Federal Grant, Bonds Might Let Duluth, Minn.-Area Aircraft Manufacturer Expand
KRTBN Knight-Ridder Tribune Business News: Duluth News-Tribune - Minnesota
Copyright © 2001 KRTBN Knight Ridder Tribune Business News; Source: World Reporter ™
Duluth’s only airplane manufacturer might expand soon, with help from a $3.5 million federal grant and $2.25 million in tax-increment lease revenue bonds.
If the money comes through, a second 63,000-square-foot facility will be built on a site east of Cirrus Design Corp.'s 140,000-square-foot plant.
The new building would boost the amount of space available to the company by about 45 percent.
The U.S. Economic Development Administration liked preliminary plans for the project so well that it has invited Duluth to submit a final $3.5 million grant proposal, Mayor Gary Doty said.
The City Council still must approve the plan for it to proceed. If council members do, Doty said, Duluth is almost certain to receive federal money based on the EDA’s past practice.
The project also would require Duluth Economic Development Authority and City Council backing to create a tax-increment financing district.
Tax-increment financing is a form of subsidy that uses new taxes generated by a project to help pay for certain development costs.
Although the city would issue bonds for the project, lease payments it received from Cirrus would repay the bonds. Doty said the project could be tackled without sacrificing existing tax dollars.
Despite recent layoffs at Cirrus, company Vice President Dale Klapmeier said, “We’re bursting at the seams.” He explained that additional space is critical to the company’s continued growth.
In early February, Cirrus laid off 20 percent of its employees. The move trimmed 104 jobs from its Duluth work force, dropping it to 367 people.
Cirrus President and Chief Executive Alan Klapmeier said the layoffs were necessary to allow for restructuring at the plant, which had repeatedly fallen short of its one-airplane-a-day production goal.
Dale Klapmeier, Alan’s brother, said the company hopes to recall laid-off workers by early May.
He said the company has revamped operations and its management structure. Klapmeier reports the company is consistently meeting its one-a-day goal with workers logging fewer hours.
Despite setbacks, the city has high hopes for Cirrus, which came to Duluth seven years ago. Doty said that with a new building, the company has projected the size of its Duluth work force will grow by 350 people in the next five years.
“Some of us have said we expected Cirrus would become one of the biggest employers in Duluth, and I still believe that,” Doty said.
DEDA Director Mike Conlan said recent setbacks in the Northland’s economy probably strengthened Duluth’s grant application. “It has reinforced the fact that our region needs to reinvest in its manufacturing base,” he said.
Should DEDA, the Duluth City Council and the federal Economic Development Administration back plans for the new facility, Klapmeier said, the building could be in place by late fall. Word on the success of the application would probably come late this spring.
The new facility could accommodate Cirrus’ painting booths, a tooling area and delivery functions. However, Klapmeier said Cirrus has no plans to cut its work force at a painting facility in Hibbing.
Doty said the EDA would have frowned on funding any project that would take jobs away from one city in favor of another.
Cirrus also has operations in Grand Forks, N.D.
With the new facility in place, Klapmeier expects Cirrus could boost its daily production to two airplanes. He said current market demand easily would warrant daily production of four to six airplanes.
More than 650 people have placed orders for Cirrus airplanes.
“The problem has not been our ability to sell airplanes,” Klapmeier said. “It’s been our ability to build them.” The company makes two models of four-seat airplanes: the 200-horsepower SR20, which has a base price of $197,600, and the 310-horsepower SR22, which starts at $276,600.