ADVERTISEMENT

ADVERTISEMENT

Emails show long-running discussion over FedEx departure

With an email last May 1 titled "confidential sensitive information," former Grand Forks Regional Airport Authority Executive Director Patrick Dame gave his board some bad news.

2386364+031316.n.gfh_.fedex3_.jpg
A FedEx plane lifts off recently at the Grand Forks International Airport. photo by Eric Hylden/Grand Forks Herald

With an email last May 1 titled "confidential sensitive information," former Grand Forks Regional Airport Authority Executive Director Patrick Dame gave his board some bad news. FedEx had called that afternoon to inform him the company is "changing their route structure in North Dakota, and therefore, they are pulling out of the Grand Forks International Airport." While subsequent emails indicate the shipper hadn't yet committed to the change, his declaration later proved true: FedEx plans to move its air service from Grand Forks to Hector International Airport in Fargo later this year, in what a company spokeswoman said was an effort to "operate even more efficiently." The move means Grand Forks airport officials now must figure out how to manage without a company that helps bring in about 16 percent of the airport's annual operating revenue.
 Emails between Memphis, Tenn.-based FedEx Corp. and officials from both Grand Forks and Fargo airports, obtained by the Herald through open records requests, show internal discussions in preparation for the move over the past 10 months. But what it may cost FedEx to terminate its Grand Forks lease is unclear. In a letter to the Herald included with the results of the newspaper's open records request, the new Grand Forks Regional Airport Authority Executive Director Ryan Riesinger said "litigation is not unanticipated," and therefore it would be "imprudent" to provide any document prepared by or at the direction of the authority's attorney "related to the Airport Authority's remedies in the event of FedEx's default under the leases." "While it would be the Airport Authority's desire to resolve any event of default by FedEx without resort to the courts, litigation is frequently necessary in order for a lessor to exercise its remedies upon the lessee's default," Riesinger wrote on March 5. Records FedEx's announced move to Fargo has disappointed local business leaders, but some officials said it didn't come out of the blue. A 2011 Herald story about the company's upcoming lease expiration in Grand Forks notes FedEx often looks at its operations. "It's one of those cycles that we continually go through to look at our operations and make sure they are the best they can be," FedEx spokesman Scott Fiedler said at the time. Ultimately, FedEx signed 10-year leases with the Grand Forks Airport Authority in 2013 for two facilities owned by the authority, one being its operational facility and the other being its maintenance building. In one email, Dame said last year's notice was the second instance in his time with the airport that FedEx had analyzed the numbers between Grand Forks and Fargo, "and it has been analyzed several more times before that." But the emails don't show why this time around was any different. [[{"type":"media","view_mode":"media_large","fid":"2386370","attributes":{"alt":"A FedEx plane lifts off recently at the Grand Forks International Airport. photo by Eric Hylden/Grand Forks Herald","class":"media-image","height":"301","title":"","typeof":"foaf:Image","width":"480"}}]] The first email included in the Herald's open records request from Hector International Airport was April 23, 2015. It came from Darrell Wodowski, a senior airport properties representative for FedEx, to Shawn Dobberstein, the Fargo Municipal Airport Authority's executive director, with a prenegotiation letter attached. "Thanks for taking my phone call this afternoon," Wodowski said. "As discussed, if the terms of the transactions can be agreed to, FedEx would like to begin jet service at Hector International Airport in the near future." But even after months of discussions about infrastructure and other matters following that initial conversation, Dobberstein told the Herald it wasn't until almost a month ago-Feb. 17-that he got word FedEx had confirmed it was coming to Fargo. "Up until that time, (I) had no idea because we've heard it before and nothing ever happened," he said. Last May 20, after a conference call with Wodowski, Dame reported to Airport Authority board members the two had discussed what FedEx would need to pay for breaking its leases. "I stressed to Darrell Wodowski that we really did not desire to provide them with a number and stressed that we would rather have them remaining in Grand Forks," Dame wrote. "He appreciated, understood and really just wants the number. There was not much interest in talking about ways to keep them here." Dame, who left Grand Forks to take a job as the director of the airport in Rapid City, S.D., in the fall of 2015, deferred comment last week to officials at the Grand Forks airport. Wodowski did not return a message seeking comment last week. Replacing the revenue It's unclear exactly how much of a hit the airport's finances will take as a result of FedEx's departure. Mary Jo Crystal, the airport's director of finance and administration, said FedEx and related ancillary services account for roughly $700,000 of the Airport Authority's annual operating revenue, or roughly 16 percent. But the actual effect of FedEx's departure will be more clear once airport management knows when the company plans to leave Grand Forks "and how and when they will make the obligated payments per the agreement," Riesinger said. In his May 1 email to Airport Authority board members, Dame said FedEx is "critical to the financial well-being of the airport, however, we have worked hard to diversify revenue over the past several years to brace for a potential pullout of FedEx." Karl Bollingberg, chairman of the Grand Forks Regional Airport Authority Board, said they've had some "preliminary