Flexsteel Industries plans to keep its manufacturing operations — and at least 200 related jobs — in Dubuque, the company announced Friday.
Chief Financial Officer Tim Hall said the company plans to invest $28 million in a new facility in Dubuque Industrial Center South, with work slated to begin later this year. Production will be shifted from Flexsteel’s existing facility at 3400 Jackson St. to the new site in late summer or fall 2018.
The company currently employs 218 at the Jackson Street facility. Hall said the 200 jobs number at the new site is a “minimum,” noting that company officials may find efficiencies with a new, state-of-the-art operation.
Friday’s announcement comes nearly eight months after Flexsteel announced plans to close the Jackson Street facility, which was built in 1897.
Hall acknowledged that company officials examined other locations, but he said Dubuque’s workforce ultimately convinced Flexsteel to stay put.
“We were contacted by a lot of different places, and they offered a lot of different incentives,” he said. “I think we were able to negotiate fairly and strongly with the city, the county and Dubuque Initiatives.
“At the end of the day, what we had here that we don’t have in all those other places are the people. They are the folks who build our furniture every day and put things together.”
Flexsteel’s plans are contingent upon approval of multiple agreements involving the company, the City of Dubuque, Dubuque County, Dubuque Initiatives and Iowa Economic Development Authority. The total proposed incentive package for the company tops $10 million.
The agreements include a plan to demolish and redevelop the existing Jackson Street site.
Local officials praised the collaboration that occurred between the entities involved in the project.
“Companies like Flexsteel have a lot of options,” said Jay Wickham, chairman of the Dubuque County Board of Supervisors. “They can consolidate. They can relocate. They can potentially downsize or outsource to Mexico and China. Flexsteel chose to reinvest in Dubuque.”
NEW SITE ON SEIPPEL
Flexsteel would build its new facility on 22 acres along Seippel Road.
The site would come the company’s way via a pair of deals pending approval.
In the first, Dubuque County will purchase more than 25 acres from the City of Dubuque for $3.32 million. About 22 acres are located in Dubuque Industrial Center South, across Seippel Road from Verena Street Coffee and immediately east of Tri-State Quality Metals. The remaining 3.9 are located in Industrial Center West, near the county maintenance building.
The 22-acre parcel then will be sold to Blue Steel 1031 LLC, a Flexsteel-affiliated organization, for $1.3 million and serve as the future site for the company.
City documents show the facility will span at least 250,000 feet, but Hall said few specifics have been determined concerning the building’s design and layout.
“What we know is we’re still going to build the same products and we’re going to do it with the same wonderful group of employees that have been dedicated to us for a long time,” he said.
Flexsteel’s manufacturing operations in Dubuque include the blue steel spring and seating items for vehicles. Hall also noted that product design and development is done at the facility.
The new site is adjacent to where the Southwest Arterial will be constructed, a factor that Hall acknowledged played a role in Flexsteel’s decision.
“Obviously, the new infrastructure and things that are happening (in that part of Dubuque) make a difference as to where we’re locating,” he said.
Rick Dickinson, president and CEO of Greater Dubuque Development Corp., also hailed the investments in the arterial as an integral part of keeping Flexsteel.
“This is probably the first tangible payoff to the significant investment that has been made by the county, city and Iowa DOT in the Southwest Arterial,” he said.
Flexsteel also would continue to operate out of its corporate headquarters in the Port of Dubuque, where about 145 employees work.
DEMOLITION, THEN REHABILITATION
Though Flexsteel’s 100-plus-year-old facility soon will be vacant, it won’t be forgotten.
Woven into the agreements ensuring the company’s continued local presence are assurances that the old site doesn’t become a “43-acre cancer at the North End of Dubuque,” according to Dickinson.
“In most communities, all you focus on is where you’re going. You don’t pay attention to where you’re leaving,” he said. “What’s important about this agreement is they’re addressing both.”
A total of $5.8 million is expected to be available in a mitigation fund, which will be used to demolish the Jackson Street facility and clean up any environmental hazards. About $500,000 would come from the IEDA, and $2.6 million would come from Flexsteel.
The remainder will come from the city, which will contribute $660,000 from the $1.32 million land sale, and the county, which will pay up to $2 million over seven years.
Flexsteel will gift the Jackson Street property to the nonprofit Dubuque Initiatives, and the site will be rehabilitated. Asbestos will have to be removed, the building will be torn down and additional environmental cleanup actions might be necessary.
Dave Lyons, sustainable innovation consultant for GDDC, said that since some resources and benefits can’t be obtained by public entities, having a nonprofit in the loop can be a real windfall.
