It's been about two years since Cirrus Design began having problems making rent to the city of Grand Forks, and while the company's made some payments, the amount it owes the city has increased.
As this story goes to print, the Duluth-based aircraft maker is still $1.27 million behind, which goes up to $1.35 million after Jan. 1, the due date for the next rent payment.
City officials with the Grand Forks Growth Fund, which owns the Industrial Park building that Cirrus rents, have discussed the company's back rent every month since September, and in the last meeting this month, they discussed their options in closed session.
One option is to evict Cirrus, but that's not on the table at all, said Doug Christensen, a City Council member who chairs the Growth Fund committee. The company provides "high-quality" jobs, he said, and has just fallen on hard times.
At its peak in 2006, Cirrus employed 330 in Grand Forks. It now employs a little more than 70.
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Optimists
The city is waiting now for financial data from the company to see when that trend might turn around and back rent is repaid, Christensen said. He expects that data at the next Growth Fund committee meeting in January.
Cirrus didn't return calls seeking comment, but its report to the committee in November suggested optimism. At the end of September, operations showed a loss of $8.3 million compared to a loss of $35.7 million the same time in 2009, a significant improvement.
And, while the general aviation industry as a whole was hit hard by the recession, Cirrus wasn't hit as hard, allowing its market share to surge to 37.1 percent, ahead of rival Cessna's 29.8 percent.
Christensen, too, seemed optimistic. The last week of December, the end of the tax year, is usually when consumers make the buying decision, he said, allowing them to write off depreciation for the year.
The company is also launching a small jet model next year, he said, which could mean more sales.
In the works
The problem for the city is it needs Cirrus' rent payment to pay the mortgage on its building, amounting to nearly $1 million a year.
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Urban Development Director Greg Hoover said the money's been coming out of other funds in his department.
City records show monthly rent payments of $84,500 became sporadic around January 2009. Cirrus has paid eight of 24 months' worth, meaning its repaid back rent as far as August 2009. That last payment happened in September. There's a separate quarterly payment for maintenance and operations of the building, but the company hasn't missed those.
Christensen said he and City Attorney Howard Swanson are talking with creditors to restructure the city's loans, which would allow Cirrus' rent to come down.
The city wouldn't be in this predicament if it had sold the building in the first place, Hoover said, but the buyer would likely be Cirrus and that's probably a ways down the road.
Growth Fund policy since about the time he came to work for the city in 2003 has been to get out of the building-ownership business if possible, he said, but the rub is it's not always possible.
Reach Tran at (701) 780-1248; (800) 477-6572, ext. 248; or send e-mail to ttran@gfherald.com .