discussions" about how they will move forward on the budget. He expects further conversations on finances in the coming months as they prepare to finalize a budget in July. "Today, I don't have a quick answer to replace the revenue," Bollingberg said. "And so I think as we go through our budget work, we're going to have to have a balanced approach." Klaus Thiessen, president and CEO of the Grand Forks Region Economic Development Corp., said he and two other staff members toured the FedEx facilities earlier this month "just to know what we have available" before talking to any prospective tenants. As for businesses who use the FedEx air service, Bollingberg and Thiessen said they have heard disappointment over the move, but not necessarily concerns about how those business' operations would be affected. Dave Doherty, president and chief operating officer of the Thief River Falls-based electronic components distributor Digi-Key Electronics, said he's not expecting any changes to the company's current pickup and delivery times as a result of FedEx's changes. "Would we like to see our partners closer to us in Thief River Falls? Generally speaking, of course we would," he said. "But these companies need to run their businesses, and so we'll rely on them to make the best decisions for themselves as long as they can continue to service us in the manner they have been or improve upon the service." FedEx's changes to its air operations won't affect the new FedEx Ground facility in the Grand Forks Business Park. The roughly 75 air service employees will be able to keep their jobs if they choose, FedEx spokeswoman Jennifer Caccavo Cordeau said last month. "This change gives us the ability to enhance service to our customers in North Dakota and northern Minnesota by providing earlier delivery and later pick-up times," she said at the time, adding the "adjustment is similar to others we've made over the last several years as part of our continual goal to provide the best service possible." Buyout? What FedEx would need to pay the Grand Forks Regional Airport Authority to break its leases was source of discussion after the shipper initially said it would move to Fargo.  Last year, in a June 25 letter to Wodowski, Dame said FedEx would default on both of its leases if it stopped using aircraft in support of its air cargo operations for 30 days. He notes that FedEx requested it be allowed to use the sort facility for a "nonaeronautical use," but the Airport Authority board had "no interest" in that, citing the building's easy access to almost all public airport facilities and the Federal Aviation Administration's opinion that the property is too valuable for nonaeronautical purposes. Moreover, the discontinuation of jet service would mean the Airport Authority would exercise its right under the leases to increase building rent from $3 to $10 per square foot for the remainder of the lease. "Any consideration of a one-time payment by FedEx to 'buy out' the remaining term of both leases will need to address the increased building rent rate for the remainder of the lease terms," Dame wrote. In an Aug. 20 email to Airport Authority board member Steve Kuhlman, Dame said the authority reduced FedEx's building rents on both facilities and took on bonds to support the company's 2,812-square-foot addition to one of its facilities when it signed new leases in 2013. On the latter point, the lease requires that the company pay the authority for "any amount not paid for on the facility" if jet service leaves, which by the then-anticipated pullout date of June 2016 would be $927,450, Dame said. "As the Airport Authority has expressed in the past, we desire to continue to have FedEx use the Grand Forks International Airport as the North Dakota Air/Ground sort facility hub," Dame wrote to FedEx on June 25. "If that is not possible, we would appreciate your cooperation as FedEx's use and occupancy of the leased premises may change in the future and result in the Airport Authority's exercise of rights that were negotiated and agreed upon when the lease agreements were renegotiated two years ago." Riesinger said past management and the Airport Authority board "did a good job of protecting the airport in the event of a FedEx default of the agreement." Asked whether FedEx planned to pay a one-time buyout of its lease in Grand Forks and if so, how much that would be, Caccavo Cordeau said, "We have a lease agreement in place and plan to meet that obligation. We don't disclose details of our property agreements." In Fargo On Feb. 23, a week after news broke that FedEx would move to Fargo, Dobberstein asked his Airport Authority board to approve a lease amendment and extension with Kansas-based MDC Corp., which owns the facilities that will be leased to FedEx. The lease amendment approved by the board expanded the MDC footprint from 59,923 square feet to 131,164 square feet, according to meeting minutes. Fargo airport officials expected the first FedEx aircraft to arrive on Oct. 30.  While the Fargo Airport Authority is not providing FedEx with any incentives such as landing fee waivers or abated ground rents, Dobberstein said MDC may apply for a property tax exemption from the city of Fargo. Jerry Dean, owner of MDC, did not return messages seeking comment late last week. Emails show Dean reached out to officials at the Greater Fargo/Moorhead Economic Development Corp. in Oct. 2015 with questions about possible economic incentives. Dobberstein said he expects Fargo's Airport Authority will spend $1.4 million to $1.5 million for infrastructure to accommodate FedEx. "It's just something that I guess any airport would be delighted to accommodate," Dobberstein said of FedEx. "We're fortunate that they decided to expand their operation here to this part of the state."With an email last May 1 titled "confidential sensitive information," former Grand Forks Regional Airport Authority Executive Director Patrick Dame gave his board some bad news. FedEx had called that afternoon to inform