Recriminations are likely to follow the news that Kestrel Aircraft Co. will not, as previously announced, build a manufacturing plant in the former Brunswick Naval Air Station. The loss of what may be a growing business and the 600 jobs it would create is indeed bad news, but those who would blame the LePage administration should hold their fire.
Governors and their economic development staff get the front-page treatment when they ride in on white horses to save a paper mill or cut the ribbon at a new call center. So the argument can be made that the failure to land business relocations also should be included on their balance sheets.
But in the case of Kestrel, as is often true, Maine is an earnest but outclassed suitor. The LePage administration’s failure to provide the kind of financing package Kestrel sought — and found in Superior, Wisconsin — actually might be prudent. While 600 jobs and a manufacturer that would buy materials and services would have boosted the Greater Brunswick economy, a cost-benefit analysis must be completed each time these deals are sought.
In fact, saving some of Maine’s old-line businesses like paper mills in Millinocket and a pulp mill in Old Town has left the state on the hook with big-dollar expenses.
Losing out on those 600 jobs also should be weighed against across-the-board regulatory and tax policies that could help 200 existing Maine businesses add three jobs each.
Kestrel represented the best kind of business Maine should lure. Its plan is to build small propeller-powered aircraft to compete in the niche now served by small private jets. Kestrel hopes its aircraft will win out because they can operate more efficiently and provide operators more flexibility in travel.
Kestrel would have been a shining example of what might be achieved at the former air base. Because of the region’s access to an educated and plentiful work force, and because of the quality of life that part of the coast offers, Brunswick Landing was — and still is — poised to spur the area forward as an economic hub.
It came down to money, though. According to Kestrel CEO Alan Klapmeier, communities in 18 states were competing to come up with the financing package for the company. Maine fell about $20 million short; the state was unable to get Kestrel that amount in federal New Market Tax Credits.
Mr. Klapmeier said the company “didn’t try to play communities against one another. We told them, ‘This is what we need. Please come to us with what you can do.’ After that, it was more like a race to the finish,” he told the Duluth News Tribune.
The winning package included: $3.1 million in local tax-increment financing; a $2.4 million low-interest loan through the city of Superior; transfer of county-owned land next to the airport; a $500,000 loan through the county; $30 million in New Market Tax Credits in 2012 and $60 million in future allocations; a $2 million loan through the state’s Small Business Credit Initiative Program; $18 million through the Wisconsin Housing and Economic Development Authority; and a $2 million economic development loan.
Even with that kind of money, Mr. Klapmeier admitted, “We know we still need a bunch more private capital. It takes a lot to get something like this done.” And Kestrel is still about three years away from winning Federal Aviation Administration certification to begin selling aircraft.
Rather than throw blame around, the governor, his staff and legislators ought to review the state’s many business incentives with an eye to strengthen what works and ditch what does not.
You got to know when to hold em, and know when to fold em…. Maine may have done well to let Kestrel walk. First and foremost, the Kestrel aircraft has not yet completed the FAA certification process and until they do they can’t sell the aircraft. Secondly, to my knowledge, they have not written orders for this aircraft. Finally, they still require additional capital. Given all of the above Kestrel’s success is not foreordained – they could easilly fold before the 600 jobs materialize. Maine will do better to focus on well-established business organizations with a history of success and stability.
Right on! This is the wrong business to prop up. Many competitors in this business. This aircraft is not certified and has zero sales. The chances of success and the employment of 600 workers is
very slim. This guy has no track record and is taking on several very savey and experienced aircraft manufactures. A great chance to lose taxpayer dollars; risk is way to high and time to pull out.
“This guy has no track record” Really where did you get that information? Alan
Klapmeier and his brother Dale founded Cirrus Design back in 1984 and went on to produce one of the best selling private planes ever the Cirrus SR 20 as well as the SR22. Klapmeier has been called the Steve Jobs of aviation.
If that’s the case, why doesn’t he use his own money to capitalize the business???
Because you don’t know how business works. The last thing you want to use is your own money. If your profit is more then the cost on the financing then you receive Higher Return on your Investment.
If I don’t know how business works, what have I been doing for the last 40 years, housework?
