Gov. Asa Hutchinson was joined by U.S. Sens. Tom Cotton and John Boozman at a Capitol news conference this morning to tout his legislation to issue $87 million in bonds for corporate welfare to lower Lockheed Martin’s bid for a new generation of tactical vehicles for the U.S. military to succeed the Humvee.
A report issued Friday showed that the bonds will cost the state around $120 million — depending on the market interest rate and the length of the bond issue — or roughly $6 million a year for 20 years. A separate analysis said the state might begin receiving a positive cash flow from that expenditure in the form of worker income tax and taxes on their spending about 20 years into the project.
Hutchinson emphasized that the plant could spawn related industry and emphasized the importance of getting Arkansas’s first full vehicle assembly plant. He also touts Lockheed Martin as a valuable Arkansas citizen at Camden for many years.
Questions: Why do some Arkansas companies get handouts and not others?
Why should poor Arkansas be subsidizing the U.S. government’s military production (our $83 million will account for more than half the cost in plant at Camden.)
Shouldn’t the proper criteria for selection of the winning bid be the best vehicle at the best price, not the mere fact that one of three competitors will put 500 people to work in Arkansas, at a taxpayer cost of roughly $240,000 per worker?
Why can’t Lockheed Martin pay for its own capital costs, as most other businesses in Arkansas do?
Where’s the $6 million a year to come from? That financial workout shows the payments beginning in 2016.
UPDATE: Calling it an exciting day after Memorial Day, Gov. Asa Hutchinson touted the economic benefits of the massive, sand-beige Lockheed-Martin truck parked at the foot of State Capitol lawn — the company’s entry into the competition for a new Joint Light Tactical Vehicle to replace the Pentagon’s aging fleet of Humvees. Currently, Arkansas is one of three states in the running for the new plant. Hutchinson said the Pentagon would likely announce the winner of the competition in August.
“This is a golden opportunity for the state of Arkansas,” Hutchinson said. “It’s a golden opportunity, because it means more jobs, because it would mean our first vehicle assembly plant in the state of Arkansas. It is also a golden opportunity because it is a 25 year commitment. That’s almost an eternity in terms of job creation and industrial growth.”
Hutchinson said that officials with Lockheed-Martin had bragged to him about Camden and the quality of the workers there. He went on to say that an independent analysis of the effort to spend taxpayer dollars to help Lockheed-Martin win the JLTV project for the state had found that a factory to build the vehicles in Camden could also bring in sub-suppliers who might relocate to the Camden area to supply materials for the plant, and that “even from a conservative standpoint of a cost/benefit to the state of Arkansas… there will be a greater return on investment through the years and it is a sound investment for the state.”
Sen. Tom Cotton, an Army veteran who served tours in Iraq and Afghanistan, said that he supports phasing out the Humvee in favor of a vehicle that could better protect soldiers.
The Humvee, Cotton said, is “an old and venerable vehicle, but never one that was designed to be a tactical vehicle that could protect our troops. That’s why the Joint Light Tactical Vehicle project is so critical. It’s going to provide survivability for our troops from small arms fire, machine gun fire, from explosions from roadside bombs, and mobility, whether they’re on city streets, in the sands of deserts around the world, in mountains or fields, [and will provide] reliability so they’re not always constrained with their vehicles in the motor pool.”
Cotton said he has talked to Lockheed-Martin leadership, including CEO Marillyn Hewson, and is confident that the contract for the new JLTV will be awarded on the basis of which vehicle is most capable, and which contract will be the best value for the American taxpayer. The process, he said, will highlight “just what a jewel the industrial park is” in Camden.
Taking questions from reporters, Hutchinson was asked if it was wise to put tax dollars into helping Lockheed-Martin win the contract for the JLTV, especially in a time of tight budgets and with further tax cuts inbound.
Referencing the independent analysis which showed the state potentially reaping economic rewards from both the project and subsystem suppliers who might relocate to Camden to provide materials for the plant, Hutchinson said that it was “extremely wise” to assist Lockheed-Martin.