him the company is "changing their route structure in North Dakota, and therefore, they are pulling out of the Grand Forks International Airport." While subsequent emails indicate the shipper hadn't yet committed to the change, his declaration later proved true: FedEx plans to move its air service from Grand Forks to Hector International Airport in Fargo later this year, in what a company spokeswoman said was an effort to "operate even more efficiently." The move means Grand Forks airport officials now must figure out how to manage without a company that helps bring in about 16 percent of the airport's annual operating revenue. [[{"type":"media","view_mode":"media_large","fid":"2386367","attributes":{"alt":"A FedEx jet is de-iced at the Grand Forks International Airport Thursday morning. photo by Eric Hylden/Grand Forks Herald","class":"media-image","height":"480","title":"","typeof":"foaf:Image","width":"357"}}]] Emails between Memphis, Tenn.-based FedEx Corp. and officials from both Grand Forks and Fargo airports, obtained by the Herald through open records requests, show internal discussions in preparation for the move over the past 10 months. But what it may cost FedEx to terminate its Grand Forks lease is unclear. In a letter to the Herald included with the results of the newspaper's open records request, the new Grand Forks Regional Airport Authority Executive Director Ryan Riesinger said "litigation is not unanticipated," and therefore it would be "imprudent" to provide any document prepared by or at the direction of the authority's attorney "related to the Airport Authority's remedies in the event of FedEx's default under the leases." "While it would be the Airport Authority's desire to resolve any event of default by FedEx without resort to the courts, litigation is frequently necessary in order for a lessor to exercise its remedies upon the lessee's default," Riesinger wrote on March 5. Records FedEx's announced move to Fargo has disappointed local business leaders, but some officials said it didn't come out of the blue. A 2011 Herald story about the company's upcoming lease expiration in Grand Forks notes FedEx often looks at its operations. "It's one of those cycles that we continually go through to look at our operations and make sure they are the best they can be," FedEx spokesman Scott Fiedler said at the time. Ultimately, FedEx signed 10-year leases with the Grand Forks Airport Authority in 2013 for two facilities owned by the authority, one being its operational facility and the other being its maintenance building. In one email, Dame said last year's notice was the second instance in his time with the airport that FedEx had analyzed the numbers between Grand Forks and Fargo, "and it has been analyzed several more times before that." But the emails don't show why this time around was any different.
 The first email included in the Herald's open records request from Hector International Airport was April 23, 2015. It came from Darrell Wodowski, a senior airport properties representative for FedEx, to Shawn Dobberstein, the Fargo Municipal Airport Authority's executive director, with a prenegotiation letter attached. "Thanks for taking my phone call this afternoon," Wodowski said. "As discussed, if the terms of the transactions can be agreed to, FedEx would like to begin jet service at Hector International Airport in the near future." But even after months of discussions about infrastructure and other matters following that initial conversation, Dobberstein told the Herald it wasn't until almost a month ago-Feb. 17-that he got word FedEx had confirmed it was coming to Fargo. "Up until that time, (I) had no idea because we've heard it before and nothing ever happened," he said. Last May 20, after a conference call with Wodowski, Dame reported to Airport Authority board members the two had discussed what FedEx would need to pay for breaking its leases. "I stressed to Darrell Wodowski that we really did not desire to provide them with a number and stressed that we would rather have them remaining in Grand Forks," Dame wrote. "He appreciated, understood and really just wants the number. There was not much interest in talking about ways to keep them here." Dame, who left Grand Forks to take a job as the director of the airport in Rapid City, S.D., in the fall of 2015, deferred comment last week to officials at the Grand Forks airport. Wodowski did not return a message seeking comment last week. Replacing the revenue It's unclear exactly how much of a hit the airport's finances will take as a result of FedEx's departure. Mary Jo Crystal, the airport's director of finance and administration, said FedEx and related ancillary services account for roughly $700,000 of the Airport Authority's annual operating revenue, or roughly 16 percent. But the actual effect of FedEx's departure will be more clear once airport management knows when the company plans to leave Grand Forks "and how and when they will make the obligated payments per the agreement," Riesinger said. In his May 1 email to Airport Authority board members, Dame said FedEx is "critical to the financial well-being of the airport, however, we have worked hard to diversify revenue over the past several years to brace for a potential pullout of FedEx." Karl Bollingberg, chairman of the Grand Forks Regional Airport Authority Board, said they've had some "preliminary discussions" about how they will move forward on the budget. He expects further conversations on finances in the coming months as they prepare to finalize a budget in July. "Today, I don't have a quick answer to replace the revenue," Bollingberg said. "And so I think as we go through our budget work, we're going to have to have a balanced approach." Klaus Thiessen, president and CEO of the Grand Forks Region Economic Development Corp., said he and two other staff members toured the FedEx facilities earlier this month "just to know what we have available" before talking to any prospective tenants. As for businesses who use