As Sikorsky proves in CT, states will pay for aerospace jobs

Sikorsky's new heavy lift helicopter, now in flight testing.

Sikorsky Aircraft

Sikorsky’s new heavy-lift helicopter, now in flight testing.

In the world of megadeals that states craft to attract and keep employers, the $220 million in incentives that the Connecticut General Assembly is expected to approve Wednesday for Lockheed Martin to produce Sikorsky’s new helicopter line in Stratford doesn’t crack the top 75 — nor is it the biggest subsidy ever obtained by Lockheed.

The California legislature overwhelmingly voted in 2014 for legislation projected to provide Lockheed with $420 million in tax credits over 15 years, a bid to help bring the state a share of the $55 billion the Air Force expects to spend on its next generation of bombers. California estimated the return on investment at $1.6 billion in state and local revenues.

For all the reasons the Lockheed deal is expected to pass overwhelmingly in Connecticut, as did the larger package in California, aerospace companies rank high nationally as beneficiaries of competitions among the states. Aerospace manufacturing pays well, with spending that ripples through the economy via an extensive supply chain.

From the Sun Belt to the Rust Belt, states pay big to attract and keep aerospace – and a wide range of other companies, from Nike in Oregon to Tesla in Nevada to H&R Block in Missouri. As the New York Times reported in its 2012 series, “United States of Subsidies,” states commit about $80 billion every year in incentives, a mix of loans, grants and tax benefits, with Texas leading the way at $19 billion a year.

According to data compiled by the corporate-watchdog group Good Jobs First, Boeing has received deals worth about $13 billion in the past 13 years: $3.2 billion in 2003 and $8.7 billion in 2013 from Washington state, $900 million from South Carolina in 2009, and $91.7 million from Oklahoma in 2015. Florida approved $471 million for Northrup Grumman in 2014. Alabama lured Airbus with a $158 million package in 2014 after giving $150 million to Boeing in 1997.

Sikorsky President Dan Schultz and Gov. Dannel P. Malloy.

mark pazniokas /

Sikorsky President Dan Schultz and Gov. Dannel P. Malloy.

“The idea of corporate welfare, that just isn’t what this is. That’s a naive view of how competitive the world economy is,” said Joe McGee, the vice president of the Business Council of Fairfield County and a former economic development commissioner during the administration of Gov. Lowell P. Weicker Jr.

Florida, Georgia, South Carolina and Texas all made bids for Lockheed Martin, which purchased Sikorsky in 2015, to produce the CH-53K King Stallion in those states, McGee said. One advantage for Connecticut was the presence of its sprawling factory in Stratford, where production of the Black Hawk is winding down, and its trained workforce.

Lockheed officials told legislators in private meetings Monday that producing about 200 helicopters over the 14-year life of the incentive deal would cost $400 million more in Connecticut than in the competing states.

Connecticut is promising annual grants and tax breaks of about $14 million if the aerospace giant meets goals for hiring, capital investments and purchases from its chain of more than 300 suppliers, for a total of $200 million in incentives. By exceeding hiring goals, the company could earned another $1.9 million annually, up to a maximum of $20 million.

The yardstick for judging the wisdom of incentives should be the return on investment to a state, say legislators and private-sector officials involved in economic development, even if some legislators say it is hard not to resent facing what often comes across as an ultimatum.

House Minority Leader Themis Klarides, R-Derby, said the economic incentives can feel like paying ransom, even when they make economic sense.

McGee said one of the best features of the deal is how tightly the incentives are tied to Sikorsky’s nearly doubling purchases from its network of more than 300 suppliers in Connecticut. The company also is committed to investing in its Stratford plant, where it expects to have two production lines for the CH-53K.

“Just Sikorsky’s expenditures are $96 per dollar that we put in,” Gov. Dannel P. Malloy said Tuesday after addressing members of SAE International, an organization of automotive and aerospace engineers. “That has nothing to do with the supply chain. It’s an unbelievable transaction that we’ve entered into.”

