Wisconsin lured Kestrel Aircraft away from Maine with a stronger plan to provide federal tax credits for the $100 million manufacturing plant originally planned at the former Brunswick Naval Air Station.
The company and Wisconsin officials announced Monday that the plant will be built in Superior, Wis., near a Kestrel office in Duluth, Minn.
Kestrel had announced in 2010 that Brunswick Landing would be the site for the plant, which will make a new type of six- to eight-passenger turboprop plane and could employ as many as 600 workers.
But the project ran into problems with financing, and Kestrel decided in September to seriously consider other locations.
Kestrel plans to keep 25 engineering support and aircraft modification jobs in Brunswick and then add functions, which could include a “completion center” to handle the last manufacturing phase for the new turboprops, said Alan Klapmeier, the company’s chairman and chief executive officer.
Wisconsin and Maine raced to put together the winning financing plan for the plant, which Klapmeier said is a year behind schedule.
On Friday, Maine Gov. Paul LePage announced a total of $7.75 million in possible loan guarantees to bridge a financing gap.
Over the weekend, Wisconsin made a proposal with crucial commitments involving the federal New Markets Tax Credit Program. The Wisconsin Housing and Economic Development Authority will provide $30 million in tax credit allocations immediately, a second allocation of $30 million by the end of this year, and a commitment for a third allocation of $30 million in 2013 if the authority has it available, Klapmeier said.
By comparison, the company received a $20 million tax credit allocation in Maine and the status of future allocations was unclear.
“In the end, that’s the really big difference. We couldn’t keep going down the path we were on with that level of uncertainty,” Klapmeier said.
“If Wisconsin hadn’t gotten it done and Maine had continued to reduce that uncertainty – which is what the governor and (Economic and Community Development Commissioner George Gervais) were trying to do – then we’d have gotten to the point where we would have selected Maine.”
The New Markets Tax Credit Program is designed to encourage investment in low-income areas.
The tax credit allocations are distributed by entities approved by the federal government.
When a business spends the amount of the allocation, it gets the tax credit.
In Maine, Kestrel received a $20 million tax credit allocation through Coastal Enterprises Inc., a private nonprofit community development company based in Wiscasset.
Kestrel spent $13 million of its own money and $7 million from an insurance company with which it has a relationship, which yielded about $7.8 million in tax credits. Kestrel netted a little less than $5 million, after fees and expenses, Klapmeier said.
The origin of the problem with future tax credit allocations in Maine was not clear Monday.
In July 2010, a group of economic development entities outside state government proposed a $100 million plan that involved the New Markets Tax Credit Program, Klapmeier said.
But ultimately, the company was not able to get what it had expected from the plan.
He described the $20 million tax credit allocation in Maine as only getting the project over a “minimum hurdle.”
LePage said last week that Kestrel’s expectations for financing from Coastal Enterprises were not met.
Charlie Spies, chief executive officer of CEI Capital Management, the organization’s financing arm, could not be reached for comment Monday.
Spies has said that his group never mentioned anything other than the $20 million in its discussions with Kestrel.
Brunswick Town Councilor Benet Pols said Monday that Kestrel’s decision to go to Wisconsin was a blow, but not an overwhelming one.
“We can’t approach this as if all our eggs were in one basket and they’ve now been smashed,” Pols said.
“To be sure, it’s a disappointment based on the promises that had been made. We naturally had our hopes up about it.”
Pols said residents favor using the former air base for aviation, but other, less glamorous development is under way, like the construction of a production facility for Rynel, a subsidiary of a Swedish medical products company that hopes to employ as many as 100 people.
Alisa Coffin, owner of the Great Impasta Italian Restaurant on Maine Street, said redevelopment of the base is important for the town’s economic base.
“It’s just so sad. It looked like we had a good thing going and then they decided to go elsewhere,” she said.
But the loss is not fatal, she said. “Will anyone go out of business because of it? I seriously doubt it.”
Gervais, Maine’s economic development commissioner, said the stark difference between the two states’ proposals was the involvement of the Wisconsin Housing and Economic Development Authority.
He said Maine had solved the immediate financing gap but hadn’t solved the confidence issue regarding the tax credit program.
“We do not have any authority over the people who put out those federal tax credits in Maine. I think, moving in the future, we ought to pursue an allocation for a state authority,” he said.
Maine tried to make up for the lack of a second tax credit allocation with a $4.75 million loan guarantee through the Finance Authority of Maine and a $3 million guarantee or letter of credit from the Midcoast Regional Redevelopment Authority, which is redeveloping the base and has applied to be part of the federal tax credit program.
Steve Levesque, executive director of the authority, said Monday’s news was disappointing, but jobs in Brunswick are still part of Kestrel’s plan.
“We’re disappointed, clearly disappointed,” he said.
“At the same time, there’s still going to be a pretty significant Kestrel presence in Maine.”
Staff Writer Ann S. Kim can be contacted at 791-6383 or at:
Staff Writer David Hench can be contacted at 791-6327 or at: