Last Minute Budget Item Could Mean Millions for Electric Boat

Friday, June 21, 2013


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Could incentive program contained in budget for manufacturing turn out to be one of the state's largest

The $8.2 billion fiscal year 2014 budget approved by the Rhode Island General Assembly House Finance Committee this past week garnered mixed reviews, depending on the widely varied vantage points of elected officials, lobbyists, and community leaders (see slideshow of reactions to budget below).

One budget provision in particular, Article 24, the Manufacturing Revitalization Act, has garnered the support of Quonset-based Electric Boat.  The General Dynamics submarine builder has indicated it is looking to expand in the near future and add thousands of jobs to the Rhode Island economy -- and it appears it could also possibly serve to benefit to the tune of millions from the state in employment incentives through the budget item, contingent upon making major capital investments.  

Bill McCourt, Executive Director of the Rhode Island Manufacturers Association, indicated that the requirements put forth in the budget proposal would make it very difficult for the majority of manufacturers in the state to meet the infrastructure spending and employment thresholds in order to take advantage of the incentives.  

"I don't like picking winners and losers, whether it's on 38 Studios, bi-weekly pay, or this," said McCourt.  "We need to rethink as a state this all or nothing approach." 

Geared for Large Scale Company?  

Article 24 as contained in the budget approved by House Finance would allow manufacturing and tech companies in the state that invest at least $10 million in capital infrastructure investments the ability to seek a "job creation reimbursement" of $500 per full-time position created, which would have to be at least 200% of the state minimum wage.

In order to qualify for the job creation reimbursement each year, the company would have to create at least one hundred (100) full-time equivalent active employees "in excess of its stabilized employment" in each calendar year.  

The proposal had originally been introduced as a stand-alone measure (H-6064) by Representative Helio Melo back on May 1, and was considered at a May 9th hearing, and then held for further study.  It resurfaced when the budget was unveiled last week, along with a number of previously introduced stand-alone measures that were included due to their potential fiscal impact. . 

Electric Boat Supportive of Measure -- and Poised to Expand 

On Thursday, General Dynamics Electric Boat Director of Communications Bob Hamilton spoke with GoLocal about the company's interest in the measure -- and plans to expand.  

"As one of the largest employers in Rhode Island, and one that would like to expand, EB has strongly supported this bill," Hamilton wrote in an e-mail response to questions.  "Because it has only passed the House at this point, the terms of the bill are subject to change. Until the bill has been passed by the legislature and signed into law, it would be speculative to gauge its impact on Electric Boat."

Hamilton continued, "However, our support for this bill is based on the effect it would have on our efforts to control costs for our customer, the United States Navy, as well as the effect it would have on economic development and job creation in Rhode Island." 

"Regarding EB's growth, a lot is going to depend on the Navy’s plan for construction of the next-generation submarine, but indications now are that the Quonset Point workforce could increase from 2,700 to 5,000 or more between now and the 2020s." 

Hamilton also noted that EB is in discussions with Quonset Development Corporation about leasing additional space at Quonset Point. "While it is too early to predict the outcome, I can tell you that we expect to modify our lease to accommodate our current and future workload," wrote Hamilton.  

Ramifications for Electric Boat, and State

Larry Berman, spokesperson for Speaker of the House Gordon Fox, said that the investment incentive wasn't geared towards any one company.  "Anyone who qualifies could apply for this," Berman said.  

"This is revenue neutral," continued Berman, pointing to the last page of this year's House budget book, in which the program is addressed on the very last page.  Berman indicated that the capital investment coupled with job creation would offset the employment incentives offered through the program.  

If Electric Boat were to expand and add over 2000 jobs to its workforce, the job creation reimbursement under the program, at $500 per employee, would be over $1 million, contingent upon the capital infrastructure investments.  

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McCourt, however, is questioning who can take advantage of the program -- and why.  

Referencing another section of the proposal that appears to state a company need only create 50 jobs, McCourt said, "Why 50 employees? If a company adds 49 employees, is that not good? Those would be jobs at 200% of minimum wage, taking some people off of unemployment, putting them back to work."  

"And why does the baseline have to be at that $10M level or above?" questioned McCourt. "If a smaller employer makes some investments, adds five jobs, isn't that enough?  We have plenty of companies that would love to have sucn an incentive."  

Still, McCourt said that the proposal as it stands is good thing -- for those companies that could qualify.  

"I certainly favor rewarding the companies that are here, have been here, and are working to grow their business, including Electric Boat," said McCourt.  "However I've heard from RIMA members that they'd like to some something like this with broader applicability for smaller to medium-sized businesses, to help them expand and boost the economy."  

See more Rhode Island leaders' budget hits -- and budget misses -- below.  



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