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Taking flight.

The Legislature Supplies A New Round Of Corporate Tax Breaks, This Time Aimed At Attracting Aerospace Industries

The setting last week was the governor's conference room on the second floor of the state Capitol.

The news was good.

Lt. Gov. Jim Guy Tucker, filling in yet again for campaigning Gov. Bill Clinton, announced near-record figures for new manufacturing facilities, plant expansions, industrial jobs and capital outlay for 1991.

It was a proud moment for members of the Arkansas Industrial Development Commission.

And it provided a boost for proponents of corporate tax incentives.

The timing was ideal.

The previous week, another package of such incentives had been approved by the Legislature with virtually no opposition.

This time, the aerospace sector was targeted:

* A $10 million Arkansas Aviation and Aerospace Industry Development Fund to help companies in their relocation efforts.

* The creation of an Arkansas Aviation and Aerospace Commission to administer the fund.

* Sales-tax exemptions, enterprise zones and the use of tax refunds and income-tax credits for qualified businesses.

Some viewed it as the latest round of corporate giveaways, sure to burden the middle class.

But most legislators saw it as a necessity if Arkansas is to compete in what is becoming an open market. In their eyes, it represented the state's attempt to stay in the aerospace game.

"There is great movement within the aerospace industry," says Rep. John Miller of Melbourne, an author of the package. "If we don't do it now, we've lost. There's no use thinking about doing it six months from now because decisions will have been made.

"For you and I, it is now or never. And I don't want it to be never."

The Time Is Right

Miller is on an aerospace task force created by the governor's office to take advantage of movement within the industry. Companies are leaving both coasts, citing union pay demands, strict environmental laws and high taxes.

And they're being courted.

The task force -- which includes veteran legislators such as Sen. Jay Bradford of Pine Bluff, Sen. Nick Wilson of Pocahontas and Rep. Walter Day of Blytheville -- was formed six months ago to develop a package for the special legislative session.

"It was a fast-track effort to get Arkansas in a competitive position with other states," Bradford says.

The bills passed easily. The effort had been greased in advance of the session.

The result?

Tax breaks that will cost the state about $1.2 million annually.

Still, Miller warns, "Some states may develop programs that will be hard to compete with. We appropriated the minimum amount of money."

Brownie Ledbetter of the Arkansas Fairness Council lauds the efforts of Miller and Wilson to include provisions requiring job creation. However, she initially was worried that the $10 million in the Aviation and Aerospace Industry Development Fund would be shouldered by the working class.

First, she heard income-tax refunds would be delayed to obtain the money.

Then, she heard the state would borrow from its Medicaid fund.

The money actually will come from funds set aside each year to pay for court judgments the state might lose.

Rep. Ed Thicksten of Alma opposed the funding mechanism, which will not be part of the regular state budget.

"If the just debts of the state are just that, we must pay those before anything," Thicksten says. "Aerospace, in my opinion, is not a just debt of the state. It's a new program, a good one, but it's just that."

After this year, the aerospace fund will be part of the regular budget.

"It should share, as do other economic packages, in either the shortfalls or extra money in the state budget," Thicksten says.

Easy On The Tax Breaks

Sen. Vic Snyder of Little Rock was one of three legislators to vote against part of the incentive package last month.

He opposed the sales-tax exemption.

"There is very little evidence that a specific sales-tax exemption is an important factor in ... attracting business to a state," Snyder says. "... I am a conservative when it comes to government meddling with our tax laws to favor one business over another. What this sales-tax exemption did was say, 'You folks who fly in big planes ... are more important than all our Arkansans who service their own cars.'"

Snyder believes it shouldn't be up to legislators to decide which industries are important and which aren't.

But there seems to be little doubt among AIDC officials and the vast majority of legislators that the aerospace industry is important.

They give two reasons:

* Aerospace companies are on the move.

* Aerospace jobs pay well.

The average annual pay of an Arkansas aerospace employee (there are 17,000) is 34 percent above the average manufacturing rate, according to Tucker.

"The $10 million fund was designed not to target minimum-wage jobs," Tucker says.

The average aerospace job in Arkansas pays more than $20,000 per year.

The median annual income in the state is $14,188, according to the Department of Commerce's Bureau of Economic Analysis.

It's no wonder AIDC Executive Director Dave Harrington has considered putting a full-time employee in southern California to recruit aerospace companies.

"Some industries are more important to us than others," Harrington admits.

In Louisiana, industrial recruiters tempt the aerospace industry with the motto "we will beat any deal any state makes."

When McDonnell Douglas Corp. was searching for a plant site, one state offered $1 million for the company to use as it pleased.

"That's out-and-out bribery," says Bob Fisher of Arkadelphia, president of the Clark County Industrial Council.

Clark County recently landed a $25 million Rohr Inc. plant to be built in an industrial park at Gum Springs, which is between Arkadelphia and Gurdon. The battle for the facility was fierce.

Tax incentives played a part in the process, Fisher says.

"It almost seems that tax breaks violate some form of fair trade, where one state does and another doesn't," says Fisher, dean of Henderson State University's business department. "But the reality is that states compete. We have a choice to make -- get in the game or watch the game.

"Some taxpayers say they don't want their tax money to go to help a profitable company. But I ask, 'Do you want your children to have good jobs?'

"If you don't want to play, you're out. For good."

An Academic Matter

Little Rock Aerospace School Could Help Bring Industry To Arkansas

If the best-laid plans of central Arkansas aviation enthusiasts come to fruition, construction of Little Rock's Aerospace Education Center will begin in January.

The doors will open in the fall of 1994.

