Aviation News Item: 11919

2nd Sep 2010

Source: kansas.com

Wichita sits too far from the Gulf Coast to be damaged by hurricanes - until now, that is.

Louisiana and Mississippi are using federal money meant for hurricane reconstruction to attract large companies from other states.

That makes the Machinists union, now facing sizable wage concessions at Hawker Beechcraft to keep jobs in Wichita, cry foul.

Hawker Beechcraft has confirmed that it is considering offers from Louisiana and Mississippi to move some operations.

"The whole idea of economic development of stimulus or hurricane relief was to help the communities rebound from calamity and not to steal jobs from other states," said Tom Buffenbarger, international president of the Machinists.

He described those states as "vultures."

Louisiana has recently made its mark in recruiting new companies. This year it was named by Pollina Corporate Real Estate as the "most improved" state in economic development, jumping from 40th in 2008 to 20th in 2010.

Its targeted incentive program was one factor in the dramatic improvement, Pollina said.

Kansas ranks seventh in the Pollina survey.

The potential sources of federal money for economic development incentives are numerous and, often, hard to trace. But one such federal money source has gained a higher profile.

In 2009, Louisiana received just more than $1 billion in recovery money from the federal Department of Housing and Urban Development for damage from hurricanes Ike and Gustav in 2008.

As part of the grants, the state got approval to spend $80 million on economic development.

The money, according to documents from the Louisiana Recovery Authority, is aimed at major economic projects and includes authorization for money for roads and utilities, building construction, worker training, new machinery, even working capital.

A Feb. 2 story in the Advocate of Baton Rouge states that Stephen Moret, secretary of the Louisiana Department of Economic Development, told the recovery authority's board that he would use the money to recruit large projects to the state.

No projects have been announced, yet, said Jennifer Pike, research director of the Public Affairs Research Council of Louisiana, a nonprofit watchdog.

The Louisiana Department of Economic Development didn't return calls for comment.

Louisiana, Mississippi and Alabama have also been active in using Gulf Opportunity Zone bonds, which allow tax-free construction and 50 percent bonus depreciation, since Hurricane Katrina in 2005.

In the Baton Rouge area alone, the bonds have financed $1.3 billion worth of construction, according to the Advocate. Only about half of that amount has been used for traditional economic development, such as manufacturing plants and headquarters buildings.

Louisiana also has a mega-project incentive fund, which was as high as $420 million earlier this year, but has now been drawn down to pay incentives to incoming companies.

The state legislature put tax dollars into the fund over the past several years, Pike said. But, she noted, the state economy was partially supported by federal reconstruction dollars during that time.

"It's hard to draw the line between state and federal money," she said.

Pike said there has been no controversy in the state over using these federal funds for incentives, but some are concerned more generally about giving tax money to private companies.

Louisiana has been victimized by other states using huge incentives as well, she said. And some regions of Louisiana are using public money to lure companies from other regions of the state.

"The fact is that all the states are doing this, plus competition within the state," she said. "It raises a lot of questions in the minds of the public."

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