the FedEx air service, Bollingberg and Thiessen said they have heard disappointment over the move, but not necessarily concerns about how those business' operations would be affected. Dave Doherty, president and chief operating officer of the Thief River Falls-based electronic components distributor Digi-Key Electronics, said he's not expecting any changes to the company's current pickup and delivery times as a result of FedEx's changes. "Would we like to see our partners closer to us in Thief River Falls? Generally speaking, of course we would," he said. "But these companies need to run their businesses, and so we'll rely on them to make the best decisions for themselves as long as they can continue to service us in the manner they have been or improve upon the service." FedEx's changes to its air operations won't affect the new FedEx Ground facility in the Grand Forks Business Park. The roughly 75 air service employees will be able to keep their jobs if they choose, FedEx spokeswoman Jennifer Caccavo Cordeau said last month. "This change gives us the ability to enhance service to our customers in North Dakota and northern Minnesota by providing earlier delivery and later pick-up times," she said at the time, adding the "adjustment is similar to others we've made over the last several years as part of our continual goal to provide the best service possible." Buyout? What FedEx would need to pay the Grand Forks Regional Airport Authority to break its leases was source of discussion after the shipper initially said it would move to Fargo.  Last year, in a June 25 letter to Wodowski, Dame said FedEx would default on both of its leases if it stopped using aircraft in support of its air cargo operations for 30 days. He notes that FedEx requested it be allowed to use the sort facility for a "nonaeronautical use," but the Airport Authority board had "no interest" in that, citing the building's easy access to almost all public airport facilities and the Federal Aviation Administration's opinion that the property is too valuable for nonaeronautical purposes. Moreover, the discontinuation of jet service would mean the Airport Authority would exercise its right under the leases to increase building rent from $3 to $10 per square foot for the remainder of the lease. "Any consideration of a one-time payment by FedEx to 'buy out' the remaining term of both leases will need to address the increased building rent rate for the remainder of the lease terms," Dame wrote. In an Aug. 20 email to Airport Authority board member Steve Kuhlman, Dame said the authority reduced FedEx's building rents on both facilities and took on bonds to support the company's 2,812-square-foot addition to one of its facilities when it signed new leases in 2013. On the latter point, the lease requires that the company pay the authority for "any amount not paid for on the facility" if jet service leaves, which by the then-anticipated pullout date of June 2016 would be $927,450, Dame said. "As the Airport Authority has expressed in the past, we desire to continue to have FedEx use the Grand Forks International Airport as the North Dakota Air/Ground sort facility hub," Dame wrote to FedEx on June 25. "If that is not possible, we would appreciate your cooperation as FedEx's use and occupancy of the leased premises may change in the future and result in the Airport Authority's exercise of rights that were negotiated and agreed upon when the lease agreements were renegotiated two years ago." Riesinger said past management and the Airport Authority board "did a good job of protecting the airport in the event of a FedEx default of the agreement." Asked whether FedEx planned to pay a one-time buyout of its lease in Grand Forks and if so, how much that would be, Caccavo Cordeau said, "We have a lease agreement in place and plan to meet that obligation. We don't disclose details of our property agreements." In Fargo On Feb. 23, a week after news broke that FedEx would move to Fargo, Dobberstein asked his Airport Authority board to approve a lease amendment and extension with Kansas-based MDC Corp., which owns the facilities that will be leased to FedEx. The lease amendment approved by the board expanded the MDC footprint from 59,923 square feet to 131,164 square feet, according to meeting minutes. Fargo airport officials expected the first FedEx aircraft to arrive on Oct. 30.  While the Fargo Airport Authority is not providing FedEx with any incentives such as landing fee waivers or abated ground rents, Dobberstein said MDC may apply for a property tax exemption from the city of Fargo. Jerry Dean, owner of MDC, did not return messages seeking comment late last week. Emails show Dean reached out to officials at the Greater Fargo/Moorhead Economic Development Corp. in Oct. 2015 with questions about possible economic incentives. Dobberstein said he expects Fargo's Airport Authority will spend $1.4 million to $1.5 million for infrastructure to accommodate FedEx. "It's just something that I guess any airport would be delighted to accommodate," Dobberstein said of FedEx. "We're fortunate that they decided to expand their operation here to this part of the state."With an email last May 1 titled "confidential sensitive information," former Grand Forks Regional Airport Authority Executive Director Patrick Dame gave his board some bad news.FedEx had called that afternoon to inform him the company is "changing their route structure in North Dakota, and therefore, they are pulling out of the Grand Forks International Airport."While subsequent emails indicate the shipper hadn't yet committed to the change, his declaration later proved true: FedEx plans to move its air service from Grand Forks to Hector International Airport in Fargo later this year, in what a company spokeswoman said was an effort to "operate even more efficiently." The move means Grand Forks airport officials now must figure out how to manage without a company that helps bring in about 16 percent of the airport's annual operating revenue.
