June 18, 2018
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Failure to land Kestrel reveals flawed strategy of fawning for business

Pat Wellenbach | AP
Pat Wellenbach | AP
A ceremony at the Brunswick Naval Air Station marked the beginning of the process of redevelopment of the recently closed Navy property in Brunswick in February 2011.

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.

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