Sunday, September 29, 2013

Sheboygan County officials eye severing ties to languishing Morgan Aircraft: May sue once-ballyhooed firm to recover $160,000 in airport upgrades

Troubled startup manufacturer Morgan Aircraft is nearly a year behind on its lease payments at Sheboygan County Memorial Airport, and county officials now appear likely to cut ties with the once-promising firm.

The Oostburg-based company has until Oct. 1 to pay $29,947 in past-due rent before the county can cancel its lease and take legal action to recover both the rent money and the nearly $160,000 that the county spent in making airport improvements for the company.

The looming deadline comes four years after Morgan Aircraft announced plans to build a 600,000-square-foot manufacturing plant and offices at the airport, where it hoped to one day build a line of airplane-helicopter hybrid aircraft capable of vertical takeoffs and landings.

The project attracted considerable attention at the time as it was announced at the height of the recession and came with the possibility of creating thousands of jobs. However, it appears to have been undone by the company’s struggles to secure investors in what remains a tough economic climate.

“Though they’ve made good progress on the design of their airplane and continued to take steps forward to achieve their vision, ultimately they struggled to garner the investment revenue or funding they needed to continue the development of their airplane,” County Administrator Adam Payne said.

Company co-founder Brian Morgan declined to comment on the firm’s status, only to say that they’re currently restructuring.

The company may also be on the hook for an up-to-$1 million forgivable state loan it received in 2011 to construct its headquarters. For the state loan to be forgiven, Morgain Aircraft has until 2015 to invest $105 million in the project and until 2017 to create 340 new full-time jobs. If neither occurs, the company is obligated to repay the loan at 2 percent interest.

Dane Checolinski, director of the Sheboygan County Economic Development Corporation, said the company hadn’t yet borrowed the full $1 million, while other state incentives it was offered were never awarded as they’ve yet to begin production.

“It probably boils down to a myriad of factors,” Checolinski said, referring to the company’s troubles. “Like any field out there, it’s extremely competitive and there are so many investment dollars to go around.”

The company is now four years into its 50-year airport lease, which carries an option to use an additional 50 acres. Company officials had previously said they hoped to be producing aircraft there by 2016 that could be used as air ambulances, search and rescue aircraft, corporate jets and as unmanned military drones.

The county eventually spent $157,816 to improve Morgan’s building site, including building a road and adding electricity, said Airport Superintendent Tom Boyer. However, the company never broke ground and had continued to operate out of a rented office in the Oostburg Business Park.

The county had committed an additional $2 million or so to make further site improvements but instead ended up spending the money on highway infrastructure when it became clear that things were not progressing.

More red flags came this spring when the county agreed to defer Morgan Aircraft’s rent payments until fall and temporarily suspend a construction timeline included in the lease, which the company has not met.

Boyer said that the company has made one monthly lease payment since September 2012.

Payne said he feels that until now, county leaders have “erred on the side of optimism” given the project’s job-growth potential, despite skepticism from the outset by some that the company’s vision would never pan out.

If Morgan Aircraft’s lease is voided, the county would likely seek out other entrepreneurs to take over Morgan’s space at the airport, and officials say all is not lost given that they have an improved site that another firm could take over.

The infrastructure that’s now in place has already helped attract interest from firms looking to begin operations, expand or relocate, Payne said, though none are on the scale of what Morgan had been intending.

The county’s decision on whether or not to sever its relationship with Morgan Aircraft will likely go before the county’s Transportation Committee in the coming weeks. Any action would also require approval by the County Board.

“Unfortunately, it may be coming to an end,” Payne said.

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