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$550,000 from state helped to lure Pinnacle airline jobs

Minnesota pledged to pay Pinnacle for transferring headquarters to Twin Cities if the airline created 200 jobs.

April 15, 2013 at 3:54PM

Pinnacle was a partner of Northwest at the time this flight was leaving Minneapolis-St. Paul International Airport in 2004. Now Pinnacle is the commuter partner of Delta Airlines and expects to move its headquarters from Memphis to office space in a hangar tower at MSP. (Star Tribune/The Minnesota Star Tribune)

The state could end up paying $2,750 for each Pinnacle Airlines job when the carrier moves its headquarters to Minneapolis-St. Paul International Airport.

It's part of a package of financial incentives worked out by Minnesota governments to lure at least 200 jobs to the Twin Cities.

State officials said Friday that the Department of Employment and Economic Development (DEED) agreed to reward Pinnacle for moving its headquarters to the airport from Memphis. The deal calls for giving the airline a $550,000 forgivable loan that would, in effect, become a grant if the carrier makes good on promises to move 200 jobs here.

The state also agreed to consider giving job training grants to Pinnacle to improve skills of mechanics and other employees.

"It's on the table and could be valuable," said Blake Chaffee, a DEED spokesman.

The Metropolitan Airports Commission will lose some parking revenue by forgoing fees from Pinnacle employees and has agreed to pay $550,000 for improvements to the building that Pinnacle will occupy. But that payment would be offset by the state's contribution to Pinnacle, a partner and eventual subsidiary of Delta Air Lines. Delta now rents the building and will eventually reimburse the Airports Commission under the agreement.

DEED said government funding is a reality when vying with other states for business, as happened with Pinnacle.

"This is the nature of economic development," Chaffee said. "Minnesota has to compete. We don't have to give away the store."

Under state law, the DEED funding must be routed to Pinnacle through a city, and nearby Richfield agreed to be the conduit.

"Richfield would always be supportive of bringing more jobs into the area," said Richfield Assistant City Manager Pam Dmytrenko.

Pinnacle, a commuter partner of Delta, expects to move its headquarters in May from Memphis to vacant office space in a hangar tower at 34th Avenue S. and Interstate 494. The tower is leased by Delta from the Airports Commission.

Pinnacle is reorganizing through bankruptcy court. The airline said it decided to move to the Twin Cities after "an exhaustive evaluation of the most cost-effective option" and weighed pitches from Memphis and the state of Minnesota. Memphis and its business interests provided Pinnacle with incentives to attract the carrier to that city in 2010.

While Pinnacle expects to move its headquarters to Minneapolis-St. Paul airport in May, it will have two years to transfer the 200 jobs there and have the loan forgiven.

The $550,000 loan -- the equivalent of $2,750 for each of the 200 jobs -- is comparable to the state subsidy of the expanded Polaris plant in Chisago County. DEED announced last September that it was lending Polaris $400,000 that would be forgiven if Polaris created 150 jobs at the plant within two years. That amounted to $2,666 per new job.

Chaffee said DEED guidelines call for paying no more than $5,000 per job through forgivable loans.

The building that Pinnacle will occupy has been owned by the airport and leased to Delta. It has been mostly vacant for several years. "We're willing to put dollars into the building for improvements that would be paid back to the MAC over time," said the commission's executive director, Jeff Hamiel.

Pat Doyle • 612-673-4504