GRAND FORKS - FedEx will pay the Grand Forks Regional Airport Authority more than $2.7 million under an agreement the airport's board approved Thursday, Nov. 17, nine months after the company said it would move operations to Fargo.
FedEx recently shifted its air cargo operations from the Grand Forks International Airport to Fargo's Hector International Airport. The company, based in Memphis, Tenn., started flight service in and out of Fargo more than two weeks ago.
Grand Forks airport officials and FedEx began negotiating a deal to terminate FedEx's leases in May, three months after FedEx's plans became public. FedEx signed 10-year leases for two facilities at the Grand Forks airport in 2013.
Gary Malm, a member of the Airport Authority board, said the agreement was more than likely the best deal possible.
"We got it finished," he said after the meeting. "Now we have to find another use (for the facilities)."
The agreement the Airport Authority board approved Thursday requires FedEx to pay $2,753,775, about $1.8 million of which accounts for 75 percent of rent payments estimated to be due under the lease agreements plus projected inflation of 1.9 percent a year from Dec. 1 through March 31, 2023.
The remaining $924,500 is for the balance of the unrecovered costs the Airport Authority incurred in constructing an addition to one of the FedEx buildings. The payment is due before Dec. 1.
A memo from Airport Authority Executive Director Ryan Riesinger cites a number of benefits to the agreement, including reducing the stream of future rent payments to a one-time payment, eliminating the need to monitor FedEx's contractual obligations and allowing for the immediate occupancy of both former FedEx facilities by a prospective new tenant. The memo also notes the payment provides enough funds to defease, or pay off, bonds the airport took on to build an addition to one of FedEx's facilities, which eliminates the restrictions the bonds imposed on the use of the facility.
FedEx said in February the air cargo move would not affect the new FedEx Ground facility in the Grand Forks Business Park or the non-airport FedEx Express station here. The company has said the move to Fargo was made in an effort to operate more efficiently.
"This change gives us the ability to enhance services to our customers in North Dakota and northern Minnesota by providing earlier delivery and later pick-up times," company spokesman Jack Pfeiffer said Thursday.
FedEx also previously said their roughly 75 Grand Forks air cargo employees will be able to keep their jobs if they chose to. The company said in late October that it expected more than 30 of the Grand Forks workers to join the Fargo operation.
"All affected employees have been offered positions and have the additional option to bid on other open FedEx positions anywhere in the country," company spokesman Chris Allen said at the time.
FedEx's departure also means Grand Forks airport officials will have to operate on a tighter budget. The Airport Authority board finalized a 2017 budget in August that includes a 9.4 percent drop in operating revenue, due in part to a cut in landing fees from FedEx.
Riesinger said they have given a couple of tours to prospective tenants to fill FedEx's void, but there's "nothing firm as of yet." He also noted the airport was exploring the possibility of finding a non-aeronautical use for the short-term.
"Obviously, our long-term goal is to have the highest and best aeronautical use for both the airport and the community at-large," Riesinger said.
Ken Pawluk, chairman of the Municipal Airport Authority in Fargo, welcomed FedEx's decision to move south.
"It's too bad that they had to leave Grand Forks in order to come to Fargo," he said. "But I really have the sense that this was an economic issue."