- Associated Press - Tuesday, May 26, 2015

LITTLE ROCK, Ark. (AP) - An $87 million incentive package aimed at luring a defense contract to south Arkansas was endorsed by legislative committees on Tuesday, a move that the Republican governor says could help the state land its first vehicle assembly plant.

The House and Senate Agriculture, Forestry and Economic Development committees advanced separate but identical versions of the bond proposal. The House and Senate are set to vote on the bills Wednesday, the top agenda item for a special legislative session that convened Tuesday.

The proposal calls for the state to issue the bonds if Lockheed Martin wins the contract for a tactical vehicle that will replace the Humvee. The Maryland-based company has said it will assemble the vehicles at its Camden facility.

“This is a golden opportunity for the state of Arkansas,” Gov. Asa Hutchinson said earlier Tuesday at a press conference that featured a prototype of the vehicle.

Lockheed is competing with two other companies for the contract - Indiana-based AM General and Wisconsin-based Oshkosh Defense. The bonds won’t be issued unless Lockheed wins the contract, which is expected to be awarded later this summer.

A consultant hired by the Legislature to review the project said it would provide a $16.3 million net benefit to the state over a 25-year period after the bonds and interest are paid off. But the report by Colorado-based IHS said the benefit would likely be higher, since its analysis wasn’t factoring in the possibility of suppliers moving to the state or Lockheed selling the vehicles to other countries.

Lockheed on Tuesday said it expected the project to create more than 1,000 jobs in addition to the nearly 600 expected at the plant, including construction on the facility and suppliers for the project. The company said it also expected to sell the vehicles to other countries.

If approved by the Legislature, the project will mark the second time Arkansas has issued bonds under a 2004 constitutional amendment aimed at helping the state land large economic projects. Lawmakers two years ago approved $125 million in financing for a steel mill under construction in east Arkansas.

Unlike the steel mill, the Lockheed project has drawn little vocal opposition and no organized lobbying effort.

“It’s just not as complicated,” said Democratic Sen. Bobby Pierce, who sponsored the Senate bill on the incentive package.

Americans for Prosperity, a conservative group, on Tuesday opposed the incentive package and said the state should instead focus on tax and regulatory reform.

“Americans for Prosperity Arkansas opposes this misguided corporate handout, and encourages lawmakers to vote no on this risky and expensive legislation,” the group said in a statement on its website.

Arkansas officials say they expect the state to pay off the bonds in 15 to 20 years. The state would pay between $109 million and $122 million for the repayment and interest, depending on how the bonds are structured.

Hutchinson said he understands concerns about state spending to lure major projects, but said he believed the package would help Arkansas compete for something that would create more jobs.

“Arkansas (has) been on the losing end of many of those competitions,” Hutchinson said. “And we want to compete, so this is where you set aside pure economic theory and say, ‘Let’s be practical, let’s compete.’”


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

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