Thomas Prete, the vice president of engineering at Pratt & Whitney, told the international audience that the Malloy administration was instrumental in fashioning a $400 million incentive package that induced the jet-engine maker’s parent, United Technologies Corp. to build a new engineering center in East Hartford and commit to hire 8,000 workers in coming years to replace retiring workers and gear up for an influx of commercial jet engine orders.

“It’s a great time to be in aerospace,” Prete said.

Peter Gioia, an economist and vice president of the Connecticut Business and Industry Association, said Connecticut cannot hope to draw new advanced manufacturing to the state, given the cost of labor, electricity and other expenses in the Northeast, as well as the fiscal challenges the state faces.

“That’s a [expletive] joke,” he said.

Southern states have spent heavily in recent years to attract foreign automakers. Mississippi provided $1.2 billion in aid to Nissan, while Tennessee attracted a Volkswagen plant with $554 million in incentives. Georgia gave $410 million to Kia. Ford, GM and Chrysler all received billions from northern states to retain factories, not always successfully.

But the state can and should compete to keep and grow companies that are here, especially aerospace manufacturers with extensive supply chains, Gioia said.

“You nurture the core,” he said. “Retaining and boosting a marquee manufacturer like Sikorsky will clearly have a positive impact on its Connecticut-based supply chain and larger aerospace industry.”

McGee, who also is co-chairman of the state’s Commission on Economic Competitiveness, said the loss of Sikorsky and its 7,000 jobs would have been devastating. The departure of General Electric, which moved its headquarters from Fairfield to Boston, was a blow to the state, but the bulk of its employees remained in Connecticut as the company spun off its financial services businesses, he said.

“It’s a shame to lose GE, but there is nothing that compares to this,” McGee said. “We have 6,000 former GE employees still here, working in financial services. You lose the helicopter business, it’s gone. There’s no place for those people to go.”