No potential tenants have been identified, but the site’s proximity to the Northwest Arterial will make it attractive to businesses, according to Dickinson. However, new tenants likely will have an industrial focus.
Though both the county and city are committing funds to site rehabilitation, the public contribution could be substantially lower.
Flexsteel’s $2.6 million will be expended first, along with any funds obtained through grants or forgivable loans.
“Once this property is cleaned up and shovel-ready and sold by Dubuque Initiatives … there’s a formula of reimbursement to the county and to the city and, most importantly, to the taxpayers,” Dickinson said.
The tentative deal preserving Flexsteel’s stay in Dubuque is a complex web of real estate transactions and tax benefits involving two municipalities, a state agency, a community college and an area nonprofit. Six development agreements detailing obligations and contingencies are expected to be signed in the coming weeks.
The $5.8 million in the escrow fund will be used by Dubuque Initiatives to raze the Jackson Street facility and prepare the site for redevelopment.
“One of our five strategic goals going forward is that we support the North End redevelopment,” said Doug Horstmann, president of Dubuque Initiatives. “This is a primary piece of real estate out there.”
The City of Dubuque also will provide tax-increment-financing incentives to Flexsteel, for rebates of up to $4.1 million over 10 years. That is contingent on Flexsteel maintaining the equivalent of 200 full-time jobs.
Flexsteel also is set to receive $100,000 in workforce training incentives from Northeast Iowa Community College. The Iowa Economic Development Authority will be asked to chip in $1 million in the form of a forgivable loan, $293,200 in investment tax credits and $750,000 through a sales, service and use tax refund.
According to a memo from City Manager Mike Van Milligen, the total incentive package is worth about $10.2 million.
“The (City) Council was really looking to get an agreement where jobs could be retained (and) where Flexsteel could be a profitable company domiciled in Dubuque,” Mayor Roy Buol said. “That was really the bottom line of everything we were trying to do.”
Hall, of Flexsteel, said he can “empathize” with the workers’ frustrations after months of uncertainty. But he is happy the company likely can follow through on its stated goal to remain in Dubuque.
“Flexsteel indicated in that first press release (regarding the decision to close the Jackson Street facility) our desire to stay in Dubuque, and that has not changed and that has not wavered one bit,” he said, adding, “I said, ‘Flexsteel is Dubuque, and Dubuque is Flexsteel.’ And I still believe that today.”
Flexsteel employees leaving the facility today at the end of their shifts shared their elation at the news — and their apprehension in recent months.
“We were supposed to have an answer by Feb. 5, but every month, it’s been pushed (back) another month, so I’m glad it’s over,” said 30-year employee Mike Gross. “The last six months have been pretty iffy as to whether they’re staying or whether they’re not.”
Customer Service Manager Kathy Hines, who has worked at Flexsteel for 45 years, said the deal really benefits longtime employees.
“I think it’s good for a lot of people because you have people who have been here for 20 or 30 years, and it would be harder for them to get hired elsewhere,” she said.
Class A dye setter Gordon Dossey said he was mowing his lawn when he got a call to come in for an important meeting this afternoon.
“Yeah, it was stressful, but a lot of us just remained positive,” Dossey said. “It’s a relief, a real relief.”
About 200 of the workers at the local manufacturing facility are union members. About 185 of them are members of Local 1861 of the United Steelworkers, according to union staff representative Jeff Hartford.
The union ratified a conditional agreement with Flexsteel in December, and the company initially stated that it would announce its decision in February.
Hartford said he and other members had no inkling as to Flexsteel’s plans prior to Friday afternoon. He added that members were “really relieved” the company’s operations would not be going elsewhere.
“For them, this has been several months of angst,” he said. “We had a lot of members who didn’t know whether to hang on (at Flexsteel) or quit and take another job. We are happy Flexsteel decided to stay in Dubuque and continue their legacy there.”
About one dozen workers are members of Teamsters Local 120, and three maintenance workers are represented by Local 234 of Operating Engineers.
Cheryl Arnold, business representative for Local 234, said members were “thrilled” to hear of Flexsteel’s decision.
“It has been a long process and one that has been put off a couple times,” Arnold said. “Today I am grateful that the employees and their families will get to stay in Dubuque. I know that they are very happy Flexsteel is staying.”
Molly Grover, president and CEO of Dubuque Area Chamber of Commerce, called the Flexsteel announcement “great news” for the employees at Flexsteel and for Dubuque as a whole.
“Manufacturing is really the engine of the economy,” she said. “One could argue no other sector creates more economic value or supports more additional jobs than manufacturing.”
Reporter Matthew Rezab contributed.