Duluth looks for a new airbase tenantby Bob Kelleher, Minnesota Public Radio
Duluth officials hope to find a new occupant for a very big building at the Duluth airport. Northwest Airlines all but abandoned their massive heavy jet maintenance facility in 2005. City officials expect the airline to drop its lease soon. But if, and when, Northwest officially pulls out of the building, state law makes it almost impossible for Duluth to find another tenant.
Duluth Minn. — The idled jet maintenance base is more than an empty promise to Duluth: it's expensive too. The base was built as part of a state-backed airline bailout in the early 1990s.
But according to Duluth city officials, the airline's payments haven't covered the building's financing bonds, since Northwest entered bankruptcy nearly two years ago.
The city and its economic development agency, DEDA, are on the hook to cover the difference.
"DEDA's had to borrow about $400,000 total over one year to make those bond payments," says DEDA director Tom Cotruvo. "Now we're hopeful that when the bankruptcy is completed that we'll be repaid those funds that are owed to us, because, even though Northwest did not make those payments, we feel that Northwest owes us that amount."
In a written statement Northwest Airlines confirms the base lease is under review. The airline says it's paid as much money as bankruptcy law allows.
The issue could be settled as soon as this summer when Northwest Airlines is expected to emerge from bankruptcy.
But if Northwest pulls out of the lease, things could get even more expensive for Duluth and its economic authority. The two could be tapped for about half a million dollars a year. That's quite a turn around from a few years ago when Northwest was paying the bill.
"It's bad enough that you don't have the promised jobs," says Duluth Mayor Herb Bergson. "Add on top of that the bond payments. It's a really bitter pill."
At one time, the Duluth base employed some 400 well-paid aircraft mechanics. That number was already dropping by August 2005, when the 300 mechanics there joined a strike against Northwest Airlines. Soon after that, the airline was operating in bankruptcy and the Duluth mechanic's jobs were gone.
"Each one of those 300 jobs fed a family, and paid rent for a family, bought cars for that family, and groceries," Bergson says. "You take that out of your economy, and it hurts. It hurts a lot. Especially when you throw in that debt payment that may be thrown in on top of that."
So, Duluth is looking for a new tenant. But Bergson says the choices are slim. State law limits the occupants to a Minnesota-based airline employing at least 300 people there. Only Northwest Airlines fits the bill.
"The law doesn't allow us to have a tenant in the building that isn't a Minnesota corporation," Bergson says. "And that's the big change that we're looking for. If Northwest Airlines rejects the lease, and we expect them to do that, we need to be out there finding a new tenant. And we can't limit it to just a Minnesota company."
A bill is working through the legislature intended to give Duluth more flexibility. It strikes the language that narrows the building's occupant to basically Northwest Airlines.
"We just want to make sure our options are as broad as they can be to try to get somebody to pay the bills up there," Bergson says.
Still, a 190,000 square foot building with giant sized garage doors isn't going to work for just anybody. DEDA Director Tom Cotruvo says the highest and best use of the facility is for large aircraft maintenance, so that's where the hunt begins.
"I think that we have a reasonable chance of success at that because the aviation industry is coming back from the declines it had recently," Cotruvo says. "And it's a growing industry. It's growing here in Duluth. We have a good airport. We have good service facilities for aviation. So I'd be very optimistic that we could find an aviation replacement for the facility."
The changes don't appear to be controversial, and are supported by the governor and the state, according to Minnesota Department of Finance Assistant Commissioner Peter Sausen. The bill to rewrite the legislation was heard in a House committee Wednesday, and now goes before the Senate Committee on State and Local Government Operations and Oversight.
- All Things Considered, 03/08/2007, 5:24 p.m.