Lockheed, development authority brief school board on proposed bonds and incentives package

Aug. 19—MARIETTA — Should Lockheed Martin receive the unprecedented bonds and tax breaks it is seeking from the Development Authority of Cobb County, and the federal contracts it says such incentives will help secure, Cobb County and Cobb schools will net $51 million over a 26-year period, officials said Thursday.

That was the number that Nelson Geter, the authority's executive director, provided Cobb school board members during a presentation he, authority Chairman Clark Hungerford and Lockheed executives gave on the proposed bonds and incentives.

Lockheed's $1.6 billion bond request, the largest the authority has ever considered, is the first of its kind, since the authority doesn't yet know how much financing it might ultimately give the aerospace giant.

While previous bond requests from companies expanding in or moving to the county have been for a one-time project, Lockheed's request is instead open-ended. Lockheed says the incentives would help the firm, which employs about 5,000 people at its Marietta plant, compete against other defense contractors for an array of potential government contracts over the next 20 years.

The total amount of abatements Lockheed might receive remains to be determined.

Geter said of the $1.6 billion in bonds, $1.4 billion of that would be invested into new taxable personal property.

Lockheed executive Tony Frese said the projects could result in an additional $87 million in property tax revenues from real and personal property alone.

Lockheed expects to spend between $400 million and $2 billion to update its plant, depending on how many of those contracts it secures. Future investments could bring between 500 and 3,000 jobs to Cobb over the next 20 years, also dependent on how many contracts are secured.

"We think this is a great opportunity, we think it will allow for an increase in employment at Lockheed, a substantial investment that will generate tax revenue for everyone, and even with the abatement, will generate an increase ... for both the county and the school board," Hungerford told the school board.

While the school board has no say in whether the bonds and incentives are approved, the authority presents projects it is considering to the school board prior to approving them.

Board Chairman David Chastain recused himself from the discussion, since he is a Lockheed employee.

At its July meeting, the authority approved an "inducement resolution" for Lockheed's request — a formal indication that the authority is interested in approving the bonds. That vote carried 4-1, with most board members enthusiastic about the prospect of growing the plant.

Asked by school board member Randy Scamihorn whether Cobb schools needed to worry about tax breaks costing the school system money, officials said that wouldn't occur.

"I don't think you need to be at all concerned about losing money on this project," Geter said.

Added Hungerford, "It's new revenue coming in. So you're not losing anything on that new revenue. ... They're trying to get awarded that work. So whatever we can do to assist them and getting the bid as competitive as possible, then gets us to the point that we can look at benefits down the road. But if they don't get the bid, there is no purchasing of equipment, there is no new tax revenue."

If granted, the tax abatements would not erode any revenue currently on the tax rolls, Geter said.

Lockheed pays about $2 million per year on personal property that exists now.

Normally, the authority's abatements are done over 10 years, with 100% of property improvements abated in the first year, before being gradually reduced in 10% increments over the following decade.

In this instance, abatements would be granted to investments made within a 16-year period, as contracts are secured, and then run for 10 years from when the investment occurs. In effect, the revenues Lockheed would receive for tax breaks could continue rolling in for up to 26 years.

Lockheed has indicated it will also seek incentives from the state. Asked about those Thursday, Lockheed executive Andrew Dill didn't provide many details, but said the company is working with the state on "statutory and legislative opportunities to increase our opportunity to win the bid."

Among Lockheed's recent government incentives is Georgia's passage and signing of Senate Bill 6, which allows the firm to claim up to $100 million in state tax credits if it spends up to $800 million in new investment.

The contracts Lockheed hopes to secure relate to classified "next generation air defense" programs, Frese said, and could include research and development, engineering, design production, development, manufacturing, and testing. Such programs, including aircraft, hardware and software, are part of the military's goals of competing with similar high-tech development that countries like China and Russia are conducting.

Frese touted the company's current projects, such as the C-130J, the F-35 program, the F-16 program and the F-22 program.

"But at some point, these programs will come to an end, and we have to secure our future," Frese said.