“I’ve always said we’re not going to tax ourselves into prosperity,” Hutchinson said. “We have to grow our economy into prosperity. This is an economic boost to the state and all of the studies indicate that this, in the end, will actually generate, over time, more tax revenue because we’re creating more jobs, more taxpayers, more revenues… This is exactly what we need to be doing, even in tight budget times. Growing our economy is going to allow us to address all the needs of the state.”
UPDATE: The corporate welfare bill met no opposition in committees Tuesday in both the House and Senate.
Here’s the governor’s prepared release:
Governor Asa Hutchinson announced today he is calling a special session for state legislators to consider $87.1 million in general obligation bonds under the authority of Amendment 82. The financing will go toward a Lockheed Martin manufacturing facility in East Camden that would produce the company’s new Joint Light Tactical Vehicle (JLTV) developed by the U.S. Army and the Marine Corps. Lockheed Martin is one of three companies under consideration for the contract to manufacture the JLTV. A decision from the Pentagon is expected in July 2015. The JLTV will replace the Humvee, which has been used by the military since 1985.
Should Lockheed Martin win the contract, the company plans to invest more than $125 million in the East Camden facility. Approximately 600 new full-time positions will be created at the facility and as many as 655 indirect jobs will be created in South Arkansas as a result of this project.
Governor Hutchinson was joined by Sens. John Boozman and Tom Cotton and Rep. Bruce Westerman at a news conference today at the State Capitol to discuss the project.
“I think this is exactly the type of project Arkansas voters had in mind when they approved Amendment 82,” Governor Hutchinson said. “If East Camden is ultimately chosen as the site for this new facility, South Arkansas will experience a tremendous economic impact for years to come. We need to make this happen, which is why I have chosen to call the General Assembly into special session.”
If Lockheed Martin wins the contract, the East Camden, Arkansas manufacturing facility will be the first original equipment manufacturer (OEM) in the state.
“Securing a contract of this magnitude is important for providing a solid economic foundation for the future of our state, South Arkansas and the people who call this region home,” said Boozman. “As home to businesses that contribute to our nation’s defense, East Camden would be a perfect fit for this facility. The potential for attracting hundreds of highly skilled, quality jobs that will strengthen our national defense and protect our nation’s service members is well deserving of the attention of our state lawmakers. I applaud Governor Hutchinson for his commitment to economic development and job creation in our state.”
The JLTV is a fully integrated combat tactical system that meets today’s requirements but was also designed with the future in mind. It offers higher levels of crew protection, substantial increase in performance and payload, as well as greater reliability, outstanding fuel efficiency, and lower operations and sustainment costs. The U.S. Army and Marine Corps announced that more than 50,000 JLTVs would be produced for the U.S. military, and it is anticipated that the vehicle will draw interest from the international military vehicle marketplace as well.
“As a solider in the Army, I saw firsthand the critical support equipment like the JLTV provides to our troops,” Cotton said. “Arkansas’s strong support for our country’s servicemen and women could have no better tangible representation than producing the vehicles that our soldiers will drive on the front lines around the world.”
This is the second time Amendment 82 has been triggered since its adoption during the November 2004 general election. It allows the state legislature to approve up to 5 percent of the state’s general revenue budget to be used for bonding of competitive super economic development projects. The first time Amendment 82 was approved was for Big River Steel, currently under construction in Osceola, Arkansas.
Arkansas has a rich history in the defense industry. Aerospace/aviation is the state’s top export, making the defense industry – and Lockheed Martin – critical to Arkansas’s economy. Camden is home to several defense manufacturers. Lockheed Martin has been a member of the Camden business community for more than 35 years. Since that time, the company has invested hundreds of millions of dollars into the area. Since 2010, the company has donated more than $660,000 to local community partners and the company’s employees have volunteered almost 50,000 hours and donated almost $300,000 through payroll deductions supporting various communities in Southern Arkansas.