Assemblyman Hopes Tax Break Lands Plane Pact

The contract to build the next generation of military fighter jets is expected to be one of the largest in history, an 11-year project that could bring the eventual winner more than $200 billion to produce 3,000 aircraft.

But Assemblyman George Runner (R-Lancaster) is not so concerned about who gets the contract as he is about where the fighter will be built.

In hopes of revitalizing the aerospace industry in the Antelope Valley, Runner is pushing state legislation to provide an $80-million tax break for the firm that brings production of the so-called Joint Strike Fighter to California.

The contract could create up to 10,000 jobs, and Runner wants a big chunk of them to go to his constituents.

“There is a whole pie out there and we should try to get as big a slice as possible,” he said.

The two firms vying for the contract--Lockheed Martin Corp. and Boeing Co.--both have facilities in Palmdale but have yet to decide where final production would take place. Both firms say the tax break could play a role in their decision.

“We are aware of the bill and we are pleased they are taking this initiative,” said Kathryn Haden, a Lockheed spokeswoman. “The main thing for this fighter is affordability. When we get to that point when we decide where it will be built, we will decide based on affordability.”

Runner’s interest in local job creation, however, is running into ardent opposition over its cost.

Even though the bill won’t be heard in committee until January, the state’s Franchise Tax Board and the California Tax Reform Assn. have already blasted Runner’s bill, saying the cost is too high. They also fear the tax credit may spark a bidding war with other states hoping to attract the firms.

Lenny Goldberg, executive director of the California Tax Reform Assn., argues that past tax breaks have proven to play a very small role in the decision of such large firms and are mostly an exercise in political gamesmanship.

“In a lot of cases, we’ve given away way too much for what we’ve gotten,” he said.

In a financial analysis of the bill, the Franchise Tax Board argues that the deal could prompt other industries to seek a similar concession. The board also suggests that such a break for California sales could be viewed as discriminatory against out-of-state businesses and in violation of the commerce clause of the U.S. Constitution.

The bill once again raises the policy debate over whether the state should provide breaks for struggling industries or focus on adopting an across-the-board tax-reform package that benefits all industries.

But Runner, a freshman legislator and former Lancaster mayor, argues that the bill is worth the price if it creates thousands of jobs, particularly in the aerospace industry, which has struggled since the end of the Cold War.

“It’s not a question of what this bill would cost us but what it would cost in jobs if we don’t do it,” he said.

As for suggestions that the bill would spark a bidding war, Runner said such states as Texas and Oklahoma have already offered incentives to attract production of the Joint Strike Fighter.

“It depends on how serious California wants to be to grow jobs,” he said.

Supporting Runner is Rep. Howard “Buck” McKeon (R-Santa Clarita). In fact, McKeon said he has sent a letter to both Boeing and Lockheed signed by 47 members of California’s congressional delegation, urging the firms to build the fighter in the Antelope Valley. “We just think it makes sense there,” he said.

Palmdale is already benefiting from the jet fighter contract. Lockheed is building a prototype at its Skunk Works site in Palmdale, creating 800 jobs there. Seattle-based Boeing is building its version of the plane in Puget Sound. The government will choose between the two versions in 2001.

The winner of the final production contract will be building the dominant fighter aircraft used by the Air Force, Navy, Marines and the British Royal Navy, with the first jets to be delivered in 2008.

The goal of the program is to produce a jet that is affordable and can be used by all branches of the military. Up to 90% of the equipment and parts will be identical on all versions of the plane to hold down the cost of maintenance and supply.

There is still some debate in Washington on the need for such an expensive project, considering the cost and the fact that the United States already enjoys worldwide air superiority.

But if the projected budget survives future cuts, experts are calling it one of the largest military contracts ever. With spare parts and lifetime support, the value of the contract could eventually increase to $1 trillion, some experts say.

“It’s the biggest brass ring around,” said John Harbison, an aerospace consultant with the management consulting firm Booz, Allen & Hamilton. “It’s the Big Kahuna.”

The bad news for Palmdale and California is that the two firms vying for the contract have already hinted they might build the jets outside California. Lockheed Martin has a production facility in Fort Worth that may be used for the jet, while Boeing has suitable sites in Seattle and St. Louis.

But Runner is optimistic nonetheless, arguing that even if most of the production is done outside California, jobs will be created in Palmdale and elsewhere in the state even if it’s through the work of subcontractors that manufacture parts for the contractor.

“Even if they do final assembly in Wichita or Fort Worth,” he said, “there are still lots of parts to that airplane.”