The Duluth Economic Development Authority met Tuesday afternoon to deal with some of the financial fallout from the ongoing COVID-19 pandemic and to look ahead to better days, including the prospect of further development in Canal Park.

AAR settlement

AAR Aircraft Services Inc. has abandoned the Duluth air base where it once serviced commercial jetliners, but Chris Fleege, the city's director of planning and economic development, remains optimistic those operations could one day return, when and if the coronavirus finally is in check and travelers again return to the skies in large numbers.

On Tuesday, DEDA approved a settlement whereby AAR will pay $210,423 for terminating its lease agreement for the cavernous facility without providing the contractually required six months' notice.

DEDA already had waived three months' worth of payments at the base, as it sought to preserve about 270 local jobs. But the financial relief was not sufficient to stave off AAR's decision to close the maintenance facility in May, as commercial air travel continued to plummet.

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Fleege said the agreement reflects rent and other expenses for the remaining three months the company was obligated to stay in the building.

Despite the financial settlement, Fleege maintains that DEDA and AAR remain "on great terms" with one another.

"We still think they are the logical party to come back and to operate out of the Duluth MRO (Maintenance Repair and Overhaul facility)" should the airline industry recover, he said. But Fleege predicted that was unlikely to happen for another two to three years.

Cirrus lease

At least for the near term, Cirrus Aircraft will make use of part of the air base space AAR has vacated.

Fleege explained the situation to DEDA commissioners Tuesday, saying: "Cirrus found themselves with kind of a short-term supply chain challenge with one of their key suppliers. So, rather than having aircraft scattered in multiple locations, with the MRO being open, it really gave us an opportunity to support Cirrus and provide a space where they could store their aircraft while they're waiting for some of those last key components."

Cirrus is expected to occupy no more than about half the enormous hangar space at the base. The company has agreed to pay $21,000 per month to make use of about 36,000 square feet inside the building while it works through its supply chain issues.

"It doesn't pay the full freight for the full facility, but they're not using the whole facility," Fleege said.

Scoping Canal Park site

In other action, DEDA authorized staff to accept a state grant to assess contamination and develop a remedial action plan for a 1.5-acre site that's currently home to a large parking lot in Canal Park. The work could lay the groundwork for the property's future redevelopment.

The land in question is located between Grandma's Saloon and Grill and the Dewitt-Seitz Building. About one-third of the property is owned by DEDA, and the other two-thirds is controlled by STAR NW LLC., managed by Grandma's Restaurant Chief Financial Officer Kristine Barnes.

The site was formerly occupied by a salvage yard known as Northwestern Iron & Metal and is known to have issues with soil contaminants, including arsenic, barium, cadmium, chromium, lead and mercury, according to initial Minnesota Pollution Control Agency findings.

DEDA is poised to receive a $50,000 state grant to further explore contamination levels on the site, with those funds to be matched with at least $12,500 in local funds.

"No final determinations have been made on what type of a development could occur there, but we definitely knew that it was in both parties' interests to really delineate the extent of it (the contamination)," Fleege said.

The DEDA resolution passed Tuesday contemplates a combination of commercial development and a multi-level parking structure on the site.