$87M bond issue sails in committees

Lockheed help easily advances at session’s start

Gov. Asa Hutchinson tries out the driver’s seat of a Lockheed Martin joint light tactical vehicle that was parked Tuesday at the state Capitol before the start of a special session that includes measures to help get an assembly plant for the vehicle in Camden. With Hutchinson are (from left) Scott Green and Colin Sterling of Lockheed Martin and U.S. Sen. Tom Cotton.
Gov. Asa Hutchinson tries out the driver’s seat of a Lockheed Martin joint light tactical vehicle that was parked Tuesday at the state Capitol before the start of a special session that includes measures to help get an assembly plant for the vehicle in Camden. With Hutchinson are (from left) Scott Green and Colin Sterling of Lockheed Martin and U.S. Sen. Tom Cotton.

House and Senate committees Tuesday advanced bills to authorize the state to issue $87.1 million in bonds to help Lockheed Martin obtain a federal contract and create nearly 600 jobs in Camden.

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Arkansas Democrat-Gazette

House members Vivian Flowers (right) D-Pine Bluff, and DeAnn Vaught, R-Horatio, share a hug as Mark McElroy (left), D-Tillar greets fellow lawmakers Tuesday at the start of the special legislative session called primarily to provide funding to help win a Lockheed Martin vehicle assembly plant in Camden.

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Arkansas Democrat-Gazette

With a rap of his gavel, House Speaker Jeremy Gillam convenes the special session Tuesday at the state Capitol.

The action came in the first day of a special legislative session called by Gov. Asa Hutchinson to help the Maryland-based corporation get a U.S. Department of Defense contract to build joint light tactical vehicles for the Army and Marine Corps.

The vehicles would replace the line of vehicles known as Humvees made by Indiana-based AM General LLC.

Companies based in Indiana and Wisconsin are also competing for the contract. State officials say the project would create jobs in southern Arkansas and help retain more than 550 jobs.

In separate voice votes with no dissenting votes, the House and Senate Agriculture, Forestry and Economic Development Committees each endorsed companion bills authorizing the Arkansas Development Finance Authority to issue up to $87.145 million in general obligation bonds for the Lockheed Martin project under Amendment 82 to the Arkansas Constitution.

The identical bills are House Bill 1003 by Rep. Matthew Shepherd, R-El Dorado, and Senate Bill 6 by Sen. Bobby Pierce, D-Sheridan. The House is to vote on the HB1003, and the Senate is to vote on SB6 today.

"The opportunity to have such a significant project in Ouachita County, Calhoun County is really kind of a once-in-a-lifetime opportunity," Shepherd said after the House committee meeting.

This is the second time that the Arkansas Legislature has considered authorizing a bond issue for a "superproject" under Amendment 82.

In 2013, the Legislature authorized a $125 million bond issue for the Big River steel mill near Osceola. That mill is under construction.

"This is a golden opportunity for the state of Arkansas," Hutchinson said Tuesday morning at a news conference on the steps of the state Capitol.

"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 also is a golden opportunity because it is a 25-year commitment, and that's almost an eternity in terms of job creation [and] in terms of industrial growth," the Republican governor said.

Hutchinson said the $87.1 million bond issue is "actually what we need to be doing even in tight budget times because growing our economy is going to allow us to address all the needs of the state."

The measures drew opposition from Americans for Prosperity Arkansas, a conservative group that advocates for "economic freedom and opportunity."

"Arkansas taxpayers should not be fronting the money for one of the largest and most successful companies in the world. Indeed, Arkansas families and entrepreneurs would be far better served by broad-based tax and regulatory reforms that create a more favorable business environment for everyone than by spending tens of millions of dollars on government-financed 'incentives' to lure particular projects or corporations to the state," the group's state director, David Ray, said in a written statement late Tuesday. "Prosperity doesn't come from government handouts, or by picking winners and losers -- it comes from pro-growth policies that create a level playing field that enables everyone to succeed."

Earlier Tuesday, Hutchinson said state aid is necessary. "The fact is we would all like to be purists in which there is not any government involvement in high-stakes superprojects, but the fact is we've got a competitive environment with other states," he said.

"Other states in various ways are supporting these superprojects. Arkansas has been on the losing end of many of those competitions, and we want to compete, and so this is where you set aside pure economic theory and say, 'Let's be practical and let's compete,'" he said.