 Emails between Memphis, Tenn.-based FedEx Corp. and officials from both Grand Forks and Fargo airports, obtained by the Herald through open records requests, show internal discussions in preparation for the move over the past 10 months. But what it may cost FedEx to terminate its Grand Forks lease is unclear.In a letter to the Herald included with the results of the newspaper's open records request, the new Grand Forks Regional Airport Authority Executive Director Ryan Riesinger said "litigation is not unanticipated," and therefore it would be "imprudent" to provide any document prepared by or at the direction of the authority's attorney "related to the Airport Authority's remedies in the event of FedEx's default under the leases.""While it would be the Airport Authority's desire to resolve any event of default by FedEx without resort to the courts, litigation is frequently necessary in order for a lessor to exercise its remedies upon the lessee's default," Riesinger wrote on March 5.RecordsFedEx's announced move to Fargo has disappointed local business leaders, but some officials said it didn't come out of the blue. A 2011 Herald story about the company's upcoming lease expiration in Grand Forks notes FedEx often looks at its operations."It's one of those cycles that we continually go through to look at our operations and make sure they are the best they can be," FedEx spokesman Scott Fiedler said at the time.Ultimately, FedEx signed 10-year leases with the Grand Forks Airport Authority in 2013 for two facilities owned by the authority, one being its operational facility and the other being its maintenance building.In one email, Dame said last year's notice was the second instance in his time with the airport that FedEx had analyzed the numbers between Grand Forks and Fargo, "and it has been analyzed several more times before that." But the emails don't show why this time around was any different.[[{"type":"media","view_mode":"media_large","fid":"2386370","attributes":{"alt":"A FedEx plane lifts off recently at the Grand Forks International Airport. photo by Eric Hylden/Grand Forks Herald","class":"media-image","height":"301","title":"","typeof":"foaf:Image","width":"480"}}]] The first email included in the Herald's open records request from Hector International Airport was April 23, 2015. It came from Darrell Wodowski, a senior airport properties representative for FedEx, to Shawn Dobberstein, the Fargo Municipal Airport Authority's executive director, with a prenegotiation letter attached."Thanks for taking my phone call this afternoon," Wodowski said. "As discussed, if the terms of the transactions can be agreed to, FedEx would like to begin jet service at Hector International Airport in the near future."But even after months of discussions about infrastructure and other matters following that initial conversation, Dobberstein told the Herald it wasn't until almost a month ago-Feb. 17-that he got word FedEx had confirmed it was coming to Fargo."Up until that time, (I) had no idea because we've heard it before and nothing ever happened," he said.Last May 20, after a conference call with Wodowski, Dame reported to Airport Authority board members the two had discussed what FedEx would need to pay for breaking its leases."I stressed to Darrell Wodowski that we really did not desire to provide them with a number and stressed that we would rather have them remaining in Grand Forks," Dame wrote. "He appreciated, understood and really just wants the number. There was not much interest in talking about ways to keep them here."Dame, who left Grand Forks to take a job as the director of the airport in Rapid City, S.D., in the fall of 2015, deferred comment last week to officials at the Grand Forks airport. Wodowski did not return a message seeking comment last week.Replacing the revenueIt's unclear exactly how much of a hit the airport's finances will take as a result of FedEx's departure.Mary Jo Crystal, the airport's director of finance and administration, said FedEx and related ancillary services account for roughly $700,000 of the Airport Authority's annual operating revenue, or roughly 16 percent. But the actual effect of FedEx's departure will be more clear once airport management knows when the company plans to leave Grand Forks "and how and when they will make the obligated payments per the agreement," Riesinger said.In his May 1 email to Airport Authority board members, Dame said FedEx is "critical to the financial well-being of the airport, however, we have worked hard to diversify revenue over the past several years to brace for a potential pullout of FedEx."Karl Bollingberg, chairman of the Grand Forks Regional Airport Authority Board, said they've had some "preliminary discussions" about how they will move forward on the budget. He expects further conversations on finances in the coming months as they prepare to finalize a budget in July."Today, I don't have a quick answer to replace the revenue," Bollingberg said. "And so I think as we go through our budget work, we're going to have to have a balanced approach."Klaus Thiessen, president and CEO of the Grand Forks Region Economic Development Corp., said he and two other staff members toured the FedEx facilities earlier this month "just to know what we have available" before talking to any prospective tenants.As for businesses who use the FedEx air service, Bollingberg and Thiessen said they have heard disappointment over the move, but not necessarily concerns about how those business' operations would be affected.Dave Doherty, president and chief operating officer of the Thief River Falls-based electronic