Kozy, aircraft maintenance base weigh on Duluth Economic Development Authority bottom line

Two buildings threaten to drag down the Duluth Economic Development Authority’s budget next year: the nearly vacant aircraft maintenance base once occupied by AAR Corp. and the fire-damaged Pastoret Terrace/Paul Robeson Ballroom buildings that were previously home to the Kozy Bar and Apartments.

As owner of the Pastoret Terrace and its neighbor, the Paul Robeson Ballroom, DEDA remains in a tough spot.

Its efforts to tear down the condemned buildings and redevelop the property have been thwarted by an appellate court decision, requiring that more efforts be made to preserve and renovate the historic structures. DEDA has argued that its good-faith efforts to find a developer willing and able to restore the buildings have proven unsuccessful to date, and demolition is now the only feasible solution.

However, Eric Ringsred, the buildings’ former owner, along with a group of local preservationists called Respect Starts Here, continue to argue the structures should be spared and renovated.

The case is now back before Judge Eric Hylden, who has already ordered the DEDA to take steps to avoid further substantial damage to the building, which has endured repeated fires, including one most recently on Nov. 1.

DEDA has requested that Hylden require the plaintiffs in the case to post a bond to secure the anticipated $144,229 cost of bracing up the building’s First Street facade, ensuring that the authority could recover the money, should it ultimately prevail in the case.

READ MORE ABOUT PASTORET TERRACE

Meanwhile, Respect Starts Here argues that it should not be required to provide additional security, and if the court decides otherwise, the burden of its legitimate legal challenge could become unsustainable.

Additional work beyond the initial $144,229 investment is likely to be required in order to shore up the buildings, should the long-running legal battle continue.

A preliminary DEDA budget for next year anticipates $325,000 in expenses related to the property. Chris Fleege, director of Duluth’s planning and economic development division, cautioned commissioners that the true cost remains uncertain. He referred to the $325,000 figure as “a placeholder” and said: “We don’t know definitively what the timing and the cost will be.”

Fleege considers DEDA’s ownership of an aircraft maintenance base to be an even greater liability, however. The building was originally built to service Northwest Airlines’ fleet, but has operated as an independent maintenance, repair and overhaul (MRO) facility run by AAR in recent years. However, AAR left the Duluth facility in May 2020, as air travel dwindled amid growing concerns about the COVID-19 pandemic.

Only a small fraction of the base now remains occupied by Lake Superior Helicopters LLC, and Fleege said DEDA must remedy the situation or face mounting losses.

PREVIOUSLY:

• DEDA signs off on plan to bring F-16s to Duluth maintenance base
  
• Without AAR, Lake Superior College keeps faith in its airplane mechanics program
  
• Duluth pursues $210,000 settlement with AAR for abandoning facility
  
• AAR to close Duluth airline repair facility
  

Carrying costs for the sprawling facility run between $50,000 and $60,000 per month, with taxes alone accounting for almost $30,000 of that monthly expense.
“This will be our job No. 1: looking for a tenant,” Fleege said. “And quite frankly, we’re going to go down parallel paths. I mean, yes, it would be great to get an MRO, but if we don’t get one, we’re going to be looking for anyone who can use that space,” he said.

DEDA has proposed to budget about $35,000 to market the maintenance base in 2022.

Fleege said that ideally, DEDA could attract another MRO to the facility.

“We kind of know who the players are out there. There are probably nine,” he said. “So, we’ll be doing some outreach directly to those. And most of them already know about the Duluth facility because it is a small world.”

Fleege said the base is in better shape now than when AAR moved into the facility, with recent upgrades to its fire suppression system, lighting and energy efficiency improvements.

As a result, he said, the space should prove attractive to the right tenant.

“We do think it can be repurposed, and we have made investments there,” Fleege said. “It has been well-cared for.”

But Fleege said DEDA also must explore other potential building uses, such as light manufacturing, “because we can’t wait forever for an MRO that may never come.”