Capitol Alert: Lawmakers approve tax credit for Boeing and Lockheed Martin
07/03/2014 1:16 PM
07/03/2014 1:27 PM
Despite late lobbying from an aerospace industry rival, lawmakers approved expedited legislation designed to give the state the upper hand in landing subcontracts for a new strategic bomber project.
The California Senate on Thursday approved a fast-tracked measure to grant $420 million in tax credits over 15 years for the production project involving veteran military contractors Boeing Co. and Lockheed Martin Corp. The measure passed 28-6.
The Assembly quickly followed suit before both houses headed off on a month-long recess.
Assembly Bill 2389 by Democratic Assemblyman Steve Fox and Republican Sen. Steve Knight, both of Palmdale, is meant to help reverse years of industry decline in California. It would provide a tax credit worth 17.5 percent of wages paid to manufacturing workers.
Knight framed the package as a seminal moment for the state to reclaim its status as the home of the aerospace industry.
"Call it an investment. There is nothing unless we get something," he said. "This is an incentive plan that we should be behind."
But critics including Ben Hueso, D-San Diego, denounced the pact as corporate welfare, morally wrong and "not the biggest priority facing California today."
"The opportunity costs in this are just too high for me," added Sen. Loni Hancock, D-Berkeley, noting lawmakers should prioritize the needs of school children and infrastructure.
Representatives from Northrop Grumman Corp. have objected to the language of the bill, asserting it unfairly favored the Boeing-Lockheed partnership by limiting the tax break to a subcontractor. Northrop wanted it amended to allow "prime" contractors. The aerospace industry giants are the only firms in position to secure the contract, and Northrop also has been in negotiations with the state of Florida.
In a hearing earlier Thursday, Northrop officials told senators that they would commit 1,500 new jobs in Palmdale if the firm is awarded the contract -- regardless of whether it received the state subsidy. They argued that they never would have sought the break and only entered the discussion because it stood to put them at a competitive disadvantage.
Sen. Kevin de León, D-Los Angeles, said he acknowledged the Brown administration and the companies put lawmakers in a tough position by negotiating for months and leaving them with little time and few options other than to approve the package.
Sen. Darrell Steinberg, D-Sacramento, said he also does not like being put in the center of a bidding contest between corporations. But the Senate leaders said while tax increases are sometimes needed to invest in vital services, the only thing that will sustain that in the long-run are high-wage jobs and industry.
He and other lawmakers stressed that they were unwilling to risk losing an estimated 1,100 jobs (750 new and 350 existing) if Boeing-Lockheed does not get the tax credit. In a nod to Northrop, they pledged to expedite a bill next month that expands eligibility to contractors.
Aerospace production and manufacturing employment plummeted nearly in half from 139,300 in 1993 to 70,800 in 2013, though much of the drop occurred before 2004, according to the Employment Development Department.
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