Arizona Passes Incentives to Help Lure Hughes Jobs

Arizona legislators passed a tax bill late Tuesday that officials there say is the first incentives package offered by a state designed specifically to attract and retain defense manufacturing jobs.

The timing of the bill was influenced strongly by Hughes Aircraft’s announcement in May that it was buying General Dynamics missile operations for $450 million and that it might move the jobs, including 2,000 in San Diego connected to the Tomahawk cruise missile, to a largely vacant 2.2-million square foot plant operated by Hughes on the outskirts of Tucson.

The Tucson plant, believed all along to be the likely site of the consolidation, became a stronger favorite last Friday when Hughes executives told San Diego officials that the 2,000 Tomahawk cruise missile jobs definitely will not remain in San Diego after the purchase.

Another 2,500 San Diegans working in General Dynamics Convair missile operation are set to be laid off between now and August, 1993, when the Advanced cruise missile weapons program is terminated.

Hughes officials say they won’t decide whether to consolidate the missiles operation in Tucson or at a 2.1-million square foot Pomona plant for another two weeks.

Arizona officials hope the tax breaks are enough to lure Hughes, however. Effective July, 1993, the bill would give Hughes a first-year corporate tax credit of $2,500 for each job it relocates to Arizona. Hughes would also get up to 40% in property tax abatements and accelerated depreciation on capital equipment purchases.

Lois C. Yates, director of strategic planning and economic development in the Arizona Department of Commerce, said the benefits of the bill will also be available to companies that commercialize their defense technology.

“I don’t think it’s the most competitive list of incentives of any state, but I don’t think any other state has designed anything specific for the defense industry as we have,” Yates said.

Pushed strongly by Gov. Fife Symington, the Omnibus Bill for Defense Restructuring has been in the works for months, spurred by the projected loss of about 17,000 of the state’s 79,000 defense-related and military jobs between now and 1996. The bill reflects the state’s desire to make it attractive for defense contractors to stay.

When Symington announced in May that he would ask the state legislature to pass incentives, California officials said they would try to come up with some of their own to keep California manufacturers from leaving the state.

Julie Stewart, a spokeswoman for California Department of Commerce said Wednesday that her department and Gov. Pete Wilson’s office are jointly “reviewing incentives on our own” to offer defense manufacturers in the wake of a report earlier this year by the Council on California Competitiveness chaired by Peter Ueberroth.

Hughes Aircraft spokesman Richard Dore said Wednesday that he could not comment on how effective the Arizona tax incentives package would be in Hughes’ decision, as the company had not yet reviewed the provisions.