Brunswick still at the altar as Wisconsin courts Kestrel; council chairwoman regrets support for grant

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BRUNSWICK — First it was Brunswick.

Then Berlin, N.H.

Now Kestrel Aircraft, the company that was supposed to build airplanes at Brunswick Landing, is considering Superior, Wis., for a plant that could employ up to 600 people.

The courtship may yet result in Kestrel building planes in Brunswick. But it has the Town Council chairwoman regretting the town’s involvement in a grant application for the company.

Kestrel’s chief executive officer, Alan Klapmeier, said Wednesday that officials in Wisconsin and the city of Superior have the tax credits and local incentives available that Maine has, thus far, been unable to provide.

But he said there is still a possibility that he could decide to put Kestrel’s manufacturing plant in Brunswick if more funding comes through.

Klapmeier said the primary reason he is considering Wisconsin is that state is better equipped than Maine to administer the federal New Market Tax Credit program, which helps bring jobs and investments into low-income or distressed areas.

Kestrel was seeking $100 million in tax credit allocations through Coastal Enterprises Inc., a Wiscasset-based private, nonprofit community development institution, which would have netted the company $39 million in cash.

But so far, Kestrel has only received a fifth of the amount it was seeking – enough to get the company’s aircraft repair business, Kestrel Aeroworks, off the ground, but not to build single-engine carbon composite turbo-prop aircraft.

Klapmeier said Wisconsin has tax credits available and has more organizations that can administer New Market Tax Credits than Maine, which currently only has CEI.

Charles Spies, chief executive of CEI Capital Management, said Wednesday that CEI had already given all that it planned to give to Kestrel, about $7.8 million. He expected other New Market allocators to channel the rest of the funding to the company.

“We’re looking for another allocator to work on the next round and we’ll see where we go from there,” he said.

Spies said the decision was not based on the details of Kestrel’s project, but because of a desire to diversify CEI’s investments.

Difficulty securing funding though CEI led Klapmeier to begin discussions last fall with Cate Street Capital about building in Berlin, N.H, where Kestrel can obtain low-cost heat from a biomass power plant and have a better chance of receiving tax credits.

Shortly thereafter, the Midcoast Regional Redevelopment Authority announced it had applied to become a New Market tax credit allocator with the hope that it could funnel additional credits to the aircraft company. MRRA Executive Director Steve Levesque said he expects to hear back from the U.S. Treasury later this month.

In the mean time, officials in Wisconsin are hammering out the details of a plan to attract Kestrel to Superior.

In addition to providing another $80 million to 90 million in tax credit allocations, Klapmeier said Superior plans to issue a $2.4 million bond to loan cash to the company, and would give land in its industrial park to Kestrel.

Officials from Superior did not respond to several requests for comment this week.

In Maine and New Hampshire, meanwhile, officials continue to try to fill Kestrel’s funding gap.

A spokesman for Cate Street Capital, which owns the biomass plant in Berlin, N.H., said the two companies are still discussing a potential deal.

“We … respect that the company is exploring all potential options, as they should. We believe our site in Berlin offers the strongest co-location solution for Kestrel’s manufacturing needs, and that a decision to locate in Berlin would benefit New Hampshire and Maine over the long-term,” spokesman Scott Tranchemontagne said in an email.

Levesque offered few specifics, but said he is still working with the governor’s office and the Maine Department of Economic and Community Development to find funding for Kestrel.

In October 2011, George Gervais, commissioner of the DECD, announced that Kestrel could qualify for funding under the EB-5 Immigrant Investor Program.

But Levesque said Tuesday that the program, which does not guarantee investment, is not a short-term solution.

Elected officials in Brunswick said they weren’t surprised to hear Kestrel is considering yet a third state.

But Town Council Chairwoman Joanne King said the experience has left her wary of the company. Last year, the council helped MRRA apply for a $300,000 Community Development Block Grant that would allow Kestrel to design and build airplanes at Brunswick Landing’s Hangar 6.

Part of the agreement is that Kestrel must create 10 more full-time jobs before June 30, 2013, in addition to the 16 in place as of July, 2011, when the grant was awarded. Additionally, six of the additional jobs have to go to people from low-income households.

Klapmeier said Kestrel now employs 25 people in Brunswick.

If the company fails to comply, normally the town would have to repay the full amount of the grant to the state. But because MRRA and Brunswick signed an indemnification agreement, MRRA – not the town – would have to repay the $300,000.

King said in the future, the council will be more vigilant about which companies it assists to apply for CDBG grants.

“Whether we’re the ones getting stuck on the hook is not the point. The point is if the jobs aren’t getting created, we don’t want to be involved with these CDBG grants,” she said. “We can’t get involved in companies like that that are just looking for the best deal.”

Emily Guerin can be reached at 781-3661 ext.123 or eguerin@theforecaster.net. Follow her on Twitter: @guerinemily.

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