Lockheed asks Cobb Development Authority for record $1.6 billion in bonds

·5 min read

Jul. 19—CUMBERLAND — The Development Authority of Cobb County moved forward Tuesday on a bond deal worth up to $1.6 billion with Lockheed Martin which, if approved, would be the largest for a single project in the authority's history.

"That's 'B' ... a billion," said authority Chairman Clark Hungerford, underscoring the point.

The agreement would make the funds available to Lockheed for the next 20 years as it bids on a variety of "next-generation" defense contracts. Rod McLean, head of the firm's Marietta plant, argued Lockheed needed the funds to bid for projects which he said could bring anywhere from 500 to 3,000 new jobs to Cobb.

"That's why this incentive application is so important, because we're competing against the Boeings and the Northrop Grummans who are doing very similar things," McLean told the board.

Authority board members voted 4-1 to approve an inducement resolution, an agreement which indicates the authority's willingness to issue the bonds. Final approval could happen any time in the next 12 months, but the authority's Executive Director Nelson Geter said he expected Lockheed to return in August or September.

Board member J.C. Bradbury, a Kennesaw State University economics professor, was the lone vote in opposition, telling the MDJ he opposes incentives for companies which are already in Cobb.

Unlike many past bond issuances, which have gone toward a single project or building, Lockheed's bonds would be made available as a bucket for a series of potential contracts. Issuance of the bonds would be contingent on Lockheed earning those contracts; no win, no bonds.

Lockheed would then be eligible for tax breaks on the investments it makes to complete those contracts, which would be phased in over a 10-year period from when the bonds are issued. Its current tax liability on existing property would not decrease.

Geter told the MDJ that previously, the largest single bond issuance by the authority was a $200 million deal for improvements to Home Depot's corporate headquarters in Cumberland.

"There has never been a project of comparable size," he said.

'One-time shot'

McLean said Lockheed, which employees around 5,000 people in Marietta, is facing down a "transition point" in the aerospace defense industry.

"If you think about how the C-130 was built, we no longer build airplanes that way," he said, referring to the aircraft that's rolled off the line in Marietta since the 1950s. "They use more advanced technology, more modern techniques than ever before."

Documents submitted ahead of Tuesday's meeting indicate those techniques include an increased reliance on data and analytics, artificial intelligence, robotics, and augmented reality as compared with past aircraft. Lockheed says it will consequently have to expend significant capital — between $400 million and $2 billion — to update its facilities.

McLean didn't disclose what specific defense contracts the company is pursuing, and they are alluded to in accompanying documents only as "high impact" projects.

"We are working on several classified programs right now ... this is the type of technology and product and investments that are required to allow us to make the investments in the facilities, to allow us to compete more affordably for these types of programs," he said.

Lockheed and Airbus are currently competing against Boeing for a U.S. Air Force contract to build aerial fuel tankers, which would be partially assembled in Marietta. That project (the model has been dubbed the LMXT) is not the main concern of the bond deal on the table, officials said.

"We've been working on this project for a number of years with the company, and the LMXT was not part of the conversation. That's a separate project compared to what's in front of you today," said Dana Johnson, chief operating officer for the Cobb Chamber.

"These are franchise programs," added McLean. "Either you win it, or you're out. Think about the C-130. We won that almost 65 years ago, and we're still building the C-130 today. So these are one time shots you have to capture these programs."

Incentives

Board members — Bradbury excepting, who didn't comment on the proposal — appeared receptive to enthusiastic about the project.

"If they don't do something like this, then they're going to be behind the curve on every other contract that could possibly come down for them. So this is future-thinking," said Donna Rowe.

Added Courtney Knight, "Clearly, the jobs potentially generated by this program are very attractive," but asked why the possible scope — anywhere from 300 positions to 5,000 — was so large.

"It's all dependent on government funding," replied McLean. "How much they decide to devote to the program, and how fast they plan to ramp up, and how many — the quantity that they decide to build. Right now, it's uncertain about how many it will be, but what is certain is that it will happen.

"Because once again, that's one thing about this country — we will have, we do have a strong defense, and we won't back down. So it will happen."

Allison Dyer, a Holland & Knight attorney representing Lockheed, said the company was also looking to receive incentives from the state.

Asked what those incentives entailed, Lockheed spokesperson Rob Fuller said, "In addition to our local partnerships, we continue to partner with those at the state level for annual incentives that are received after employment growth and investments are completed. This helps us achieve affordability targets necessary to bring more high-paying, high-technology jobs to the area and keep Georgia a leader in the aerospace industry for decades to come."