Anchored and Afloat

Posted on Oct 1, 2009 :: Development
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Posted by , Insight on Business Staff Writer

Fond du Lac remains Mercury Marine’s harbor

Sometimes it takes a big loss – or the threat of that loss – to make people realize what’s really important. The Fond du Lac area went through that process last month as the future of Mercury Marine’s manufacturing facilities, which employ about 850 in Fond du Lac, hung in the balance.

The recession, which cut into the outboard-engine maker’s sales, led to layoffs at the plant and an ultimatum from the company to its union manufacturing employees: accept contract concessions or production will be moved to a non-union plant in Stillwater, Okla. In late August, union members overwhelmingly voted not to accept the contract changes and Mercury announced it would begin moving manufacturing to Oklahoma.

State and local officials then stepped in with an incentive package worth $53 million if the company would stay – and union members would accept contract changes, which included wage and benefit concessions. Right before Labor Day, members of International Association of Machinists and Aerospace Workers Lodge 1947 approved the contract changes.

The move means that instead of losing 800 manufacturing jobs – and other 800-plus jobs at the company’s headquarters which could have also left Wisconsin – Fond du Lac will regain a couple hundred manufacturing jobs in the years to come as work shifts from the Oklahoma plant to Fond du Lac.

“We began working with the company last spring to find a way to keep them here. We’ve known for some time about the troubles Mercury has been facing and have worked with them to help find a solution,” says Brenda Hicks-Sorensen, president of the Fond du Lac County Economic Development Corporation. “We are grateful to the workers who approved the contract and to the local governments who have approved the incentive package.”

As part of the $53 million incentive package, Mercury Marine will receive $50 million in performance-base loans from the county if the company retains and adds jobs to the community. To help fund the loans, Fond du Lac County will institute a half-percent sales tax. The loan funds are geared toward new engine development, the relocation of Stillwater jobs to Fond du Lac and a retirement incentive payment to union workers.

As a performance-based loan, it includes a $500 credit per job retained and a $1,000 credit per job created. There is also a penalty to the company of $500 for each position not retained and if the company does not maintain their presence in the City of Fond du Lac and Fond du Lac County, the loan becomes due immediately. The agreement reached covers the next 12 years, with a cap of 2,900 jobs.

$3 MILLION FROM THE CITY
The City of Fond du Lac is providing up to $3 million to purchase land from Mercury Marine or through forgivable loans and grants from the city.

“We want to again voice our support not only for Mercury Marine as a whole but for each individual employee of the company. It is now time for us as a community and as individuals to step up and to demonstrate that support by doing our part,” according to a joint statement from Hicks-Sorensen, Fond du Lac County Executive Allen Buechel and Fond du Lac City Manager Tom Herre released with the incentive package details.

The threat of losing Mercury Marine, which has been a part of the local business community for more than 70 years, made many people realize just what a key role the company plays in the local economy, says Russ Kamphuis, president and chief executive officer and incoming chairman of the Fond du Lac County Economic Development Corp. board of directors.
“Virtually all businesses (would have been) affected (by the departure). Approximately 250 companies in Fond du Lac County provide products or services to Mercury Marine,” Kamphuis says. “The negative impact (would have been) felt in all communities in Fond du Lac County.”

In the weeks leading up to the union vote, local economic development officials released study results showing the county could have lost an estimated 5,900 jobs if Mercury Marine had left. That number is due to the direct impact on suppliers and the indirect impact on government and businesses as a result of the employees’ lost income. The annual loss of earnings was put at a staggering $353 million.

Thanks to the incentive package and the vote by union members, the Fond du Lac community is moving past those numbers and looking ahead to its largest employer adding up to 800 more jobs in the years to come.

NEW SALES TAX
Last month, the Fond du Lac County Board created a half-percent sales tax to help finance part of the incentive package to keep Mercury Marine in Fond du Lac. The $50 million is a low-interest loan, which Mercury Marine is expected to pay back within 12 years. If the company leaves Fond du Lac, the loan is immediately due. The sales tax helps cover the debt service gap between the interest rate paid by the county vs. the interest amount the county is charging Mercury Marine (2 percent).

At the end of the 12 years, the county board will have to decide whether it wants to repeal the tax or leave it in place to fund something else. How much does the new tax amount to? On a $100 purchase, it would be 50 cents.