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MDC recommends to amend Trace Engines agreement
by Courtney Bacalso
Midland Reporter-Telegram
- Admendment would cut the number of new full-time jobs created this year from 35 to 20.
By Courtney Bacalso
Staff Writer
Trace Engines officials Friday cite lack of personnel with sufficient engineering talent and experience as the reason they will not be able to meet the Midland Development Corp.'s benchmarks for this year.
At the aviation engine company's request, the MDC will recommend City Council amend the economic development agreement with the company, which was reached in 2006.
Instead of creating 35 new full-time jobs in 2008, the proposed amendment would reduce that number to 20.
"The lack of engineers has made the developing process slow," said Buddy Sipes, a board member for Trace. "We are a year behind in getting full-time production started."
The company, owned by 30 investors, makes 600 horsepower Orenda engines for business and utility planes.
It received about $1 million in incentives from the MDC and a Texas Enterprise Fund grant, officials said.
According to the 2006 agreement, the MDC provided a $400,000 interest-free, forgivable loan to Trace Engines. It also posted with Trace Engines an irrevocable letter of credit of beginning at $400,000, a figure that's reduced every year thereafter.
Terms of the agreement require Trace Engines to reach benchmarks for the number of new positions each year.
By the end of this year, Trace was scheduled to deliver 35 new jobs with an average annual salary of at least $51,000.
However, officials said they don't think it will happen.
David Czarnecki, the company's new chief operating officer who started this month, said the challenges in developing the technology lie in the lack of aviation engineers in the area.
"Unlike the Ohio and Florida, we don't have a large concentration of aerospace engineers," said the new COO, who used to work at Lockheed Martin, General Electric and Pratt & Whitney. "So, we have had to rely on consultants."
The company is using seven consultants -- including some who travel back and forth between Midland and Florida, Czarnecki added.
The lack of expertise had added to the delay in the company receiving its certificate for production, Sipes said.
Since they do not have their certificate, all the engines must be built with a Federal Aviation Administration representative overseeing the process.
Czarnecki said oversight has made the unit cost extremely high.
Trace officials said they will be able to get the certificate in six months.
"Once we do that, we can begin full production," he said. "And we already have people lined up for the jobs that will come with that through our partnership at Midland College."
Czarnecki said they already have started looking for experienced engineers to add to the existing 16 full-time staff.
"The interview process will be fairly quick," he said. "But moving them out here will probably take six to eight weeks."
MDC Chairman Doug Henson said he understood the company's obstacles.
Because the company already has invested $18 million -- exceeding the MDC's requirement of nearly $7.9 million -- to start up the company, Henson said he has no problem making the recommendation.
However, the recommendation doesn't change the future benchmarks Trace Engines needs to meet, including a total of 114 jobs by 2013.
John Ohnemiller, assistant city attorney, said he anticipates the resolution to be ready for City Council to consider by Aug. 12.
Sipes said they will wait for the city's decision before they begin negotiations with the state, which had set the same employment benchmarks as the city for its enterprise fund grant.
Courtney Bacalso can be reached at c.bacalso@mrt.com.
By Courtney Bacalso
Staff Writer
Trace Engines officials Friday cite lack of personnel with sufficient engineering talent and experience as the reason they will not be able to meet the Midland Development Corp.'s benchmarks for this year.
At the aviation engine company's request, the MDC will recommend City Council amend the economic development agreement with the company, which was reached in 2006.
Instead of creating 35 new full-time jobs in 2008, the proposed amendment would reduce that number to 20.
"The lack of engineers has made the developing process slow," said Buddy Sipes, a board member for Trace. "We are a year behind in getting full-time production started."
The company, owned by 30 investors, makes 600 horsepower Orenda engines for business and utility planes.
It received about $1 million in incentives from the MDC and a Texas Enterprise Fund grant, officials said.
According to the 2006 agreement, the MDC provided a $400,000 interest-free, forgivable loan to Trace Engines. It also posted with Trace Engines an irrevocable letter of credit of beginning at $400,000, a figure that's reduced every year thereafter.
Terms of the agreement require Trace Engines to reach benchmarks for the number of new positions each year.
By the end of this year, Trace was scheduled to deliver 35 new jobs with an average annual salary of at least $51,000.
However, officials said they don't think it will happen.
David Czarnecki, the company's new chief operating officer who started this month, said the challenges in developing the technology lie in the lack of aviation engineers in the area.
"Unlike the Ohio and Florida, we don't have a large concentration of aerospace engineers," said the new COO, who used to work at Lockheed Martin, General Electric and Pratt & Whitney. "So, we have had to rely on consultants."
The company is using seven consultants -- including some who travel back and forth between Midland and Florida, Czarnecki added.
The lack of expertise had added to the delay in the company receiving its certificate for production, Sipes said.
Since they do not have their certificate, all the engines must be built with a Federal Aviation Administration representative overseeing the process.
Czarnecki said oversight has made the unit cost extremely high.
Trace officials said they will be able to get the certificate in six months.
"Once we do that, we can begin full production," he said. "And we already have people lined up for the jobs that will come with that through our partnership at Midland College."
Czarnecki said they already have started looking for experienced engineers to add to the existing 16 full-time staff.
"The interview process will be fairly quick," he said. "But moving them out here will probably take six to eight weeks."
MDC Chairman Doug Henson said he understood the company's obstacles.
Because the company already has invested $18 million -- exceeding the MDC's requirement of nearly $7.9 million -- to start up the company, Henson said he has no problem making the recommendation.
However, the recommendation doesn't change the future benchmarks Trace Engines needs to meet, including a total of 114 jobs by 2013.
John Ohnemiller, assistant city attorney, said he anticipates the resolution to be ready for City Council to consider by Aug. 12.
Sipes said they will wait for the city's decision before they begin negotiations with the state, which had set the same employment benchmarks as the city for its enterprise fund grant.
Courtney Bacalso can be reached at c.bacalso@mrt.com.
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aTaxpayer wrote on Jul 26, 2008 7:23 AM:
Trace should be big enough to give the money back. "