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Agency Funding of Delta's Chisholm Call Center---A Boon or Bane for Minnesota Economy?

By Madhubanti Rudra, TMCnet Contributor

The Iron Range Resources & Rehabilitation Board (IRRRB), a Minnesota-based economic development agency that approved more than $10 million in financing for hundreds of projects, has now given the stamp of approval for a $5.9 million “forgivable” loan in favor of Delta Airlines. And as expected, extension of financial assistance to a profit-making privately owned company came with its fair share of controversy.

According to a news statement, the global aviation giant is going to utilize the loan to upgrade its northern Minnesota call center. The critics of the deal questioned the justification of using public dollars (IRRRB’s money comes from taxing the taconite mining industry in lieu of property taxes) to fund a privately owned company. Shouldn’t privately owned Delta invest in its own call center, questioned the critics.

It seems IRRRB was guided by its own logic while offering financial assistance to Delta Airlines.

First of all, while considering Delta’s request for financial assistance, IRRRB had to keep in mind the struggling economy, growing unemployment and competitive business landscape, where big companies find themselves in a better bargaining position. Corporations have often been ready to move out of a state when they felt that their demands were not fulfilled.

Then, IRRRB felt that the terms of the loan would help fulfill the state’s job creation goals. The expanded Chisholm facility, which already has 418 workers, is expected to add 107 jobs.

The terms of the loan states that Delta won't have to repay if it succeeds in accomplishing this goal.

However, one should not forget that Delta’s customer-call center in Chisholm is one of the company’s best performing facilities and houses one of the best workforces. The loan terms will require the aviation company to create 400 to 500-plus jobs that pay $22,000 to $48,000 apiece, plus benefits. And this is going to be a significant boost for the state of Minnesota, which, for years, has been making efforts to diversify its economy beyond mining and tourism.

“While it may be questioned in the broader state relationship with Delta, for the Iron Range, it makes sense. I think the agency probably looked at this as an important way to preserve jobs,” a development consultant on the Iron Range, former Gov. Tim Pawlenty, said.

“This is simply another example of a very positive cooperative partnership between the [Chisholm] customer-engagement center and IRRRB,” said Delta spokesman Russell Cason. “It's a mutually beneficial arrangement for Delta and IRRRB. We've been up there for 17 years, and this will keep us there for another 12 years. We will go from more than 400 to 500 employees. That's a $25 million annual payroll.”