components distributor Digi-Key Electronics, said he's not expecting any changes to the company's current pickup and delivery times as a result of FedEx's changes."Would we like to see our partners closer to us in Thief River Falls? Generally speaking, of course we would," he said. "But these companies need to run their businesses, and so we'll rely on them to make the best decisions for themselves as long as they can continue to service us in the manner they have been or improve upon the service."FedEx's changes to its air operations won't affect the new FedEx Ground facility in the Grand Forks Business Park. The roughly 75 air service employees will be able to keep their jobs if they choose, FedEx spokeswoman Jennifer Caccavo Cordeau said last month."This change gives us the ability to enhance service to our customers in North Dakota and northern Minnesota by providing earlier delivery and later pick-up times," she said at the time, adding the "adjustment is similar to others we've made over the last several years as part of our continual goal to provide the best service possible."Buyout?What FedEx would need to pay the Grand Forks Regional Airport Authority to break its leases was source of discussion after the shipper initially said it would move to Fargo. Last year, in a June 25 letter to Wodowski, Dame said FedEx would default on both of its leases if it stopped using aircraft in support of its air cargo operations for 30 days. He notes that FedEx requested it be allowed to use the sort facility for a "nonaeronautical use," but the Airport Authority board had "no interest" in that, citing the building's easy access to almost all public airport facilities and the Federal Aviation Administration's opinion that the property is too valuable for nonaeronautical purposes.Moreover, the discontinuation of jet service would mean the Airport Authority would exercise its right under the leases to increase building rent from $3 to $10 per square foot for the remainder of the lease."Any consideration of a one-time payment by FedEx to 'buy out' the remaining term of both leases will need to address the increased building rent rate for the remainder of the lease terms," Dame wrote.In an Aug. 20 email to Airport Authority board member Steve Kuhlman, Dame said the authority reduced FedEx's building rents on both facilities and took on bonds to support the company's 2,812-square-foot addition to one of its facilities when it signed new leases in 2013. On the latter point, the lease requires that the company pay the authority for "any amount not paid for on the facility" if jet service leaves, which by the then-anticipated pullout date of June 2016 would be $927,450, Dame said."As the Airport Authority has expressed in the past, we desire to continue to have FedEx use the Grand Forks International Airport as the North Dakota Air/Ground sort facility hub," Dame wrote to FedEx on June 25. "If that is not possible, we would appreciate your cooperation as FedEx's use and occupancy of the leased premises may change in the future and result in the Airport Authority's exercise of rights that were negotiated and agreed upon when the lease agreements were renegotiated two years ago."Riesinger said past management and the Airport Authority board "did a good job of protecting the airport in the event of a FedEx default of the agreement."Asked whether FedEx planned to pay a one-time buyout of its lease in Grand Forks and if so, how much that would be, Caccavo Cordeau said, "We have a lease agreement in place and plan to meet that obligation. We don't disclose details of our property agreements."In FargoOn Feb. 23, a week after news broke that FedEx would move to Fargo, Dobberstein asked his Airport Authority board to approve a lease amendment and extension with Kansas-based MDC Corp., which owns the facilities that will be leased to FedEx.The lease amendment approved by the board expanded the MDC footprint from 59,923 square feet to 131,164 square feet, according to meeting minutes. Fargo airport officials expected the first FedEx aircraft to arrive on Oct. 30. While the Fargo Airport Authority is not providing FedEx with any incentives such as landing fee waivers or abated ground rents, Dobberstein said MDC may apply for a property tax exemption from the city of Fargo. Jerry Dean, owner of MDC, did not return messages seeking comment late last week.Emails show Dean reached out to officials at the Greater Fargo/Moorhead Economic Development Corp. in Oct. 2015 with questions about possible economic incentives.Dobberstein said he expects Fargo's Airport Authority will spend $1.4 million to $1.5 million for infrastructure to accommodate FedEx."It's just something that I guess any airport would be delighted to accommodate," Dobberstein said of FedEx. "We're fortunate that they decided to expand their operation here to this part of the state."With an email last May 1 titled "confidential sensitive information," former Grand Forks Regional Airport Authority Executive Director Patrick Dame gave his board some bad news.FedEx had called that afternoon to inform him the company is "changing their route structure in North Dakota, and therefore, they are pulling out of the Grand Forks International Airport."While subsequent emails indicate the shipper hadn't yet committed to the change, his declaration later proved true: FedEx plans to move its air service from Grand Forks to Hector International Airport in Fargo later this year, in what a company spokeswoman said was an effort to "operate even more efficiently." The move means Grand Forks airport officials now must figure out how to manage without a company that helps bring in about 16 percent of the airport's annual operating revenue.