One day after a reorganized Northwest Airlines emerged from bankruptcy, Mayor Herb Bergson announced that the city of Duluth will been freed of potentially devastating debts associated with the construction of a maintenance base for the carrier.
"This is a great day for Duluth," said Bergson, noting wryly that he didn't mind cutting short a scheduled vacation to share news of a settlement Friday.
On May 21, a bankruptcy judge approved a settlement that would provide Minnesota with an equity stake in the reorganized Northwest in return for the state dropping its claim to a $40 million financial note it had held as collateral. That settlement became official this week after a 10-day comment period passed without any challenge.
The state wasted no time in selling its equity position in Northwest, and Bergson said the proceeds were sufficient to retire all outstanding debts associated with the now-empty Duluth maintenance base.
"The money is in the bank," he said.
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Bergson said it would be up to the Minnesota Department of Finance to disclose the identity of the outfit that bought out the state's interest in Northwest.
Peter Sausen, Minnesota's assistant finance commissioner, who helped broker the settlement, could not be reached for comment Friday afternoon.
Had a deal not been negotiated, Duluth could have been compelled by the state to pay off bonds that were used to finance the 189,000-square-foot maintenance facility. All told, Bergson said the expense could have approached $30 million.
"The financial obligation of those bonds would have hamstrung the city for years to come," the mayor said.
Once the bonds are paid off, the Duluth Economic Development Authority will assume ownership of the maintenance base. Bergson said the next challenge will be to find a new tenant for the building.
The facility has sat idle since 2005.
Tom Cotruvo, executive director of Duluth Economic Development Authority, said several companies have expressed interest in the building.
But Bergson said the trick will be to find the right tenant.
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"We're looking for a tenant who will employ a lot of people," he said, adding that jobs will trump rent as DEDA weighs its options for the building.
Besides erasing the city's debts, the settlement will free up a new revenue stream. An $875,0000 franchise fee from Minnesota Power that previously had been used to service bond debt will now go directly into the city of Duluth's coffers.
Bergson said he expects DEDA will receive the keys to the maintenance base this month.
