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California lawmakers OK stealth bomber tax break

Jul. 3, 2014 - 06:14PM   |  
California Gov. Jerry Brown, left, speaks before signing the 2014-15 state budget June 20 in San Diego. Looking on at right is state Assembly Speaker Toni Atkins.
California Gov. Jerry Brown, left, speaks before signing the 2014-15 state budget June 20 in San Diego. Looking on at right is state Assembly Speaker Toni Atkins. (Gregory Bull/The Associated Press)
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SACRAMENTO, CALIF. — A corporate battle over a giant Pentagon contract to build stealth bombers spilled into the California Legislature on Thursday, as lawmakers grudgingly rushed through a $420 million tax credit for an aerospace contractor before adjourning for their monthlong summer recess.

The 15-year tax incentive would benefit one of the two major competitors, a joint bid being submitted by Boeing Co. and Lockheed Martin Corp.

That has angered the other bidder for the $55 billion federal contract, Northrup Grumman Corp., which says it cannot offer a low enough bid without a similar tax break. Gov. Jerry Brown, who pushed for the tax credit, and Democratic legislative leaders promised to consider a similar incentive for Northrup after the Legislature returns in August.

Lockheed Martin says the incentive would mean 1,100 California jobs should it win the contract, including 750 new jobs and 350 that would be retained.

But Northrup Grumman said it would create 1,500 new jobs in Palmdale should it win the contract, even without the tax subsidy. A company spokesman said giving the break to Lockheed Martin puts Northrup Grumman at a competitive disadvantage, the situation lawmakers pledged to correct next month.

"Northrup Grumman, California's largest aerospace employer, is extremely disappointed that the legislation passed today in California favors only one aerospace company," the company said in a statement after the vote. "This is a significant blow to fairness in California's aerospace industry."

The company looks forward to working with lawmakers in August to secure a similar subsidy, spokesman Tim Paynter said. "What we really want is a level playing field," he said.

The bill, AB2389, passed the Senate with one vote to spare after hours of heated debate in committee and on the floor, as senators complained that they were being asked by Brown to pass the bill with a two-thirds majority just four days after it was presented to them. It had broader support in the Assembly, where it was approved 68-2.

"I feel like this is a jam-job and this is a game of chicken," said Sen. Kevin de Leon, chairman of the Senate Appropriations Committee, which voted to send the bill to the full Senate.

The Los Angeles Democrat said California is competing for the aerospace jobs with Alabama, Florida, Texas and other states, but he wasn't happy about the last-minute process of considering the tax credit.

Yet he and others who voted for it said the gain in jobs would more than offset the subsidy.

Sen. Ted Gaines, R-Roseville, said projections are that there would be a net gain to the state budget of $80 million to $500 million over the life of the tax incentive if the jobs stay in California.

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