Northwest Airlines proved very good at working Minnesota for hundreds of millions in government assistance in the years after its debt-heavy buyout led by financiers Al Checchi and Gary Wilson in 1989.
Now, Atlanta-based Delta Air Lines, which acquired NWA in 2008, is proving equally adept, albeit on a smaller scale.
Earlier this month, the Iron Range Resources and Rehabilitation Board (IRRRB), the northeastern Minnesota economic development agency that’s funded by taconite taxes in lieu of property taxes, gave Delta a $5.9 million “forgivable” loan to renovate and expand Delta’s customer-call center in Chisholm.
The call center was built nearly 20 years ago with local, public money.
“There was … and is no state money in this deal,” said IRRRB Commissioner Tony Sertich of the Chisholm call center project. “It was all our [IRRRB] local dollars, just as it is today. And Delta has agreed to add more than 100 jobs.”
They may not be state dollars, but they are public dollars.
And shouldn’t privately owned Delta, a global aviation player, invest in its own call center? After all, Delta says Chisholm is among its best performers, in a tip of the hat to a great workforce.
Sertich, a former DFL lawmaker appointed by Gov. Mark Dayton, said the loan requires that Delta boost employment from 400 to 500-plus jobs that pay $22,000 to $48,000 apiece, plus benefits.
“Delta is wise in asking for financial assistance,” noted Sandy Layman, the former IRRRB commissioner under Gov. Tim Pawlenty, and now a development consultant on the Iron Range. “While it may be questioned in the broader state relationship with Delta, for the Iron Range, it makes sense. I think the agency probably looked at this as an important way to preserve jobs.”
And big, global corporations are good at threatening and moving facilities if they don’t get what they want.
Sertich’s board seeks to further diversify northeastern Minnesota’s economy beyond mining and tourism. The IRRRB has subsidized a couple other call centers.
We should question the richness of this package. Typically, public agencies put in a percentage of the total investment pie and are matched or exceeded by private dollars, or give a tax abatement in return for a big investment in buildings and people.
For example, in August, Scott County and the city of Shakopee approved a $3 million tax incentive package in return for California-based Shutterfly building a $60 million plant that is supposed to employ more than 300 full-time workers.
Meanwhile, locally owned Lutsen Mountains, the resort business near Grand Marais, has received about $500,000 from the IRRRB of the roughly $20 million it has used to upgrade and expand its business over the past several years. Most of the capital came from private owners and a nearby bank. That’s usually how it’s done. Of course, Lutsen Mountains can’t move jobs to Atlanta.
Admittedly, the Iron Range needs all the good jobs it can get. However, handing Delta — which took over one of Minnesota’s flagship companies — such a rich package gives me the chills.
“This is simply another example of a very positive cooperate partnership between the [Chisholm] customer-engagement center and IRRRB,” said Delta spokesman Russell Cason from Atlanta. “It’s a mutually beneficial arrangement for Delta and IRRRB. We’ve been up there for 17 years, and this will keep us there for another 12 years. We will go from more than 400 to 500 employees. That’s a $25 million annual payroll.’’
Cason said the airline is also committed to spending 70 percent of the construction funds on local contractors.
Delta claims it still employs about 12,000 Minnesotans. NWA had something closer to 13,000 just after the 2008 takeover was announced. And Delta predicted about 1,000 jobs would be lost as a result of the merger.
Cason said Delta’s 12,000-employment number includes “subsidiaries, partners and affiliates” including Compass Airlines and Endeavor, which fly commuter flights under the Delta name.
Suffice it to say, the Twin Cities lost hundreds of good-paying jobs when Delta absorbed NWA and moved key functions to Atlanta. The state applied for a $2.6 million federal grant in 2010 to help retrain about 700 former NWA employees who sought assistance.
Meanwhile, Endeavor Air Inc., the formerly bankrupt Pinnacle Airlines that is now a Delta commuter subsidiary, last summer moved its headquarters from Memphis to vacant space at what is now Delta’s regional headquarters at the Twin Cities airport. Endeavor plans to employ more than 200 Minnesotans.
Being a headquarters town for a Delta subsidiary or Delta’s regional hub packs neither the economic or community impact of a Fortune 500 company such as the former NWA.
But we’ll take the jobs, thanks.
Meanwhile, the Minnesota Department of Employment and Economic Development last winter agreed to a $550,000 forgivable loan to Endeavor. If it maintains certain employment levels.