[[{"type":"media","view_mode":"media_large","fid":"2386367","attributes":{"alt":"A FedEx jet is de-iced at the Grand Forks International Airport Thursday morning. photo by Eric Hylden/Grand Forks Herald","class":"media-image","height":"480","title":"","typeof":"foaf:Image","width":"357"}}]] Emails between Memphis, Tenn.-based FedEx Corp. and officials from both Grand Forks and Fargo airports, obtained by the Herald through open records requests, show internal discussions in preparation for the move over the past 10 months. But what it may cost FedEx to terminate its Grand Forks lease is unclear.In a letter to the Herald included with the results of the newspaper's open records request, the new Grand Forks Regional Airport Authority Executive Director Ryan Riesinger said "litigation is not unanticipated," and therefore it would be "imprudent" to provide any document prepared by or at the direction of the authority's attorney "related to the Airport Authority's remedies in the event of FedEx's default under the leases.""While it would be the Airport Authority's desire to resolve any event of default by FedEx without resort to the courts, litigation is frequently necessary in order for a lessor to exercise its remedies upon the lessee's default," Riesinger wrote on March 5.RecordsFedEx's announced move to Fargo has disappointed local business leaders, but some officials said it didn't come out of the blue. A 2011 Herald story about the company's upcoming lease expiration in Grand Forks notes FedEx often looks at its operations."It's one of those cycles that we continually go through to look at our operations and make sure they are the best they can be," FedEx spokesman Scott Fiedler said at the time.Ultimately, FedEx signed 10-year leases with the Grand Forks Airport Authority in 2013 for two facilities owned by the authority, one being its operational facility and the other being its maintenance building.In one email, Dame said last year's notice was the second instance in his time with the airport that FedEx had analyzed the numbers between Grand Forks and Fargo, "and it has been analyzed several more times before that." But the emails don't show why this time around was any different.
 The first email included in the Herald's open records request from Hector International Airport was April 23, 2015. It came from Darrell Wodowski, a senior airport properties representative for FedEx, to Shawn Dobberstein, the Fargo Municipal Airport Authority's executive director, with a prenegotiation letter attached."Thanks for taking my phone call this afternoon," Wodowski said. "As discussed, if the terms of the transactions can be agreed to, FedEx would like to begin jet service at Hector International Airport in the near future."But even after months of discussions about infrastructure and other matters following that initial conversation, Dobberstein told the Herald it wasn't until almost a month ago-Feb. 17-that he got word FedEx had confirmed it was coming to Fargo."Up until that time, (I) had no idea because we've heard it before and nothing ever happened," he said.Last May 20, after a conference call with Wodowski, Dame reported to Airport Authority board members the two had discussed what FedEx would need to pay for breaking its leases."I stressed to Darrell Wodowski that we really did not desire to provide them with a number and stressed that we would rather have them remaining in Grand Forks," Dame wrote. "He appreciated, understood and really just wants the number. There was not much interest in talking about ways to keep them here."Dame, who left Grand Forks to take a job as the director of the airport in Rapid City, S.D., in the fall of 2015, deferred comment last week to officials at the Grand Forks airport. Wodowski did not return a message seeking comment last week.Replacing the revenueIt's unclear exactly how much of a hit the airport's finances will take as a result of FedEx's departure.Mary Jo Crystal, the airport's director of finance and administration, said FedEx and related ancillary services account for roughly $700,000 of the Airport Authority's annual operating revenue, or roughly 16 percent. But the actual effect of FedEx's departure will be more clear once airport management knows when the company plans to leave Grand Forks "and how and when they will make the obligated payments per the agreement," Riesinger said.In his May 1 email to Airport Authority board members, Dame said FedEx is "critical to the financial well-being of the airport, however, we have worked hard to diversify revenue over the past several years to brace for a potential pullout of FedEx."Karl Bollingberg, chairman of the Grand Forks Regional Airport Authority Board, said they've had some "preliminary discussions" about how they will move forward on the budget. He expects further conversations on finances in the coming months as they prepare to finalize a budget in July."Today, I don't have a quick answer to replace the revenue," Bollingberg said. "And so I think as we go through our budget work, we're going to have to have a balanced approach."Klaus Thiessen, president and CEO of the Grand Forks Region Economic Development Corp., said he and two other staff members toured the FedEx facilities earlier this month "just to know what we have available" before talking to any prospective tenants.As for businesses who use the FedEx air service, Bollingberg and Thiessen said they have heard disappointment over the move, but not necessarily concerns about how those business' operations would be