Taking the scenario a step further, students will begin graduating a few years later with aviation maintenance skills.

Soon afterward, aerospace industries will begin coming to Arkansas to take advantage of the trained work force.

Dick Holbert thinks it can all come true.

Holbert is president of Central Flying Service and vice chairman of the Aerospace Education Center and Arkansas Aviation Historical Society.

Holbert's dream is the creation of a center featuring an aerospace technology magnet high school and an aviation museum.

"It will absolutely be a catalyst for economic growth," Holbert says. "We will be training people in that industry ... Our long-range goal is to build an educational infrastructure."

State Rep. John Miller of Melbourne was a proponent of the aerospace tax package. He also is a proponent of the aerospace magnet school, even though it will be located far from his district.

"We have to have an educational component," Miller says. "I don't know if one school in Little Rock is the total answer. But it will get something started. It's a building block."

The 900-student school and adjacent museum will cost an estimated $16.5 million. The center will be built on about 19 acres between the Little Rock Regional Airport and Interstate 440.

The Little Rock School District has budgeted $6 million for construction. Meanwhile, a private fund-raising campaign has brought in $4.6 million toward a goal of $6.5 million.

Holbert says two consultants have been hired. One is developing a curriculum for the high school. The other is concentrating on fund-raising activities.

Although it will be at least two years before the Aerospace Education Center opens, aerospace companies already are taking an interest in the project.

"The idea of an aerospace magnet high school is two-fold," says Bob Diffee, acting curator of the museum. "One, students come out of the school ready to go to work in the aerospace industry. Or, two, they continue their education.

"If there were a ready force of willing, able and qualified people, it would help |lure industry~."

Hear Us Rohr

Rohr Inc. Brings Clark County Full Circle With $25 Million Plant

When Rohr Inc. officials announced plans last month to build a $25 million plant in the Clark County Industrial Park at Gum Springs near Arkadelphia, it ended 10 months of whirlwind recruiting.

No more clandestine talk of "Project Vulcan."

No more negotiations with a third-party liaison.

"A lot of the big companies |with~ worldwide networks of plants do that," says Jim Dane, executive director of the Clark County Industrial Council. "GM operates that way -- on the QT."

Clark County beat out 11 other potential sites.

A 225,000-SF facility will be constructed to build jet aircraft engine components. Rohr is expected to employ 50 people in its first year of operation. The company will add about 50 employees per year through 1995.

The manufacturing jobs will put Clark County back to where it was in the mid-1980s before Levi Strauss & Co., Fafnir Bearing Co. and Reynolds Metals Co. pulled out. The plant closings resulted in a loss of almost 1,500 jobs.

Bob Fisher, an Arkadelphia native, is the president of the Clark County Industrial Council and dean of the business department at Henderson State University.

Fisher, whose father is Clark County judge, returned to Arkadelphia about the time the three plants left.

"I thought, 'What have I done? This place is dying,'" he says. "In a county of 22,000 people, we lost more than 1,000 manufacturing jobs. That's tough."

In the past two years, Clark County has lured the Carrier Corp. (a division of United Technologies Corp.), Petit Jean Poultry Inc., Rohr and the return of Reynolds on a smaller scale. The Richmond, Va.-based company will operate a state-of-the-art facility to treat the carbon-based material generated by the aluminum manufacturing process. Reynolds will employ about 75 people.

The recent influx of industry totals about 1,100 jobs.

"We're not that far off from where we were," Dane says.

And Rohr could be the tip of the iceberg.

Aerospace companies are leaving the West Coast and the East Coast for more conducive business conditions elsewhere.

More Jobs To Come

Rohr, based in Chula Vista, Calif., already operates plants at Heber Springs and Sheridan.

The company designs and manufactures components for commercial, military and business aircraft.

George Ryan, formerly general manager of Rohr's Foley, Ala., plant, has been named general manager of the newest Arkansas facility.

If Ouachita Technical College at Malvern and Henderson develop programs to train aerospace workers, Rohr might continue expanding its Clark County operation through the end of the decade.

"They announced 150 jobs, but the message to us was, "'Develop your people, and there are more where these came from,'" Fisher says.

Arkansas has about 17,000 people working in the aerospace industry. The jobs pay an average of more than $20,000 annually.

"Rohr is a great example of the kinds of industries we can attract," says state Sen. Jay Bradford of Pine Bluff, a proponent of the aerospace tax package. "Rohr is a builder of components. It likes to go to smaller towns and build smaller plants.

"That's an example of the movement in the aerospace industry. And it helps smaller towns."

Rohr's presence in Clark County is no accident.

After months of recruiting visits, Rohr officials narrowed the list of possible locations to sites in Alabama, Texas and Arkansas. On Rohr's shopping list were these criteria -- a city with a university, a city on an interstate highway and an available industrial site with full utilities. Company officials also were looking for low utility rates and a labor supply.

As always, tax incentives were a factor.

Fisher and Dane say the aerospace tax package planned for last month's special legislative session attracted Rohr's attention.

Other states also offered tax breaks.

Most important in the Rohr deal, apparently, were the rates offered by South Central Arkansas Electric Cooperative of Arkadelphia.

"They said, 'Good rates or we walk,'" Fisher says of Rohr executives.
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Title Annotation:includes related articles; liberal economic policies benefiting the aerospace industry
Author:Webb, Kane
Publication:Arkansas Business
Date:Mar 9, 1992
Previous Article:A listing of new businesses in Central Arkansas.
Next Article:Never sounded better: Klipsch & Associates Inc. of Hope introduces two more lines of speakers.

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