Senator Gerzofsky: Reflection on Kestrel

Hockey legend Wayne Gretzky once said, “You’ll always miss 100% of the shots you don’t take.”

I offer this quote as a simple analogy to the State of Maine’s recent dealings with Kestrel Aircraft. Better put, no one should blame the state for what was eventually Kestrel’s own decision. Maine did not blow a chance on this project; rather we took a shot at scoring.

It is important to remember that other states made significant offers on attracting Kestrel’s business. Wisconsin, Florida, Texas, and New Hampshire were at the table with offers much greater than Maine before Kestrel decided to come here. However, what the other states did not have was specific to Maine – an attractive location with on-site training programs through a partnership with the University of Maine and Southern Maine Community College at Brunswick Landing, existing infrastructure to meet the company needs, and other cluster composite sites in Brunswick and around the state.

As a result, the State of Maine was presented with a great economic opportunity to assist Kestrel with their expansion plans and worked diligently to make it happen. I believe it is important that we give credit where credit is due. Since it became known that Kestrel was having trouble locating additional federal New Market Tax Credit for investors to expand in Maine, I saw firsthand our federal delegation, the Governor and his staff, the Department of Economic and Community Development, and MRRA officials turn over every rock to support this effort.

Despite the public statements made by several prominent misinformed individuals about the deal, Kestrel was not chasing public grants around the country to support 100% of their capital needs, which were approximately $100 million. A project of their size requires a combination of private capital and governmental business incentives to be successful. The company had already raised cash and commitments of over $65 million in private equity and needed other programs to help them achieve their full capital needs, such as the federal New Markets Tax Credit Program, which allows investors to receive federal tax credits for investing capital into a company located in a qualified rural low-income community.

Unfortunately the original federal programs administered by CEI Capital Management, Inc. did not materialize as planned in Maine. Nonetheless, the state and MRRA were able to work collaboratively to put together a significant package for Kestrel’s consideration. In the end, however, the comprehensive package put forth by the State of Wisconsin, which involved significant participation by the local community, the county, and state government provided the necessary support Kestrel needed to survive that piece of their business. This is the reason behind Kestrel’s decision. Simply put, where Kestrel was known the best, they offered the most. Kestrel did business in Wisconsin, the owner went to school there, and they already had a connection to the state.

Maine had been consistent in its support and followed through with its agreed commitments to Kestrel. A compilation of the following resources were offered: Community Development Block Grant; a lease write-down rate; a commitment of direct building improvements; a commitment in tax revenue bonds; a deferral of rent payments until more New Market Tax Credits became available; a loan guarantee from the Finance Authority of Maine; a guarantee or letter of credit to assist the company’s efforts to secure its capital needs; and a private investor joined the state and others at the table ready to see the project through.

It is not because Maine did not try hard enough. We had no control over the decisions of CEI and the New Market Tax Credits for investors.

Now, let’s look ahead and recognize the “shots” we were able to score at Brunswick Landing, starting with Kestrel.

Kestrel will still have a major presence in our community and will continue to grow. The total job count will grow from the current 28 person total to between 100-plus employees by the end of 2014. The current average wage paid to Kestrel employees is over $67,000 per year. They will finish their planes, make all sales, delivery, plus maintenance, and future research and development here in Brunswick. The planes used for FAA certification will be completely built here as well. Brunswick is the face of Kestrel.

I can point to three legislative actions that fostered these economic opportunities: 1.) a bond package supported by the Legislature and approved by Maine voters; 2.) legislation to create the Brunswick Naval Air Station Job Increment Financing Fund; and 3.) legislation to exempt all aircraft and repair parts for aircraft from a state sales tax. These “tools” have positioned and enabled MRRA to move forward with successful redevelopment opportunities at Brunswick Landing.

Just the sales tax exemption on aircraft and repair parts for aircraft had an almost immediate impact to our state’s economy. As a result of the change, Brunswick Executive Airport started its operations; Oxford Aviation was encouraged to hire up to 20 more workers; C&L Aerospace in Bangor plans to conduct a $3 million expansion and double its workforce from 40 to 80; and the Maine Aviation Corporation in Portland announced it would be expand its airplane hangars and add at least 40 new jobs.

For the rest of Brunswick Landing, 2011 saw fifteen businesses move to the campus, employing over 117 jobs with a potential of creating up to 450 jobs. These are significant achievements for our state.

Looking ahead, it is incumbent that we build upon our many successes and also learn from the missed opportunity with the Kestrel expansion project. It is counterproductive to assign blame. For example, the state created its own version of New Market Tax Credits that will be controlled by the state to help better respond to Maine businesses looking to create quality jobs in our state. I am confident that by focusing on the future and moving Maine forward by working together, we can achieve greater economic opportunities.