I just told you why you don’t want to use your own money to capitalize the business. If Profits are higher then the cost of the financing then you will get a better rate of return on your investment.
Just because you said it, doesn’t make it right.
I’ve been in business for nearly forty years, and these guys come and go, usually with some of our tax dollars, and sometimes with some of their vendors unpaid invoices.
Best selling. Worst safety and crash record.
Three years minimum until certification. Excessive breaks, tax or otherwise rarely pay off or make cost/benefit sense.
HMMM. I guess we will see on this matter. Either way Maine is not a player. We can’t all work at LL Bean.
You can if you move to China, the location of Bean’s newest factory! lol.
Nothing more precarious than the aircraft business. Our Governor will press forward for jobs and the Brunswick area is a marvelous place to locate a company. Good luck.
I agree. I’ve been involved with commercial aviation for 25 years and it isn’t an industry that Maine should spend too much money to attract to the state. A lot of money changes hands in aviation, but very little is profit. In Maine, you can make more money as an auto mechanic, than working on aircraft. Aviation is the canary in the coal mine for the economy, Wisconsin will be the loser in this deal.
There is only so much subsidy a state of 1.3 million citizens (a small city in many other states) can afford to put at risk to attract a private start-up business. In the final analysis it boils down to basic economics, regardless of who sits in the Blaine House.
Oh come now.. the Maine Maritime Academy educates 1/2 of its student body from out of state with a Maine taxpayer subsidy of $10,000 per year for each student who leave after graduation and Augusta calls it a flaming success. Trust me.. economics or viable business models are not a concern for the connected that benefit by incestual politics.
Yawn. One issue only, still?
Well that’s for education so it’s OK
The job creators want a handout or they move on. Thanks a bunch.
Not a hand out. The price of doing business in a post NAFTA environment. Play or move to China we already sold ourselves out in the 80’s. It’s a dog eat dog climate that turns into arguments that keeps Maine out of the mainstream. I guess we like it that way.
A plumber or factory would be fired if they prduced as little as the precious job creators have done in the last few years. The 1%ers are sitting on their cash unless their risk is brought to near zero with taxpayer dollars, and all the while they whine about taxes. I agree with your point in that we liquidated our economic infrastructure in the 80s, but if we compete with china on all levels, we’ll all be eating dog meat.
What? Are you trying to say that we can’t go head to head with people who work for $20 a week without a slight shift in our standard of living? lol. Turn “free” trade into fair trade while we still have one American left with a decent job. The top 1% have seen their wealth explode by 300% since our “public servants” held the door open for them to move their factories to China. They got huge campaign contributions and jobs for life, the rest of us got the shaft. Nice trade.
The government has created a risk free environment for business dollars in government debt. Why would anyone take a risk in an uncertain environment if all you need to get a return is lend your money to the government. If the government stopped borrowing then business would have to invest to get a better return. If there is no investment in the private sector blame government over spending.
How do you come up with that? Because the government spends money, No one invest?
It works like this. Banks loan to entities with the lowest risk. The lowest risk area of the economy is the US Government notes. In a year like 2010 when 42% of GDP was money spent by a government entity, much of which was borrowed money, that is where business and banks put their money to work. That left little money for the private sector. That shortness of capital allowed the banks to only loan money to the highest credit worthy business reducing their risk again. I am sure you have heard/read stories of how hard it is for small business to get a loan. This is a major factor.
Basic Keynsian thought was for short term government stimulus to spur certain sectors of the economy. The last stimulus failed for a number of reasons not the least of which was sucking the dollars out of the system into safer less risky investments.
I told you to keep LePage away from from all of this. I am sure they smelled a rat and ran away real fast.
Everytime he opens his mouth he screws something up. This is a fine example. Go ahead, hand the mike to Paul. Must be a good laugh somewhere in all this.
I guess you gotta adjust your business plan. If the state puts its subsidy dollars into papermills and such, you can kiss off the future. Now Maine can settle back and wait for somebody that wants to build a slim jim factory to come sniffing around. LePage has a solid background in slim jims.
Or how about a solar panel factory—we could get lots of federal bucks for that.
