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Senate, House Approve Deal To Keep Helicopter Production In Connecticut

by | Sep 28, 2016 1:30pm
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Posted to: Business, Corporate Watch, The Economy, Manufacturing Sector, Energy, Jobs, Labor, State Capitol, Stratford

Christine Stuart photo

Senate President Martin Looney

(Updated 5:02 p.m.) There was bipartisan consensus Wednesday that the $220 million economic incentive package for Lockheed Martin to continue helicopter production in Connecticut is a good deal for taxpayers.

The Senate approved the deal on a 35-1 vote. Sen. Joe Markley, R-Southington was the lone vote against it. The House approved it 136-6.

The 14-year deal will allow the state to give the defense manufacturer $140 million in grants and $80 million in sales tax offsets. The state will put the $140 million on its credit card, which will cost an additional $30 million in debt service over the life of the bonds.

A majority of Senators said that’s a small price to pay for what Connecticut will get in return.

Senate President Martin Looney, D-New Haven, said there’s a “substantial danger of the loss of employment at Sikorsky” with the phasing out of Blackhawk helicopter production. He said Lockheed Martin, which has fewer ties to Connecticut than Sikorsky, could have chosen to build 200 CH-53K King Stallion Helicopters anywhere in the country or the world, but it decided to stay because of the quality of Connecticut’s workforce and a rich tradition of manufacturing.

Looney said the loss of high-paying jobs in the state has hindered its recovery from the Great Recession and the jobs that will be created and retained pay around $90,000. He said those workers will be paying state income taxes.

Gov. Dannel P. Malloy’s administration estimated that the deal will inject an estimated $384.4 million a year in tax revenue for a total of $6.54 billion by 2032.

Lockheed Martin, which purchased Sikorsky in November 2015 for $9 billion, employs 7,855 workers at its Connecticut facilities. In order to receive the full value of the package it will have to add 177 jobs to increase its total number to 8,032 by 2032. However, it will be able to access most of the funding even if it lays off some of its workforce, maintaining no less than 6,500 jobs.

But lawmakers on both sides of the political aisle said it was more important to play good defense and stop the manufacturer from moving helicopter production to states like Florida or South Carolina, two states where Lockheed Martin already has facilities and labor costs are lower.

“We have to do a deal like this,” Sen. L. Scott Frantz, R-Greenwich, said. “It’s not corporate welfare by any stretch of the imagination.”

He said the number of employees involved with this company and the multiplier impact on the manufacturing and aerospace supply chain are significant.

The deal, according to Malloy administration officials who started talks with the company in June, will invest $744.8 million in the supply chain of small manufacturers. Malloy administration officials suggest that the investment is expected to create about 24,601 jobs.

Christine Stuart photo

Senate Minority Leader Len Fasano

“While we should feel relieved this deal in all likelihood is going to go through,” Frantz said, “I don’t think we should consider this a victory.”

Markley, who voted against the deal, said he disagrees that it’s not corporate welfare.

“I don’t know what else you can call it but corporate welfare when you give a corporation hundreds of millions of dollars,” Markley said.

He said he’s heard Republicans say it’s not fair to choose winners and losers, but as far as this deal is concerned the argument seems to be, “we know we have a winner in this one so we’re justified in making the pick.”

However, if his colleagues were opposed to gambling then they should be voting against all of these deals.

Rep. Gail Lavielle, R-Wilton, said Connecticut “just doesn’t have a fundamental economic policy,” which makes putting together incentive packages for businesses necessary.

She said no matter what your opinion is about why General Electric relocated its headquarters to Boston “it’s very hard not to accept that Connecticut’s reputation took a very hard hit in the last year.”

“If you can’t face the fact that Connecticut is not known as a welcoming haven for businesses, then you’re not serving the people of Connecticut very well,” Lavielle said.

She said the state’s lack of solid economic policies forces it to rely almost “exclusively on transactions like this.”

House Minority Leader Themis Klarides, R-Derby, who voted in favor of the deal, described it as a “hostage situation.”

Christine Stuart photo

House Majority Leader Joe Aresimowicz

She said she doesn’t blame the company for asking for incentives, but she said it’s ridiculous to suggest that Democratic lawmakers are “pro-business” after they approved the two highest tax increases in the state’s history in 2011 and 2015 and passed other anti-business legislation.

Those familiar with the deal have said the company needed to find $400 million in order to stay. That’s the amount of money it would have saved if it chose to produce the heavy-lift helicopters at a facility in another state.

Department of Economic and Community Development Commissioner Catherine Smith, who helped negotiate the deal, said the $400-million figure cited by the company is a “real number” and it’s made up of fixed costs such as labor and electricity, both of which are more expensive in Connecticut than in the southern states it was considering.

Senate Minority Leader Len Fasano, R-North Haven, who voted for the deal, said the state wouldn’t need to offer a deal if it wasn’t one of the most expensive states to do business.

House Majority Leader Joe Aresimowicz, D-Berlin, said he doesn’t understand why Republicans can’t accept that Connecticut is a “winner” and instead used the deal to score political points. He said a lot of what Republicans complained about Wednesday has already been accomplished, but they can’t talk about it because it would ruin their campaign narrative. He said every state is offering incentives to companies to stay and Connecticut has to compete.

Christine Stuart photo Larry Duncan, vice president of government relations at Lockheed Martin, watched the debate in both chambers Wednesday. He said he was “elated and grateful for the action taken by the legislature on a strong bipartisan basis.”

He called the vote historic and said it couldn’t have been done without the leadership of Malloy and Smith.

“This is a bold, forward-thinking agreement that will not only support thousands of jobs at Sikorsky’s headquarters, but also has a direct impact on hundreds of small businesses all across our state that serve as suppliers to Sikorsky and will benefit from the company’s continued growth here,” Malloy said in a statement following the vote. “Competition in today’s worldwide economic climate is fierce, and Connecticut is showing that we remain a valued leader where businesses can maintain a competitive edge well into the future.”

Malloy is expected to sign the bill in the next couple of days.

But Malloy and lawmakers aren’t the only ones who have to approve the deal. The Teamsters union also will have to sign off on the deal. Attempts to reach union leadership were unsuccessful.

If the state is giving the company $220 million, it’s unclear if the additional $180 million will come from union concessions.

The union is expected to vote on the deal on Oct. 9.

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