It is official. Northrop Grumman has announced Melbourne as the home site for its ambitious expansion project, dubbed Project Magellan by the Space Coast Economic Development Council, involving the development of the next generation long term bombers for the United States. Northrop Grumman dangled some serious bait to the leaders of Melbourne and Brevard County; high paying jobs in return for steep tax incentives.
Brevard County has had a tough time these last few years. The end of the space shuttle program resulted in thousands of workers being laid off. The housing collapse decimated the property tax base. Foreclosures skyrocketed and thousands who depended on the housing trade lost their jobs. Everyone hunkered down for a very severe economic storm and spending came to a standstill.
We cannot fault the leaders of Brevard County and Melbourne for succumbing to the sirens call of high paying jobs that Northrop Grumman sang. For a community reeling with high unemployment, teacher layoffs, and municipalities threatening to go bankrupt, it was time for some tough economic loving. Northrop Grumman was afforded those steep tax incentives. And, they in turn are offering the community jobs. The rationale behind the deal is understandable.
But, do economic incentives really work for companies chasing federal dollars? Or, are we simply playing with smoke and mirrors for a short term gains, while long term we all pay the price of propping up a major corporation?
Brevard County is no stranger to government contracting. Most major defense contractors have a presence here in the county. Brevard County is the home of Cape Canaveral, the launching point for America’s space program, multiple air force bases, a naval station, and a coast guard station. Federal dollars are as common here as birds on the beach.
The federal government is curtailing its spending. Last year, federal agencies lost nearly 10% of their budgets. If you work for a federal employer, you are no stranger to the sequester. Every agency was directed to cut costs; including the Department of Defense.
While current military hawks may be promoting and advocating the development of the next generation B-2 bombers, certain members of congress are working hard to further reduce spending government spending. This means that the Northrop Grumman promised project may not come to fruition. Northrop Grumman knows this and while local elected officials tout the promise of thousands of jobs, Northrop Grumman’s press release shows a more reserved estimate of only 300 jobs being created. The rest will come in phases if the contracts are awarded to Northrop Grumman.
Manipulation of Markets
Offering tax incentives is no guarantee of a company staying in one place. Without any money invested in the project, like buying and building a campus facility, there is little to keep Northrop Grumman in place if they decide to move at a later date. In 2007, USA Today ran an intriguing article about tax incentives for big corporations and how these deals are getting out of hand. And, frustrating local tax payers who are left footing the bills.
In 2004, North Carolina offered Dell Computers a hefty package of incentives for the development of manufacturing facility within the state. The combined incentives were valued at $240 million, in exchange for the creation of 1,500 jobs. But, by 2009, Dell Computers decided to close the facility, and over 900 jobs were terminated.
The Boom (and Bust) of Brevard
While leaders praise the economics of Northrop Grumman’s project here in Brevard, we as residents simply have to look at the last major employer that was depended on federal dollars for its survival; the United States Space Shuttle fleet, which was housed and launched from our own backyard. With the termination of the shuttle program, Brevard County lost thousands of high paying jobs. And, the City of Titusville has threatened to declare bankruptcy as it struggles to recoup the revenue source that it once depended on.
While federal contracting has it upside, we have to be cautious of spending tax payer money to lure corporations who, depended on federal dollars, can leave at any time, and then leave the taxpayer with an enormous burden. For example, in the Northrop Grumman deal, who will be responsible for the 200,000 SF campus if Northrop Grumman leaves, since they will not own the facility? Brevard County has plenty of abandoned shopping malls, runways, and stand-alone stores that once housed profitable enterprises. Now, they stand abandoned and rotting. Think Detroit on a smaller scale.
While the Northrop Grumman deal appears to be very positive at the surface, many aspects of the deal could very likely hurt taxpayers in the long run. We desperately need those tax dollars that Northrop Grumman is not paying, courtesy of the local tax payers who are doing the heavy lifting here. Remember, the Brevard County School Board announced cutbacks that included 400 teacher layoffs recently. Those tax dollars that are forfeited in this deal would have gone a long way towards teacher payroll.
While some talk of the next real estate boom, lets us not forget how hard we suffered in the last bust. Economic growth should come from natural reasons to locate one’s company to Melbourne, not by artificial stimulation.
We do not want to be the next Detroit of America, albeit, with a much better climate.