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Superior Joins State Efforts To Recover Loans Lost To Aircraft Company

City, WEDC Out Millions In Loans Issued For 600 Jobs Never Created

Jed Carlson/Superior Telegram (Courtesy of WCIJ)

The Superior City Council decided Tuesday to join with the state in efforts to recover millions in loans awarded to an aircraft company for jobs that never materialized. The Wisconsin Economic Development Corp. said it would pursue legal action against Kestrel Aircraft Company last fall.

Kestrel Aircraft Company was issued $4 million in loans by the state in addition to a $2.6 million loan it received from the city of Superior and a roughly half-million-dollar loan from Douglas County. The governments announced their support in 2012 with the hopes the company would build an airplane manufacturing facility for its single-engine turboprop plane, the Kestrel 350. The deal was anticipated to create more than 600 jobs in Superior. However, the company employs a fraction of those workers and hasn’t made loan payments since late 2016.

Wisconsin Public Radio first reported in 2015 that the state signed off on the deal without proper review despite reservations surrounding the risk of the project.

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Superior Mayor Jim Paine said it’s better for the city to join with the state in any legal challenge against the company.

“The fact is the state had a much larger stake in this project then the city did so it would be surprising if they didn’t pursue their interest,” he said. “But, we definitely were following their lead on it because they were in first position on the loan. I think it’s a wise decision to join with them, to recognize that everyone that went in on this project is going to go forward together even if going forward isn’t very pleasant.”

Paine said the company reached out to the city, asking them not to join any lawsuit filed by the state.

“We tried for a very long time to work with the Kestrel organization to build a project in Superior. Failing that, we want them to repay the loan we made in good faith. That’s really our only interest,” he said. “If Kestrel were to reach out even today with the money that they owe us, I think the world changes quite a bit. That’s all we’re really asking for because that’s money that belongs to citizens of Superior.”

There is about $2 million outstanding on the city’s loan. A spokesman with WEDC released an updated statement this week, saying the agency has not yet gone to court to recover the money. However, WEDC went on to say it will “pursue any and all remedies available to protect the state’s investment.”

A spokeswoman with Kestrel Aircraft Company and its parent company, One Aviation, declined to comment on Tuesday.

Kestrel’s outstanding loans make up just over one third of the total uncollected past due loan amounts for the agency. WEDC had $9,815,078 in potentially uncollectible loan amounts that were 90 days or more past due as of Sept. 30, 2017.