affected.Dave Doherty, president and chief operating officer of the Thief River Falls-based electronic components distributor Digi-Key Electronics, said he's not expecting any changes to the company's current pickup and delivery times as a result of FedEx's changes."Would we like to see our partners closer to us in Thief River Falls? Generally speaking, of course we would," he said. "But these companies need to run their businesses, and so we'll rely on them to make the best decisions for themselves as long as they can continue to service us in the manner they have been or improve upon the service."FedEx's changes to its air operations won't affect the new FedEx Ground facility in the Grand Forks Business Park. The roughly 75 air service employees will be able to keep their jobs if they choose, FedEx spokeswoman Jennifer Caccavo Cordeau said last month."This change gives us the ability to enhance service to our customers in North Dakota and northern Minnesota by providing earlier delivery and later pick-up times," she said at the time, adding the "adjustment is similar to others we've made over the last several years as part of our continual goal to provide the best service possible."Buyout?What FedEx would need to pay the Grand Forks Regional Airport Authority to break its leases was source of discussion after the shipper initially said it would move to Fargo. Last year, in a June 25 letter to Wodowski, Dame said FedEx would default on both of its leases if it stopped using aircraft in support of its air cargo operations for 30 days. He notes that FedEx requested it be allowed to use the sort facility for a "nonaeronautical use," but the Airport Authority board had "no interest" in that, citing the building's easy access to almost all public airport facilities and the Federal Aviation Administration's opinion that the property is too valuable for nonaeronautical purposes.Moreover, the discontinuation of jet service would mean the Airport Authority would exercise its right under the leases to increase building rent from $3 to $10 per square foot for the remainder of the lease."Any consideration of a one-time payment by FedEx to 'buy out' the remaining term of both leases will need to address the increased building rent rate for the remainder of the lease terms," Dame wrote.In an Aug. 20 email to Airport Authority board member Steve Kuhlman, Dame said the authority reduced FedEx's building rents on both facilities and took on bonds to support the company's 2,812-square-foot addition to one of its facilities when it signed new leases in 2013. On the latter point, the lease requires that the company pay the authority for "any amount not paid for on the facility" if jet service leaves, which by the then-anticipated pullout date of June 2016 would be $927,450, Dame said."As the Airport Authority has expressed in the past, we desire to continue to have FedEx use the Grand Forks International Airport as the North Dakota Air/Ground sort facility hub," Dame wrote to FedEx on June 25. "If that is not possible, we would appreciate your cooperation as FedEx's use and occupancy of the leased premises may change in the future and result in the Airport Authority's exercise of rights that were negotiated and agreed upon when the lease agreements were renegotiated two years ago."Riesinger said past management and the Airport Authority board "did a good job of protecting the airport in the event of a FedEx default of the agreement."Asked whether FedEx planned to pay a one-time buyout of its lease in Grand Forks and if so, how much that would be, Caccavo Cordeau said, "We have a lease agreement in place and plan to meet that obligation. We don't disclose details of our property agreements."In FargoOn Feb. 23, a week after news broke that FedEx would move to Fargo, Dobberstein asked his Airport Authority board to approve a lease amendment and extension with Kansas-based MDC Corp., which owns the facilities that will be leased to FedEx.The lease amendment approved by the board expanded the MDC footprint from 59,923 square feet to 131,164 square feet, according to meeting minutes. Fargo airport officials expected the first FedEx aircraft to arrive on Oct. 30. While the Fargo Airport Authority is not providing FedEx with any incentives such as landing fee waivers or abated ground rents, Dobberstein said MDC may apply for a property tax exemption from the city of Fargo. Jerry Dean, owner of MDC, did not return messages seeking comment late last week.Emails show Dean reached out to officials at the Greater Fargo/Moorhead Economic Development Corp. in Oct. 2015 with questions about possible economic incentives.Dobberstein said he expects Fargo's Airport Authority will spend $1.4 million to $1.5 million for infrastructure to accommodate FedEx."It's just something that I guess any airport would be delighted to accommodate," Dobberstein said of FedEx. "We're fortunate that they decided to expand their operation here to this part of the state."

What To Read Next
Exclusive
Originally founded in Memphis, Buff City Soap is bringing two locations to North Dakota. The store carries plant-based soaps which are made in-house at each store.
While traffic has roughly doubled since 2020 — the heart of the pandemic, when there were 14.9 million passengers — it’s still not at pre-pandemic levels: In 2019, there were 39.6 million passengers.
The facility has 35,000 square feet nestled between Dollar Tree and Aldi in south Grand Forks.
It’s not the first time DEDCO has stepped in to try to save a local necessity in Drayton. In 2012, DEDCO completed a similar project to draw a restaurant back to the town.