Support for Northrop Grumman tax incentives waning in D.C.

By Nikita Stewart
Washington Post Staff Writer
Tuesday, March 9, 2010

The District's bid to attract the corporate headquarters of Northrop Grumman is unraveling as several D.C. Council members question whether the city should offer the Fortune 100 company a proposed $25 million tax-incentive package.

Northrop Grumman announced in January that it would relocate from Los Angeles to the Washington area, setting off a frenzied competition among the District, Maryland and Virginia to land the defense contractor.

Legislation crafted by the administration of Mayor Adrian M. Fenty (D), dubbed the Global Security and Aerospace Industry Tax Abatement Act, initially had seven co-sponsors, enough to lock in a simple majority vote. But council members, being pressured by constituents and struggling with the city's budget deficit, are peeling off.

Council member Mary M. Cheh (D-Ward 3), a co-sponsor, said she is now undecided because the council recently approved tax breaks for other companies without an overall plan or cost-benefits analysis. "I don't think we can keep doing this bit by bit," she said. "I like the idea of using the incentives to lure these companies here, but I am uneasy."

Dan McClain, a spokesman for Northrop Grumman, declined to comment on the waning support. "It would be inappropriate to comment on what any government body may or may not include in its proposal," he said in a statement. "We expect to announce a final site decision at the end of March or April."

In Virginia, Gov. Robert F. McDonnell (R) sent late legislation to both houses of the General Assembly aimed at drawing the firm. The bills would allow the Governor's Opportunity Fund, an economic development grant program that can be spent only on public infrastructure, to be used to renovate private buildings as well. The bills also would renew the Virginia Economic Development Incentive Grant program, which is available to companies that create 400 jobs that pay better than 150 percent of the state's average wage or 300 jobs that pay better than 200 percent. The state could begin spending $30 million over the next six years, starting July 1.

The D.C. Fiscal Policy Institute and other watchdog groups are lobbying against the D.C. bill, expressing doubts about the tax abatement at a hearing on the legislation held by the council's Committee on Finance and Revenue. During his testimony, Charlie Cray, director of the Center for Corporate Policy, called the region's three-way battle for Northrop Grumman a "corporate-welfare arms race."

Dennis P. Bourgault, owner of a Capitol Hill pet supply store, said the city has neglected to help foundering small businesses while giving tax breaks to larger companies. "We basically have no relief now," he said.

Under the legislation, Northrop Grumman would receive $5.5 million in grants to help cover relocation expenses and a 10-year property tax abatement worth $19.5 million. The company is considering lots at Fourth and E streets SW and Sixth and E streets SW near Nationals Park. The company would have to agree to employ a minimum of 250 workers in the District to get the incentives.

Representatives of the Fenty administration said the company would give the city cachet it has been missing.

"Attracting a Fortune 100 company to the District, an opportunity that is very rare, would immediately and dramatically improve the District's reputation in the eyes of business leaders worldwide," said David Zipper, director of business development and strategy in the Office of the Deputy Mayor for Planning and Economic Development.

Zipper estimated that the company would contribute about $40 million to D.C. nonprofit groups in the next 10 years.

Council member Jack Evans (D-Ward 2), chief sponsor of the legislation, said his colleagues are not looking at the indirect benefits. Although few new jobs would be created, "the bigger value is to bring the subcontractors to the same location," he said.

Council member Kwame R. Brown (D-At Large) said he cannot explain to his constituents what is happening, including where the city will get the money for the tax breaks.

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