Don Smith
Veteran
NWA falters on payments
DULUTH: DEDA hires a lawyer to pursue tax payments on Northwest's maintenance base.
BY PETER PASSI
NEWS TRIBUNE STAFF WRITER
The Duluth Economic Development Authority has a $340,000 problem.
Northwest Airlines hasn't paid taxes since May 2005 on the facility that was built for the carrier to service aircraft in Duluth. It opened in 1996.
DEDA relies on that tax revenue to service debt on the 180,000-square-foot maintenance base. The next bond payment on the facility is due Aug. 1, and the authority is scrambling to come up with the money.
At noon Monday, DEDA and the Duluth City Council will discuss how to fill the void.
Tom Cotruvo, DEDA's executive director, said the most likely stop-gap scenario involves borrowing from other tax-increment financing districts in the city. Ideally, this money would be repaid later.
DEDA has hired an attorney to pursue payments from Northwest, and Cotruvo said an airline representative said last week that the company intended to pay the property taxes it owes in Duluth. So far, no money has been received, and Cotruvo said that even if the carrier does cut a check, it probably won't arrive in time to meet the August bond payment.
Northwest did not respond to a request for comment on the matter Tuesday.
Genie Stark, finance director for the city of Duluth, said Northwest was expected to contribute about $556,000 toward bond payments this year but so far has provided nothing.
Most of that money would come from property tax collections, but the airline was to produce the remainder -- about $200,000 -- of the annual bond bill in the form of deficiency payments. Cotruvo said the airline has indicated it is unwilling to pay its deficiency payments.
"I'm going to cross my fingers and rely on city legal staff who say Northwest intends to pay its property taxes," DEDA's president Jim Stauber said. "As for the deficiency payments, I'm not in a position to hold my breath."
The state of Minnesota issued $16 million in bonds to build Northwest's Duluth maintenance base. But DEDA and the city of Duluth are obligated to service the debt. If they fail to, state aid to the city could be withheld, Stark said.
Northwest had pledged to employ at least 350 people at the Duluth facility, but the base essentially has sat idle since August 2005, when members of the Aircraft Maintenance Fraternal Association went on strike rather than accept deep cuts in staffing and pay Northwest proposed.
Less than one month later, the airline declared Chapter 11 bankruptcy. The company has continued to fly and is working to restructure its debt in the hope of emerging a stronger carrier.
"The maintenance base was a positive thing for Duluth," Stauber said. "But there's always a risk in these kinds of deals."
DULUTH: DEDA hires a lawyer to pursue tax payments on Northwest's maintenance base.
BY PETER PASSI
NEWS TRIBUNE STAFF WRITER
The Duluth Economic Development Authority has a $340,000 problem.
Northwest Airlines hasn't paid taxes since May 2005 on the facility that was built for the carrier to service aircraft in Duluth. It opened in 1996.
DEDA relies on that tax revenue to service debt on the 180,000-square-foot maintenance base. The next bond payment on the facility is due Aug. 1, and the authority is scrambling to come up with the money.
At noon Monday, DEDA and the Duluth City Council will discuss how to fill the void.
Tom Cotruvo, DEDA's executive director, said the most likely stop-gap scenario involves borrowing from other tax-increment financing districts in the city. Ideally, this money would be repaid later.
DEDA has hired an attorney to pursue payments from Northwest, and Cotruvo said an airline representative said last week that the company intended to pay the property taxes it owes in Duluth. So far, no money has been received, and Cotruvo said that even if the carrier does cut a check, it probably won't arrive in time to meet the August bond payment.
Northwest did not respond to a request for comment on the matter Tuesday.
Genie Stark, finance director for the city of Duluth, said Northwest was expected to contribute about $556,000 toward bond payments this year but so far has provided nothing.
Most of that money would come from property tax collections, but the airline was to produce the remainder -- about $200,000 -- of the annual bond bill in the form of deficiency payments. Cotruvo said the airline has indicated it is unwilling to pay its deficiency payments.
"I'm going to cross my fingers and rely on city legal staff who say Northwest intends to pay its property taxes," DEDA's president Jim Stauber said. "As for the deficiency payments, I'm not in a position to hold my breath."
The state of Minnesota issued $16 million in bonds to build Northwest's Duluth maintenance base. But DEDA and the city of Duluth are obligated to service the debt. If they fail to, state aid to the city could be withheld, Stark said.
Northwest had pledged to employ at least 350 people at the Duluth facility, but the base essentially has sat idle since August 2005, when members of the Aircraft Maintenance Fraternal Association went on strike rather than accept deep cuts in staffing and pay Northwest proposed.
Less than one month later, the airline declared Chapter 11 bankruptcy. The company has continued to fly and is working to restructure its debt in the hope of emerging a stronger carrier.
"The maintenance base was a positive thing for Duluth," Stauber said. "But there's always a risk in these kinds of deals."
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