City Gathers Carrots to Offer Hughes Aircraft : Jobs: But some say the incentives may be too late to persuade the company to keep General Dynamics Convair Division here.
The congressman will lean on the San Diego Unified Port District to roll back rents. The city manager might push for industrial revenue bonds. The Chamber of Commerce president suggests state tax credits for research and development.
Local leaders are searching for anything in their limited arsenal that might induce Hughes Aircraft not to move General Dynamics Convair Division and its jobs out of town. Hughes said last week it intends to buy Convair’s missile manufacturing operations and might move the operation elsewhere, an announcement that threw 4,500 jobs into limbo.
Nobody knows whether these incentives--or any others San Diego could offer--will be enough to keep Hughes from moving Convair to Tucson, Ariz., the rumored destination. San Diego Mayor Maureen O’Connor said that won’t be known until she and other officials have a meeting with Hughes executives to discuss the company’s plans. The meeting has not yet been scheduled.
Most city officials concede they can’t compete on the same playing field for Convair jobs as Arizona, which last week unveiled a multi-pronged tax-incentives package to encourage Hughes to consolidate the Convair operation at Hughes’ existing, largely vacant 2.2-million-square-foot plant in Tucson.
Nor are all leaders convinced that California should play the incentives game.
Julie Wright, director of the California Department of Commerce, on Monday pledged the support of her office and Gov. Pete Wilson to help San Diego keep the Convair jobs. Yet Wright also questioned the wisdom of offering tax breaks tailored to a specific business, which might “create precedents and which could be unfair to existing businesses.”
The incentives issue may be a moot one anyway. General Dynamics has already prepared its own preliminary consolidation plans, and a source knowledgeable about those plans said San Diego’s chances of keeping the 2,000 Convair jobs associated with the Navy’s Tomahawk cruise missile are very remote. About 2,500 Convair jobs are scheduled for extinction in August, 1993, when the Air Force cruise missile program ends.
Even General Dynamics, when it was negotiating to buy Hughes’ missile operations instead of the other way around, favored a move, the source said.
As part of the negotiations, General Dynamics made detailed analyses of both companies’ facilities and manpower, the source said--analyses Hughes has yet to complete. The recommendation: Move all Tomahawk manufacturing operations to the Hughes plant in Tucson, keeping only about 400 design and engineering jobs in San Diego.
But Hughes officials insist that they haven’t decided where to consolidate and won’t for another month or two. Until such a decision is made, San Diego officials say, they will offer Hughes whatever carrots they have at their disposal to keep Convair jobs here. And, if the carrots fail, O’Connor has threatened to resort to the stick of a legal challenge, possibly on antitrust grounds.
On Monday, U.S. Rep. Duncan Hunter (R-Coronado) said one of the most concrete proposals San Diego can make to Hughes is to roll back the rents General Dynamics pays to the Port District for 140 acres of San Diego tideland around Lindbergh Field. Convair builds the Air Force cruise missile as well as the MD-11 fuselage on the property.
The Port District should reduce the $2.6-million-a-year rent General Dynamics now pays for the land, a rent that will double next April, Hunter said.
“The point is, the port lands don’t cost the Port Authority a dime. There is no mortgage paid on that free land. So they are in a position of simply collecting rents with no payments to make,” Hunter said.
The Port District needs to look at the needs of the overall economy, Hunter said.
“A Holiday Inn on 20 acres of property is as valuable to them as an aerospace company with 3,000 high-paying jobs attached to it, as long as they pay the same amount of rent,” Hunter said.
Port District spokesman Dan Wilkens disagreed, saying that General Dynamics’ rent, according to terms of a 40-year lease signed in 1984, is about half of market value, a significant concession. When the rent doubles next year to more than $5 million, it will equal the market rate, Wilkens said. General Dynamics now pays an average of 48 cents per square foot per year for the land lease, he said.
But the Board of Port Commissioners would be willing to negotiate a rent rollback with General Dynamics or Hughes if the tenant agreed to guarantee a certain employment level during the life of the lease, Wilkens said.
“We haven’t had any communications with Hughes Aircraft, and we look forward to that communication to determine exactly what their situation is, their long-term plan,” Wilkens said.
One source close to General Dynamics said it might be too late for a rent rollback to persuade Hughes to keep the Convair jobs in San Diego, but said the move might persuade General Dynamics to keep its MD-11 fuselage business. General Dynamics announced earlier this month that it planned to sell the fuselage business as well as the missiles.
San Diego City Manager Jack McGrory has mentioned a menu of possible incentives, including industrial revenue bonds that could be used for expansion or capital improvements.
Lee Grissom, president of the Greater San Diego Chamber of Commerce, said the city has other incentive options, such as municipal financing and state tax credits for research and development. But those incentives typically are offered to companies looking to expand, he said, not shrink.
Yet Grissom conceded that “there really isn’t much” California can offer to compete with Arizona. “The cupboard is bare. . . . California has put itself where it doesn’t give away a lot of incentives for corporate relocations.
“Over the years, California has basically thought it was so attractive it didn’t have to create a lot of inducements,” Grissom said. “Well, California is finding out for the first time that it’s not irresistible to business.”
Grissom, who sat on the Council on California Competitiveness committee chaired by Peter Ueberroth, said the Convair sale and possible loss of jobs to Arizona shows how the “state has been hit twice, once by the recession and by increased pirating activities by competitive states that surround you.”
Wright, director of the state Department of Commerce, said most companies make consolidation decisions based not on incentives but where they have excess capacity.
“When an industry downsizes, it’s going to make management decisions based on age of facilities, where their work force currently is and things like that.”
“Insofar as Hughes and GD are concerned, we are prepared to work aggressively with both companies to maximize employment in California,” Wright said, adding that she will call Hughes chief executive Michael Armstrong to lobby for Convair jobs to remain in California.
