail down financing, he said. "We will not wait."

He noted that even if the manufacturing plant is built elsewhere, Kestrel Aeroworks, which repairs and upgrades aircraft, would stay in Brunswick, satisfying a requirement of the tax credit package.

That division employs about 25 workers, just a fraction of the employment the manufacturing plant will offer.

Klapmeier said locating in Maine seemed like a dream in 2010, but he seems resigned to it not coming true.

"We all thought it was going to work and it hasn't," he said.


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