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Sikorsky’s $75 million tax credit deal glides through CT legislature

Sikorsky Aircraft

With overwhelming support, both houses of the Connecticut legislature on Wednesday approved an incentive package for Stratford helicopter manufacturer Sikorsky Aircraft.

The deal, negotiated between parent company Lockheed Martin and Gov. Ned Lamont and announced last month, would provide up to $75 million in sales-and-use and other tax credits to Sikorsky if the company wins a pair of contracts it’s bidding to build helicopters for the U.S. Army. If only one of the contracts is secured, the state incentive would be up to $50 million.

The company got a $220 million incentive package in 2016.

The House of Representatives passed the bill 130-14 early Wednesday after brief comments from a handful of legislators who all declared fulsome support for the deal. The 14 House members who voted against the bill — four Democrats and 10 Republicans — were some of the most liberal Democrats and conservative Republicans. Rep. Craig Fishbein, R-Wallingford, said the bill was corporate welfare.

Sen. Rob Sampson, R-Wolcott, echoed that phrase when the Senate took up the bill Wednesday evening. Kicking off the debate, Sampson said, “Every tax credit that we offer to a single business in this state means that we are effectively charging every other business the difference,” he said.

After brief remarks, the senators passed the bill nearly unanimously. Sampson was the lone “no” vote.

What’s the deal?

Lamont’s deal takes a distinct tack from the $220 million incentive package legislators approved for Lockheed Martin’s aircraft subsidiary in 2016 under his predecessor, Gov. Dannel P. Malloy. The majority of that incentive, $140 million, was a bond-funded grant; the rest was sales-and-use tax offsets.

“We’re not adding to bonding or the indebtedness of the state, that’s point one,” said David Lehman, commissioner of the Department of Economic and Community Development. “Two, it’s cleaner. Lockheed needs to earn the money over time as they maintain jobs, invest in the supply chain, invest in their factory … They’re performing before they get anything.”

In exchange for the latest round of tax incentives, the company agreed to several conditions in line with what the company agreed to in 2016. Sikorsky would need to employ a minimum of 7,000 full-time workers in Connecticut — roughly the same number it employs now — and maintain its headquarters and primary helicopter production facility in Connecticut through 2042.

The agreement also sets spending minimums for Sikorsky’s Connecticut suppliers — starting at $300 million annually — as well as capital expenditure requirements that start at $70 million a year.

Lehman said he thinks of the deal as an investment over the long term.

“The first decade is being awarded the contract from the Army and building out the factory and the supply chain. Then you have a much stickier economic ecosystem around these new helicopters that are going to be built,” he said. “The jobs in that second decade, I think, are where a lot of the economic benefit comes to the state.”

A speedy flight path

The Lamont administration announced its deal with Sikorsky in late March, immediately after the manufacturer had submitted its bids to the Army. Lehman said that was intentional, because, “What we didn’t want to have happen was the competitors see what we’re doing.”

But that shortened the timeline for legislative approval. The Finance, Revenue and Bonding Committee held a special briefing on April 14, and the bill received emergency certification Tuesday. The House and Senate took it up Wednesday.

During Wednesday’s session, Rep. Sean Scanlon, co-chair of the Finance, Revenue and Bonding Committee, called the latest iteration of the Connecticut-Sikorsky partnership “historic.” Scanlon said that without the new contracts, Sikorsky’s labor force in the state could decline by several thousand.

“We don’t want to just maintain 8,000 jobs, we want to grow the future of aerospace in Connecticut,” Scanlon said. “We make submarines, we make helicopters, we do amazing things that help our country and protect our country. But without this agreement, and without those two contracts, you will continue to see a gradual reduction in the number of employees that work at Sikorsky.”

Lehman wanted to make clear that there’s no imminent threat of Sikorsky moving its operations out of the state.

“It was always, ‘We want to do this in Connecticut. We think this is great for us, and we think it’s great for the state. Let’s work together to make sure we have the most competitive bid.’”

“We’ve got to get past that theme,” he went on. “GE, that was 2016 when [it moved its headquarters from Connecticut to Boston] … We should always be focused on the business environment, but I think we need to be honest that we haven’t seen that happen recently.”

In a statement Wednesday night, Lamont thanked the legislature for its quick work.

“I can’t overstate the significance of what this means for Connecticut workers, not only for those who work directly for Sikorsky, but also for the people who are employed by the 242 suppliers located all throughout our state that contract and do business with this worldwide leading aerospace company.”

CT Mirror staff writer Mark Pazniokas contributed to this story.

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