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Northrop Grumman move raises stakes for D.C., Maryland, Virginia leaders

By Rosalind S. Helderman and Aaron C. Davis
Washington Post Staff Writers
Thursday, February 25, 2010; B01

RICHMOND -- Earlier this month, top executives from defense behemoth Northrop Grumman conducted the economic development version of speed dating.

In search of a new home for their corporate headquarters, the company's leaders first went to Richmond, where they were wooed by Gov. Robert F. McDonnell (R). Then they went to Annapolis for a rendezvous with Gov. Martin O'Malley (D).

Top company officials have also flirted with the District and met with Mayor Adrian M. Fenty (D) before Christmas. They have made clear that Northrop won't be a cheap date, saying that tax incentives will factor into their decision, which they expect to make in the next few weeks.

The Los Angeles-based company is so emboldened because it has what every political leader in the United States wants: hundreds of high-paying jobs. That means that the publicity surrounding the move has raised the stakes considerably for McDonnell, O'Malley and Fenty, turning what probably would have been a quiet competition into a test of personal reputations that will hand one elected leader a political triumph and the others an open defeat.

"The stakes couldn't be higher," said Quentin Kidd, a political science professor at Christopher Newport University in Newport News, Va. "We want jobs, but it's not just the jobs. We want something of an emotional win, and this would be a real emotional win."

Maryland officials said they have been following up with weekly calls to Northrop, having the state's congressional delegation reach out to company leaders and getting other chief executives from defense and other industries to pitch the state.

"We want them to know we are taking the time to understand their needs and make sure they feel the personal touch along the way," said Christian S. Johansson, O'Malley's secretary of business and economic development, who was among those who met with Northrop executives during their visit to Annapolis.

Virginia Lt. Gov. Bill Bolling (R), who was tapped by McDonnell to lead job-creation efforts, said state leaders are "working very aggressively with [Northrop] to try to put together as good a package as we can and show them why Virginia's the place for them to be. We understand we are in a significant competition with Maryland and the District of Columbia."

The D.C. Council is weighing legislation to provide Northrop with $7.4 million in tax incentives and relocation grants, packages that could grow much larger.

Aris Melissaratos, former secretary of Maryland's Department of Business and Economic Development and a former executive at a company that was sold to Northrop, said he had spoken with economic development officials from all three Washington area jurisdictions. He said he understood that the District would put up $20 million in tax incentives, and Virginia even more.

Officials in the three jurisdictions were hesitant to tip their hands by revealing details of what they're doing to win over Northrop.

Government enticements

For McDonnell, landing Northrop Grumman would be a huge victory weeks into his first year in office, allowing him to burnish his job-creation credentials and to make the case that his conservative approach to taxation and business regulation is the surest path to economic growth.

Losing the company to Democrats in Maryland or the District would be an embarrassment, especially given that the Pentagon and much of the defense industry is in Virginia.

O'Malley would get a big boost during this election year if he wins the Northrop sweepstakes, but failing to land the firm would give Republicans a powerful example to counter his "jobs, jobs, jobs" mantra.

A surprise win by Fenty would give him a lift in his bid for reelection at a time when his popularity is slipping.

And it's possible that all three could come out losers -- if they offer too much and create the perception of giving a sweetheart deal to wealthy executives while their jurisdictions are cash-strapped.

A Northrop spokesman said that the company hopes to pick a site next month or in April and that it will make its choice based on the best office space it can find, proximity to federal customers and employees' quality of life. He said that government enticements will also play a role.

Officials from Maryland, Virginia and the District "have all been very eager to meet with us and to explain to us what's great about their particular jurisdiction," said Dan McClain, a spokesman for the company. "We are certainly accepting whatever offers the states and District have to make and are weighing that."

Ripple effect in Va.

A win would be particularly important for Virginia's new governor. During his campaign last year, McDonnell distributed bumper stickers that read "Bob's 4 Jobs," and he has insisted that his party's business philosophies are key to landing companies such as Northrop Grumman.

Virginia, home to the Pentagon and thousands of Northrop employees, is considered by many to be the leading contender. Northern Virginia is also on a bit of a roll, having snagged a handful of high-profile corporate relocations in recent years, including Volkswagen's U.S. offices in 2007 and SAIC last year.

But both of those economic victories occurred during the tenure of Democratic Gov. Timothy M. Kaine (D), and McDonnell had pledged that he could do better. He has asked the General Assembly to approve a $50 million jobs plan that includes money to lure companies.

At the same time, McDonnell has recommended $2.1 billion in budget cuts over the next two years that would dramatically reduce funding for and jobs in education, health care and other services, limiting his ability to offer too much to a single private company.

"It's a tough issue because of all the flash points that are related to it," said Stephen Fuller, director of the Center for Regional Analysis at George Mason University. "Yes, we do need jobs. But do we need these jobs as much as other jobs?"

Complicating the negotiations in Virginia is an ongoing dispute between the state and Northrop's information technology unit over a troubled 10-year, $2.3 billion contract to overhaul government computer networks.

The two parties have been moving toward a solution that will probably involve Virginia paying Northrop millions more than once planned to provide services that were not envisioned in the contract, the largest state contract in history. Relocating the company's top executives to the state could help heal hurt feelings, but not if the public comes to think that the company used the move to rework its contract.

McDonnell has promised that he will not mix his efforts to land the headquarters with negotiations over the contract.

McDonnell spokesman Tucker Martin said that a Northrop relocation could create "positive ripple effects through the economy" and that Virginia's business-friendly climate and top-notch schools give it an edge. But he said McDonnell's political legacy will be judged over four years, not a single economic deal.

Elections in Md., D.C.

If McDonnell were to score a win, it would mean a loss for Fenty and O'Malley months before each faces reelection. Losing in Maryland, in particular, would help Republicans build a narrative that Democratic tax policy has weakened the state's economic competitiveness.

"As much as I would very much love to get those jobs, we are starting in this competition significantly behind our sister state to the south," said Del. Christopher B. Shank (Washington), a leading Republican member of the Maryland House of Delegates. "It's entirely a situation of our own making."

O'Malley spokesman Shaun Adamec said last week that O'Malley and Democratic heads of the General Assembly appeared to be on the same page about efforts to lure Northrop. They were seen walking the halls of the Maryland State House with Wes Bush, Northrop's chief executive and president, and Gaston Kent, the company's vice president of finance.

Adamec said that Maryland was "aggressively" pursuing Northrop and offered another rationale for why the state might edge its neighbors: the defense-heavy makeup of Maryland's congressional delegation.

The state's senior U.S. senator, Barbara A. Mikulski (D), is a member of the Senate Select Committee on Intelligence, Sen. Benjamin L. Cardin (D) is chairman of the Senate Judiciary's terrorism and homeland security committee, and U.S. Rep. C.A. Dutch Ruppersberger (D) is chairman of the House Intelligence subcommittee on cyber security. Plus, U.S. Rep. Steny H. Hoyer (D-Md.) is House majority leader.

Regardless of who lands the company, Northrop is likely to come out a winner, said Jim Dinegar, president and chief executive of the Greater Washington Board of Trade.

"If you're going after the star athlete, you're going to pay a good amount of money to get him," Dinegar said. "This really will reset what it takes to land a company of this caliber."

Staff writer Nikita Stewart contributed to this report.

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