Santa Clarita / Antelope Valley : Aircraft Maker Gets $24.5-Million Offer to Move to Palmdale
In its most ambitious job-producing effort yet, the city of Palmdale is dangling a $24.5-million incentive package in front of a North Hollywood aircraft manufacturing firm in hopes of persuading the company to relocate here.
Advanced Aerodynamics & Structures Inc., which still needs Federal Aviation Administration certification before it can start production of its small corporate aircraft, is also being wooed by several other states as well as the city of Long Beach.
“West Virginia, Virginia and Arizona are all talking to us,” said Carl Chen, AASI president. “Personally, I’d like to stay in California because of the aircraft workers available.”
The 4-year-old company, which Chen said now employs about 50 people, expects its work force to grow to as many as 1,000 employees when its aircraft are in full production.
The company is expected to make a decision about where it will relocate by the end of the year.
Palmdale Mayor Jim Ledford, while hopeful AASI will choose his city, said much will have been gained even if the deal doesn’t work out.
“It’s a basis to look at other potential companies, a formula to work with,” Ledford said. “One of the stipulations I’ve given the staff is I want serious industry that pays good wages, that makes people able to participate in the market. People need to earn the wages that allow them to buy the homes, participate in the economy.”
The deal has also affected the way the California Trade and Commerce Agency views Palmdale.
Laurel Shockley, deputy director of the agency’s Los Angeles regional office, said: “It’s an extremely impressive deal. One of the most impressive I’ve seen from a community.”
Because of the package Palmdale offered to AASI, Shockley said she recently informed the city of “a very large prospect.” Neither Shockley or Palmdale officials would disclose the name of that firm.
“We always marketed Palmdale,” said Shockley, whose region includes Los Angeles, Santa Barbara, Ventura, Riverside and San Bernardino counties. “I think the fact they have the ability to deliver makes them at the forefront of the contenders now.”
Palmdale learned about seven months ago that AASI was in need of a larger plant to build its planes. After some initial discussions with company officials, Palmdale’s economic development staff began to research the firm and put together an incentive package. A private consulting firm, PHH Fantus, was also brought in to do an analysis of the jet aircraft industry.
The $24.5-million incentive package includes such things as property, plant and equipment financing, fee waivers and employee training.
The package calls for the city to waive $500,000 in development fees; provide a 35-acre site and all the necessary sewer, water and other infrastructure; construct a 150,000-square-foot building, financed through the sale of bonds; and, also through bond sales, provide equipment money to AASI. The state would contribute training funds at $2,500 per employee, for a total of $1 million.
The $10 million in bonds would be issued in AASI’s name. The company’s bond payments would be reimbursed by the city with the sales tax revenue AASI generates for Palmdale. For the first three years the city would cover any shortfall between the sales tax revenue and the bond payments.
AASI has asked for, at a minimum, an additional $10 million worth of incentives. Chen said other states have offered packages valued as high as $40 million.
“Twenty-four million dollars is as far as we’ll go in the risk,” Ledford said.
Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said the situation has reached a precarious point.
“When other states come in here, they dangle these very attractive packages,” he said. “It’s a bidding war. And you’ve got to be very careful because these bidding wars can turn into a no-win situation.”
Palmdale’s package is based on the assumption that AASI would be selling 200 aircraft annually within a few years of its relocation. With its lowest-priced plane expected to sell at $1 million, that’s a minimum of $200 million in annual sales and Palmdale would reap about $2 million in sales tax revenue.
There would also be other benefits to having the company in the city, officials said. AASI would purchase materials from local suppliers and its workers would spend money locally.
“For every manufacturing job,” Kyser said, “there are at least two to two-and-a-half jobs that result in the community.”
Palmdale should be an attractive relocation destination for a firm such as AASI, Ledford said, since the north Los Angeles County region has a plethora of workers with years of aerospace manufacturing experience.
Many of the company’s employees, Chen said, are former Lockheed workers who lost their jobs because of shrinking defense budgets.
But even if AASI does come to Palmdale, there are risks. The small aircraft industry in general has been far from bountiful the last several years.
And AASI has not received FAA approval to produce its first plane, known as the Jetcruzer. It is a six-seat aircraft with a composite fuselage and turboprop engine that can travel at 300 m.p.h. and has a 1,000-mile range. It would sell for $1 million and Chen said the company already has received orders for 50 of the planes.
Three of the Jetcruzers have been built and are in flight test at Camarillo Airport in Ventura County.
The company, which has had as many as 120 employees, is also developing a second model. The twin-engine Stratocruzer, similar to its predecessor, could travel at 480 m.p.h. with a 3,200-mile range. It would sell for $3.5 million.
“That has big potential,” Chen said of the Stratocruzer, which would seat eight to 12 people. “Very conservative estimates say that this kind of aircraft has a worldwide market as high as 4,000 to 12,000 units.”
Ledford conceded that the city would be taking a risk. But he said it’s a balanced risk with significant potential.
Kyser said, “This has been, and could be again, a very vigorous and competitive market.”
