- Associated Press - Friday, May 22, 2015

LITTLE ROCK, Ark. (AP) - A defense project Arkansas hopes to land with an incentive package will provide a $16.3 million net benefit to the state over a 25-year period, a consultant hired by the Legislature said in a report issued Friday ahead of next week’s special session.

Colorado-based IHS said it saw minimal risks to Arkansas Gov. Asa Hutchinson’s proposal to issue $87 million in bonds to help Lockheed Martin land a contract assembling a new tactical vehicle that would replace the Humvee. Lockheed has said it will assemble the vehicles at its Camden plant if it’s awarded the contract.

The Legislature is set to convene Tuesday for a special session focusing on the bond proposal.

“While there is always some risk when a state makes a long-term commitment to provide up-front economic incentives that are repaid indirectly over time by the hope for increases in statewide economic activity, HIS’ conclusion is the proposed economic incentive package makes economic sense for the state of Arkansas, and that it is a prudent, responsible use of taxpayer resources,” IHS said in its report.

The report called the estimated net benefit conservatively low, saying it assumed that key components for the vehicles such as iron and steel wouldn’t be purchased from within the state. The consultant said the benefit would likely be higher, saying the number of vehicles produced at the Camden facility would probably be more than the 55,000 expected under the defense contract.



Lockheed Martin is competing with two other companies for the contract, Wisconsin-based Oshkosh Defense and Indiana-based AM General. The state would issue the bonds only if Lockheed Martin wins the contract.

In a separate report delivered to lawmakers, the Arkansas Economic Development Commission said the project would create 589 new jobs at the Camden facility and retain 556 existing ones. The average wage of the new positions would be $46,720 a year, growing to an average of $81,679 by 2040, according to AEDC. Lockheed Martin would be required to pay back some of the incentives if it doesn’t create or retain the jobs promised under the agreement.

Senate President Jonathan Dismang said the report would help make the case for the economic development bonds and that he believed it was a conservative estimate of the project’s impact.

“Having this type of entity here operating and creating vehicles will really have a big impact when similar entities are looking to relocate or build new facilities,” said Dismang, a Republican from Beebe.

If approved by lawmakers, the proposal would mark the second time Arkansas has issued bonds under a 2004 constitutional amendment intended to help the state land major projects. The Legislature in 2013 approved $125 million in financing for a steel mill under construction in east Arkansas.

The Lockheed Martin project so far has drawn little public opposition, but a conservative group that opposed the Big River Steel bond package two years ago signaled resistance to the plan.

“Although not all the details of this proposal have been released, Arkansas would be better served by reducing taxes and regulation in order to create a better environment for all businesses rather than spending tens of millions of dollars in taxpayer money on ‘incentives’ to lure particular projects or corporations to the state,” Americans for Prosperity’s Arkansas Director David Ray said in a statement earlier Friday. “Taxpayer money should be used to benefit all business across the state, rather than giving a handout to one corporation.”

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Follow Andrew DeMillo on Twitter at www.twitter.com/ademillo

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