States bring incentives to bear in courting Hawker Beechcraft

Wichita Business Journal - by Daniel McCoy
Media

Louisiana and Mississippi bring plenty of incentives and motivation to the table as Hawker Beechcraft Corp. considers them for a possible relocation of some of its operations out of Wichita, according to one national site selection consultant.

“Louisiana and Mississippi are both very aggressive in the way they are attracting business,” says Jason Hickey, president of site selection firm Hickey & Associates LLC.

But it appears Kansas doesn’t have much to counter with.

Joe Monaco, a spokesman with the Kansas Department of Commerce, says incentives written into the state tax code are tied to job growth, not retention. That means states courting companies such as Hawker can offer the company more to relocate than Kansas can offer to keep it in place.

“We don’t have incentives to throw at a company that is threatening to leave,” Monaco says. “It really is that simple.”

Louisiana and Mississippi have a slew of tax credit programs, property tax exemptions and training initiatives to lure new companies. For instance, Louisiana is offering companies $2,500 tax credits for each new job they create. Mississippi offers credits to manufacturers who make major capital investments in that state.

The state of Kansas announced earlier this week it had reached a deal to help another aircraft company, Bombardier Inc., expand its Learjet facility in Wichita. The state deal will help the company add several buildings for work on the Learjet 85.

An expensive move
In a letter to employees last week, Hawker CEO Bill Boisture said the company continued to evaluate locations “both within and outside the U.S. that might be suitable for parts of our business.”

Boisture’s letter, which said that no decisions on relocation had been made, came on the heels of a letter from the International Association of Machinists and Aerospace Workers that warned members that Hawker could reduce its Wichita work force by as much as 75 percent during the next two years.

Hickey says if Hawker were to move that much work out of Wichita, it would buck the trend.

“We actually see a lot more consolidation of manufacturing mainly because of supply chain savings,” he says.

Rolland Vincent, an aviation analyst and president of Rolland Vincent Associates, says other states could be home to parts of Hawker’s business.

But, he says, moving the amount of work the union is talking about would mean relocating existing production lines for older models of aircraft. Vincent says that’s a much costlier prospect than finding a new site for a new product.

Moving older product lines means not just moving all the existing equipment, he says, it also means a drop in productivity as the company builds up its work force in a new location.

It makes Vincent skeptical that such a large-scale move is good for Hawker.

“Frankly, I’d be very surprised if this was the development,” he says.

He also says moving large portions of work to Mexico, where the company already has a facility, creates the same problems as moving to other states.

A look at incentives Mississippi and Louisiana have to offer manufacturers:

Louisiana

A 100 percent property tax abatement for up to 10 years on materials used in new manufacturing.

A $2,500 tax credit for each certified net new job created and either a 4 percent sales/use tax rebate on capital expenditures or income and franchise tax credits up to 1.5 percent of investment.

A 5 percent refundable state tax credit for manufacturers modernizing or upgrading existing facilities in Louisiana.

Louisiana FastStart program provides training and employment sourcing services at no cost to the company.

Mississippi

National or regional headquarters tax credits that equal between $500 and $2,000 per position and can be applied to state income tax to reduce corporate income tax liability.

An up to 10-year exemption from property taxes may be granted by local governing authorities on real and tangible personal property being used in the state. The exemption may be granted for all local property taxes except school district taxes on any property, but may not be granted on finished goods or rolling stock. The exemption usually includes land, buildings, machinery, equipment, furniture, fixtures, raw materials and work in process.

Income tax credits for existing manufacturers that have operated in Mississippi for at least two years are available if an existing manufacturer invests at least $1 million in additional buildings and/or equipment. The credit is calculated as 5 percent of the eligible project investment and is allowed for the year that the investment occurs. The credit allowed on any project cannot exceed $1 million.
A rebate of a percentage of Mississippi payroll to qualified employers for a period of up to 10 years is available to businesses that promise significant expansion of the economy through job creation.

Sources: Louisiana Economic Development and Mississippi Development Authority.

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