The Big Business of Economic Incentives
From the low-cost South to the high-cost Northeast, every state plays the game.
rank recipient company ultimate parent company subsidy value year state
1 Boeing Boeing $8,700,000,000 2013 WA
2 Alcoa Alcoa $5,600,000,000 2007 NY
3 Boeing Boeing $3,244,000,000 2003 WA
4 General Motors General Motors $2,336,500,000 2009 MI
5 Ford Motor Ford Motor $2,300,000,000 2010 MI
6 Sempra Energy Sempra Energy $2,194,868,648 2013 LA
7 Nike Nike $2,021,000,000 2012 OR
8 (tie) Intel Intel $2,000,000,000 2004 NM
8 (tie) Intel Intel $2,000,000,000 2014 OR
10 Lake Charles LNG Export Company, LLC Energy Transfer $1,787,600,000 2015 LA
11 Cheniere Energy Cheniere Energy $1,689,328,873 2010 LA
12 Royal Dutch Shell Royal Dutch Shell $1,650,000,000 2012 PA
13 Cerner Corp. Cerner $1,635,152,242 2013 MO
14 Chrysler Fiat Chrysler Automobiles $1,300,000,000 2010 MI
15 Tesla Motors Tesla Motors $1,287,000,000 2014 NV
16 Nissan Nissan $1,250,000,000 2000 MS
17 Advanced Micro Devices (AMD); later GlobalFoundries Advanced Technology Investment Company $1,200,000,000 2006 NY
18 ThyssenKrupp ArcelorMittal $1,073,000,000 2007 AL
19 Boeing Boeing $900,000,000 2009 SC
20 Northwest Airlines (now part of Delta Air Lines) Delta Air Lines $838,000,000 1991 MN
21 Nebraska Furniture Mart (owned by Berkshire Hathaway) Berkshire Hathaway $802,000,000 2011 TX
22 SolarCity Corp. SolarCity $750,000,000 2014 NY
23 IBM IBM $660,000,000 2000 NY
24 Intel Intel $645,000,000 1993 NM
25 (tie) Pyramid Companies Pyramid Companies $600,000,000 2002 NY
25 (tie) Texas Instruments Texas Instruments $600,000,000 2003 TX
27 Continental Tire the Americas, LLC Continental AG $595,500,000 2016 MS
28 Mayo Clinic Mayo Clinic $585,000,000 2013 MN
29 Intel Intel $579,000,000 2005 OR
30 Volkswagen Volkswagen $554,000,000 2008 TN
31 Scripps Research Institute Scripps Research Institute $545,000,000 2003 FL
32 Dominion Cove Point LLC Dominion Resources $506,000,000 2013 MD
33 Forest City Covington Forest City Enterprises $500,000,000 2007 NM
34 Hemlock Semiconductor (controlled by Dow Corning) Dow Chemical $479,400,000 2008 TN
35 Northrop Grumman Northrop Grumman $471,005,000 2014 FL
36 Northside Regeneration McEagle Properties $430,600,000 2009 MO
37 Bayer CropScience Bayer $429,500,000 2013 AL
38 Goldman Sachs Goldman Sachs $425,000,000 2005 NY
39 (tie) Lockheed Martin Lockheed Martin $420,000,000 2014 CA
39 (tie) Northrop Grumman Northrop Grumman $420,000,000 2014 CA
41 Kia (controlled by Hyundai) Hyundai Motor $410,000,000 2006 GA
42 Sabine Pass Liquefaction, LLC Cheniere Energy $405,922,115 2015 LA
43 (tie) Cornell University/Technion-Israel Institute of Technology Cornell University $400,000,000 2011 NY
43 (tie) United Technologies Corp United Technologies $400,000,000 2014 CT
45 Ameream LLC, Meadow Amusement LLC and Affiliates Ameream $390,000,000 2013 NJ
46 Hemlock Semiconductor (controlled by Dow Corning) Dow Chemical $372,300,000 2008 MI
47 CF Industries CF Industries $366,380,700 2013 LA
48 Google Google $360,000,000 2005 OR
49 Toyota Toyota $354,000,000 2007 MS
50 Kvaerner Aker $350,000,000 1997 PA
51 H&R Block H&R Block $341,317,824 2004 MO
52 General Motors General Motors $336,800,000 2011 MO
53 Faraday Future Faraday Future $335,000,000 2015 NV
54 Revel Entertainment Group Revel AC $323,000,000 2011 NJ
55 Apple Apple $320,700,000 2009 NC
56 Pershing Road Development Co., LLC DST Systems $314,434,599 2003 MO
57 Schupp & Grochmal, LLC Schupp & Grochmal $313,750,000 2007 CT
58 (tie) International Sematech Sematech $300,000,000 2008 NY
58 (tie) Starwood Property Trust Starwood Property Trust $300,000,000 2011 CO
60 United Airlines United Continental $298,000,000 1991 IN
61 Jackson Laboratory Jackson Laboratory $291,000,000 2011 CT
62 AEG Group/KB Home Anschutz Company $290,000,000 2005 CA
63 General Motors General Motors $284,600,000 2000 MI
64 Dell Silver Lake $279,000,000 2004 NC
65 Areva Areva $276,000,000 2008 ID
66 Sears Holdings Corp Sears $275,000,000 2011 IL
67 Sasol Ltd. Sasol $272,000,000 2013 LA
68 $269,000,000 2012 TX
69 General Motors General Motors $268,500,000 2008 MI
70 Volkswagen Volkswagen $263,300,000 2014 TN
71 Holtec International Holtec International $260,000,000 2014 NJ
72 Yahoo Yahoo $258,000,000 2009 NY
73 Motiva Enterprises Royal Dutch Shell $257,400,000 2006 TX
74 Nucor Nucor $255,000,000 2010 LA
75 Google Google $254,700,000 2007 NC