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Duluth forges ahead with Cirrus facility

The city of Duluth is rushing ahead with plans to build a new facility for Cirrus Aircraft in order to meet the needs of the fast-growing company and cash in on its pledge to bring at least another 150 jobs to town on top of the 600-or-so people ...

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Cirrus employees detail several Cirrus planes in the company's customer delivery building on Wednesday. Steve Kuchera / skuchera@duluthnews.com

The city of Duluth is rushing ahead with plans to build a new facility for Cirrus Aircraft in order to meet the needs of the fast-growing company and cash in on its pledge to bring at least another 150 jobs to town on top of the 600-or-so people it already employs locally.

So eager are city officials to land those jobs that they have agreed to open Duluth's wallet even before a development agreement for the project has been inked.

To develop drawings, Duluth has hired the architectural and engineering firm of Burns & McDonnell at a cost not to exceed $456,500.

But at least two city leaders unsuccessfully argued against the expenditure in the absence of a detailed and binding agreement with Cirrus.

"I'm really hopeful and optimistic that we will have in front of us at some point a development agreement that this council and I can support. But we don't have that development agreement in front of us, and I can't in good conscience vote to commit city funds to this project until we have all the details in front of us," said 2nd District City Councilor Joel Sipress prior to a council vote, authorizing the city to retain the services of Burns & McDonnell.

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Joining Sipress in opposition to spending any money on the project until a signed development agreement is in hand was 2nd District City Councilor Sharla Gardner.

"I just don't think we should agree to anything when we don't know everything. And we don't know what will be in that agreement," she said.

Sipress said he wants to make sure any agreement spells out certain obligations.

"I'll be looking to see what the financial assurances are on job creation, for instance. I'll be looking to see what the wage guarantees are," he said.

Labor concerns

Sipress also said he would like to see labor provisions included in the agreement, similar to those proposed by Reps. Erik Simonson and Jennifer Schultz when the Minnesota Legislature voted to allocate $4 million of funding for the project. Cirrus officials opposed the labor requirements and they were not included in the package that was ultimately approved.

But Sipress contends the city has every right to hold Cirrus, a company without unionized workers, to account.

"Within the manufacturing industry generally, abuse of the rights of employees is rampant. People get fired all the time simply for expressing interest in union representation, and I want to make sure that Cirrus, being the good employer that is represented, provides guarantees that won't happen. I'm optimistic we'll have all those things, and that we'll move forward with a great project," Sipress said.

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Bill King, Cirrus' vice president of business administration, considers the language that was proposed at the Legislature overreaching and unnecessary. He said the company already has a grievance process in place to handle any worker disputes and doesn't need additional mediation and arbitration rules.

He also suggested that if workers at Cirrus had felt the need to unionize because of work concerns they would have done so long ago.

Simonson said Cirrus misunderstood the intent of the language he sought to include in legislation that provided funding for the project.

"That's kind of the common misconception that it has something to do with organizing or unions, but really what it is is it's the same kind of labor peace language that the state put into development agreements for hotels and other projects that would employ restaurant and hotel workers. Essentially, it just provides that there would be no labor strife during the construction of the project," he said.

Simonson said he has not received any specific complaints about Cirrus as an employer and proposed the labor language simply because he considers it good policy. He withdrew his proposal, however, when Cirrus objected.

For his part, 5th District City Councilor Jay Fosle sees little need to intervene in Cirrus' internal operations.

"I know a bunch of people who work at Cirrus, and they love their jobs. And they must pay well, because they don't complain about what they're getting," he said.

Sense of urgency

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At Large City Councilor Linda Krug said people in Duluth often talk about the need for more good-paying jobs.

"Here we have them," she said. "And now we're saying that well, the I's haven't been dotted and the T's haven't been crossed so maybe we should just wait?"

Councilor Jennifer Julsrud, who represents Duluth's 1st District, also urged the city to push ahead with a new facility for Cirrus.

"This is an excellent opportunity for economic development in our city. It's a great opportunity to provide 150 or more new jobs that are higher-wage," she said, contrasting the manufacturer with Duluth's numerous tourism-based businesses.

King said Cirrus is eager to expand into the proposed 60,000-square-foot facility as the company prepares to launch production of its first jet, the Vision SF50.

Chris Eng, Duluth's director of business and economic development, said he hopes construction of the building will begin by October. He expects the structure, made of precast concrete panels, will go up quickly and be ready for occupancy by April or May.

Mechanics of the deal

All told, the city expects to spend $8 million on a new finishing facility for Cirrus.

It will receive $4 million in support from the Minnesota Investment Fund.

The city's match of $4 million will come from tax-increment financing - a form of subsidy that uses new taxes generated by a project to cover certain development costs.

For its part, Cirrus expects to invest more than $2.5 million to equip and fit out the new plant.

The building would be owned by the city, but Cirrus is expected to sign a long-term lease that would be used to pay off tax-increment financing bonds issued to finance the project.

City administration has pledged to sign a project labor agreement, ensuring that union workers will build the facility and that no labor unrest will delay completion.

Eng said he will seek to include corporate guarantees in the forthcoming development agreement, requiring complete financial repayment if Cirrus subsequently abandons the building or fails to make good on promised jobs.

City Council President Emily Larson stressed the importance of those assurances, saying: "What I'm trying to avoid is another Northwest Airlines hangar that we are heating and maintaining and hanging onto for a few years before we can find another tenant."

Assuming Cirrus gets its new facility, it won't be the first time it has received help growing operations in Duluth. In 2002, it moved into a 63,000-square-foot "aviation incubator" building constructed with the help of $3.5 million from the federal Economic Development Administration, $3.1 million from the city of Duluth and $2 million from the Duluth Economic Development Authority.

Long-term commitment

Cirrus is now owned by an entity called China Aviation Industry General Aircraft, and 4th District City Councilor Howie Hanson asked whether there was a danger of the company moving production to its owner's home nation in time.

King said such fears are unfounded.

"They did not buy us to move us. If they were going to do that they would have 3½ to 4 years ago before they invested over $100 million in additional new funds to bring a jet to market in the U.S.," he said. "This is the single biggest market in the world, and there's no threat of us trying to take these jobs and move them to China."

However, he didn't rule out the idea of Cirrus one day opening Chinese manufacturing operations.

"We don't doubt we'll produce airplanes in China someday. I hope we do," King said. "But the air space isn't open there, and there's no one to sell them to if there's no air space open."

If and when Cirrus does open a Chinese plant, King said: "It will be for that market and that part of the world when it happens. In the meantime, we see a remarkable opportunity for continued growth here. And this is where our base is for North and South America, and the western hemisphere."

For now, King said Cirrus remains closely focused on its Duluth operations.

"This is about growing our business here. We're growing here. We're going to give a corporate guarantee here. We're on the hook. Make no mistake about it," he said.

"This is about building our footprint and our infrastructure for developing, building, selling and servicing the product right here in the United States and really for all of North and South America, as well as Western Europe."

Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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