Randy O'Neal, Lockheed Martin's vice president of production operations, said more than 1,000 jobs will be created in the state beyond "the 580 jobs-plus [created] in East Camden" at Lockheed Martin.

"We have a lot of other businesses that will grow and other teams of businesses that will come into the area, so it is kind of a multiplier effect through the wage thresholds that we have committed to, and through the hiring and manpower thresholds we have committed to," he said.

O'Neal said "we are working with several of the key suppliers to move closer to us now."

The governor's office said the $87.1 million bond issue would include an $83 million cash grant to the company for qualifying building and infrastructure improvements, equipment and other eligible expenses incidental to the project.

The bond issue also would include $2.5 million for the payment of the state's bond-issuance costs, debt-service reserves and other financing costs incurred or paid by the state, and a $1,645,000 training grant to be used for constructing and equipping training facilities at Southern Arkansas University Tech, Hutchinson's office said.

Jobs and wages

During Tuesday's joint meeting of the House and Senate Agriculture, Forestry and Economic Development Committees, Mike Preston, director of the Arkansas Economic Development Commission, said the state financing would help create 589 jobs in south Arkansas and ensure that Lockheed Martin retains its 556 existing positions for at least 25 more years.

"That's a key component," he said. "There's nothing tying them to Camden right now."

The annual wage for the new jobs would average $58,830. The annual payroll would be about $35 million for the new positions.

In 2013, 2,500 people worked in manufacturing plants in Ouachita County, according to the U.S. Census Bureau. Total payroll was $138.5 million.

At Tuesday's meeting, a consultant hired by the Legislature said the state would recoup the money spent on the project, plus earn $16.3 million over 25 years.

Phil Hopkins of the IHS Global Insight consulting firm said the estimate did not include the possibility of additional companies locating in the state.

Even though it's unlikely that companies will build engine or transmission factories in Camden, a number of smaller parts providers or vendor-related businesses could pop up, he said.

"While they may not be making the engines there, the kind of jobs and the wages that were talked about were quite high," he said. "There's a lot of complex activity that will take highly skilled workers."

If the Defense Department chooses Lockheed Martin for the project, 17,000 vehicles would be made over nine years in the facility, according to the terms of a contract between the department and the company.

Global Insight's estimates assume that the Department of Defense will order 55,000 vehicles over a 25-year period -- a number the department has stated publicly.

"Whenever you're doing something like this, you're taking a risk, but if it's a prudent, informed risk, I think it's responsible public policy," Hopkins said.

Preston said clawbacks, designed to recover disbursed money, would hold Lockheed Martin to its promises on jobs and payroll, and would kick in if the company decided to leave prematurely.

"Lockheed Martin is not going in this for a nine-year deal," Preston said. "Our contract with them is going to be for 25 years. We're looking at the bare minimum going into that."

"So basically they would be reimbursing us the remainder of that time period if they're unable to perform on the jobs and payroll commitments that they've made to the state."

The state will lose money on the deal for about the first 20 years, but will make up the difference by the 25th year, Hopkins said.

THE PROTOTYPE

Lawmakers got a close look at the new vehicle before Tuesday news conference.

A prototype of the joint light tactical vehicle was parked east of the state Capitol in Little Rock. Hutchinson, U.S. Sens. Tom Cotton and John Boozman, and U.S. Rep. Bruce Westerman -- all Arkansas Republicans -- separately got behind the wheel of it.

Cotton, who served in the military in both Iraq and Afghanistan, noted that he had driven the vehicle's predecessor -- the Humvee, "an old and venerable vehicle, but never one that was designed to be a tactical vehicle that could protect our troops."

The new vehicle will provide "surviveability for our troops from small-arms fire, machine-gun fire, and from explosions of roadside bombs, mobility whether they are in city streets, in the sands and deserts around the world, mountains or fields, [and] reliability so they are not always constrained with their vehicles in the motor pool trying to get them back up and running ready for the next mission," Cotton said.

As the chairman of the Air Land Subcommittee of the U.S. Senate Armed Services Committee, Cotton said "I'm confident that this program is going to be [awarded] on the basis of the best vehicle criteria and the best value to the taxpayer."

Metro on 05/27/2015

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