More Maine jobs lost. LePage you are truly pathetic. You had 600 jobs just waiting to move into Brunswick. They were there, in front of your nose and you just blew it again. I ask you LePage everyday now where are the Jobs you promised Maine? So tired of your Lies.
Wisconsin seems like a nice place to move to…………
I’ll help you pack.
You did not read the editorial did you?
It wasn’t in the cards. Good for Governor LePage for trying. Indeed in the end this may prove a blessing.
PR1492 is exactly right. No FAA certification, much less purchase contracts that lead to production order’s and they still need a bunch of cash to get the whole thing off the ground. Look at what Wisconsin had to give up, literally, to get them. The transfer of County owned land to a private company, and they’re not even in production yet, is especially troubling. In the event Kestrel goes under you can bet the farm that Kesterl is gonna use that land, now that they have clear title to it, as a cash asset in any bankruptcy proceeding’s. Wisconsin bought a pig in a poke and it is very likely gonna’ bite’em in the butt when ‘The Wheel’ comes around. As much as I dislke LePage’s tactic’s, this is one deal that he was smart to walk away from. What is needed, even more, is the same ‘smart’s’ the next time some business comes knocking.
If we are going to subsidize private business with state money, it should be existing businesses that already employ Mainers, not ones that only intend to employ Mainers, if successful.
Is this what the call free market capitalism, $118 million in tax breaks and government loans? Good example of a so-called “job creator.”
Where is the “Free Enterprise – Private Market” in all of this?
While small businesses, in the overwhelming instances, do it on their own — big business comes in and asks for an arm, leg, torso, first born and tax exemptions. This is now the American way.
The free enterprise moved to Wisconsin. Think it though, you’re a smart man, you can get it.
Guess you didn’t read the story, WI gave more “welfare” to the company than ME did.
Come on CPP you have more insight than an 18 year old drama queen retort. Use it.
Even Rusty wouldn’t have posted what Charley did!
Agree-corporations have taken over
The pleasure in so many comments that Kestrel will NOT be creating 600 jobs in Maine is symptomatic of the problem for anyone who does want to create a new business in Maine. How do you create new businesses, how do attract business from out of state, when there is such an investment in preventing either from happening? This translates into a blur in state government as it tries to encourage new business without encouraging it too much. If you look at a number of recent “efforts,” from Plum Creeks attempt to invest in Greenville, to LNG terminal proposals in Downeast Maine, to lobster processing in Prospect Harbor, to Jackson Labs moves out of state, to Kestrel in Brunswick, to . . . the list goes on, a common theme is that it is hard to do business in Maine because there are vested interests which will block or frustrate because they prefer the status quo. As a result Wisconsin can offer Kestrel what Maine doesn’t. As a result, years into the process Plum Creek is still arguing a business plan. LNG terminals and lobster processing in Downeast Maine are thwarted by Canadian competitors. How do we realize the challenge on which Governor LePage’s administration is based, that Maine must be open for business? What we know painfully is that it hasn’t been opened for business YET. Perhaps we need to question with all due respect, who benefits from this status quo and who pays the price?
Well said!
There are enemies amoung our elected and appointed authority figures that have agendas totally opposite to what would be good for our citizens.
Very well stated…..sometimes we the citizens are our own worst enemy……
Good question! Note CPPray’s comment below.
This sounded like a fly by night company.. It probably wouldn’t of gotten off the ground.. Imagine all those tax dollars given to that company and they never get a FAA approval.. That would of devastated Maine’s economy.. The founding fathers of Kestrel may be established as business elite but that doesn’t mean the company will thrive..
“Maine Open For Business””!
Its funny, When they announced that they were going to create those 600 jobs, everyone was saying that LaPage business incentive’s are doing exactly what he wanted, and they gave all the credit to LaPage, Now when they are moving somewhere else?
“Mr. Klapmeier said the company “didn’t try to play communities against one another. We told them, ‘This is what we need. Please come to us with what you can do.’ After that, it was more like a race to the finish,””
Mr. Klapmeier’s actions are the perfect definition of playing one community against another, which is exactly what he did.
Maine is well out of the Klapmeier clutches. He only has an uncertified design and a lot of hype to support his claim of 600 workers. The plant currently making the SR20 and the SR22 doesn’t employ 600 people.