by April Scheinoha
Reporter
The three local government entities approved Arctic Cat’s request for a 15-year tax abatement to aid in its $25.7 million expansion plans.
The Thief River Falls City Council, Thief River Falls School Board and Pennington County Board separately approved the request after a joint public hearing Tuesday, May 12 at the Joint Operations Facility. The tax abatement is not to exceed a total of $2.2 million over the 15-year term. Commissioner Cody Hempel, who is employed at Arctic Cat, didn’t attend the hearing due to a perceived conflict of interest.
“We’re very appreciative and thank everyone who has helped us to get this far,” said Dennis Buckley from Arctic Cat.
Also in attendance was Ann Marie Woessner-Collins with commercial real estate firm Jones Lang LaSalle Americas Inc. She said the team did a nice job representing the city and was creative in helping Arctic Cat. Woessner-Collins said she would definitely bring others to Thief River Falls to look at other projects.
Buckley said Arctic Cat plans to expand in order to operate a new paint line in a building that will be constructed in an open area on its property. A company news release indicated that expansion will aid its growth in the field of recreational off-highway vehicles.
According to online county tax documents and a public hearing notice, the building will be constructed at Arctic Cat’s current site along Brooks Avenue.
In a prior interview with the Northern Watch, Woessner-Collins said construction would start immediately after Arctic Cat’s announcement. She also indicated that Arctic Cat considered the cities of St. Cloud; Fargo, N.D.; Des Moines; and Sioux Falls, S.D., as well as Thief River Falls for the expansion project that will now occur here.
At the Thief River Falls plant, employees currently paint metal parts using equipment close to 50 years old. They paint 23,000 parts per day during the peak of the season. Buckley said they want to increase that amount to 33,000 parts. The new system would be a more correct system. Both the new and old paint systems would be in operation for a few months until eventually the old system would be phased out.
Arctic Cat plans to expand in Thief River Falls by 27,000 to 70,000 square feet over the next three years. It is anticipated that the expansion will lead to the creation of 39 additional full-time jobs and the retention of 150 jobs. The facility modernization and paint-line project was contingent on the approval of local incentives and a development agreement. Arctic Cat indicated that the project is expected to generate close to $2 billion in economic value for the state and Thief River Falls over the next 15 years.
Prior to the joint public hearing, the government entities received no written comments pertaining to the tax abatement. No one from the public spoke at the hearing.
Arctic Cat currently pays $123,572 in taxes annually on the parcel, according to online county tax documents. With this approval, taxes will be abated for the additional square footage. Over the 15-year term of the tax abatement, it is expected that up to $690,000 in city taxes would be abated, up to $1,070,000 in county taxes would be abated and up to $520,000 in school district taxes would be abated.
Arctic Cat has also requested funding from the Minnesota Department of Employment and Economic Development for the Thief River Falls project. It is seeking at least $850,000 from both the Minnesota Investment Fund and the Job Creation Fund.
St. Cloud facility
In a press release, Arctic Cat also announced that it plans an estimated $400,000 project to expand assembly capability at its St. Cloud engine manufacturing facility. That project would add about 10 positions.
“We are excited to strengthen our Minnesota manufacturing footprint and position the company for continued long-term success,” said Arctic Cat President and CEO Christopher Metz in the press release. “We will be adding a new state-of-the-art production line in Thief River Falls and expanding our engine manufacturing operations in St. Cloud in order to meet the demand for our innovative, quality products. We are grateful to the local leadership of Thief River Falls and St. Cloud, and the state of Minnesota, for their support as we invest in our shared future.”
Earnings
Arctic Cat’s formal announcement pertaining to its plans came the same day that it reported net earnings of $4.9 million for fiscal year 2015. A year earlier, it was $39.4 million.
In a press release, Metz said Arctic Cat plans to rightsize its “core North America ATV dealer inventory levels during fiscal 2016.” Net sales in fiscal year 2016 are expected to be $690 million to $705 million.