Iowa plant gets $10M in incentives to stay but will cut jobs

The state of Iowa will give Flexsteel more than $2 million as part of a $10 million bid to keep the furniture-maker's plant in Dubuque and save most of the 218 jobs there.

Flexsteel announced in September that it planned to replace its 120-year-old factory but equivocated on where it would put its new plant. The news sparked months of talks between local and state officials lobbying to keep the plant in Iowa.

This month, the company announced plans to build a new factory in the Dubuque Industrial Center South and pledged to keep at least 200 workers there.

In total, Flexsteel will receive more than $10.2 million worth of state and local incentives — a number that tops 40 percent of the estimated $25 million construction costs of the new plant.

On Friday, the Iowa Economic Development Authority board approved a $2.1 million incentive package, which includes a $1 million forgivable loan and $1,043,200 in tax credits and refunds.

Board member Chris Murray acknowledged the loss of 18 jobs at Flexsteel's modern facility. But he said the gains of a new facility and a multimillion-dollar capital investment proved a "win-win" for the community and the company.

"While there is a net loss in jobs," he said, "I do want to note that everybody came together to recognize there is a greater good here."

In addition to the state award, a lengthy project agreement shows Flexsteel will receive:

• $6,545,600 from the city of Dubuque, an amount that includes a 10-year, $4.1 million tax increment financing rebate.
• $1,534,400 from Dubuque County in land discounts.
• $100,000 from Northeast Iowa Community College for workforce training.

The agreement involves a complex web of local incentives and land-purchasing agreements between the city, the county, Flexsteel and the nonprofit Dubuque Initiatives to ensure the demolition of Flexsteel's current plant and environmental remediation and marketing of the site for future use.

"It's arguably one of the most complex projects that our organization and our community has seen in years," said Daniel McDonald, vice president of existing business at Greater Dubuque Development Corp. 

Flexsteel is a key employer in the community, McDonald said, with some families sending four and five generations to the plant.

"Dubuque is Flexsteel and Flexsteel is Dubuque," he said.

Even with job losses, he said the community will benefit from keeping 200 jobs in the city.

As companies continue to invest in technology and efficiency, he said these sort of projects will become even more common among economic development groups.

"They could be anywhere, and they choose to be here," he said. "When you look at the direct impact — of not only the jobs, but the supply chain — it’s a huge benefit to the state and the people of Dubuque without question."

In September 2016, Flexsteel President and CEO Karel Czanderna announced plans to close the 1897-era factory, which the company described as inefficient and costly to maintain.

"We have identified several viable locations for manufacturing," he said in a news release. "With our corporate history and long-term commitment to the Dubuque community, the company desires to remain in the Dubuque area. However, before finalizing a decision regarding location, we must ensure we can operate in a new facility while remaining competitive in the market.”

CFO Timothy Hall said Flexsteel seriously considered opening in other locations, but that the company ultimately decided to stay put for two reasons:

"It’s a combination of the workers that we have in Dubuque — both union and nonunion. The skillset of the people we have is really important to us," Hall said, "and the ability to have some incentives that help us stay competitive in the marketplace that we serve."

In addition to an estimated $25 million in construction costs, state records show Flexsteel plans to spend $1,320,000 on land acquisition, $3 million on machinery and equipment and $6,320,000 in demolition and rehabilitation costs at the current factory's location.

Without the state and local incentives, "it would have been very difficult to do this," Hall said.