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Long Beach Forms Team to Find Ways to Keep Boeing's C-17

Posted on: Tuesday, 3 January 2006, 21:00 CST

By Felix Sanchez, Press-Telegram, Long Beach, Calif.

Jan. 02--LONG BEACH -- The city of Long Beach has gone on a C-17 red alert.

With tough questions remaining over whether a political surge of support will be enough to overcome continued Pentagon and Air Force qualms about buying more of the Boeing Co.'s military cargo planes, the city is also stepping up economic pressure.

A "red team," formed and led by the city's Economic Development Department, is brainstorming with Boeing executives and representatives from local, regional and state agencies, utilities and business leaders to find ways to make it economic nonsense to not order more C-17s.

Using tactics normally reserved for recruiting new business, or keeping firms from bolting, the red team is looking at tax incentives, abatements and fee deferrals or reductions to help Boeing reduce the cost of building the $160 million plane.

Some ideas include the city taking over running Boeing's F ire Department at its Long Beach Airport plane factory, or Southern California Edison (SCE) giving Boeing a 15 percent, five-year discount on its utility bills .

At stake are more than 6,500 jobs at the facility that assembles the C-17, and an economic footprint that is $8.4 billion wide, stretching from the city, across California and the world for suppliers that build parts for the plane.

The hurdles keep piling up.

In mid-December, the Pentagon's top transportation officer said the Air Force is better served by buying new tanker airplanes that also carry cargo and ferry troops rather than additional C-17s.

The military has enough C-17s and other cargo planes, said Air Force Gen. Norton Schwartz, chief of the U.S. Transportation Command.

And if forced to make a budget decision, the 180 C-17s the military has contracted with Boeing, Schwartz said reluctantly, will be the last the Air Force orders.

That means the C-17 plant would be shuttered in 2008, when the last of the 180 on order are completed. But reducing operations would begin in early 2006, Boeing officials have said.

The defense budget passed in late December by Congress has $3.5 billion set aside for C-17s but with the Pentagon wavering on the planes, doubts over its future are even murkier.

Long Beach and California elected officials have rallied political support among colleagues to keep the C-17 program alive, and now, the unique "red team" effort is looking to provide the economic incentives to go along with ballot-box drive.

Boeing has not been shy about asking for help. T he company first approached the city in the fall when word emerged that government studies might recommend against future military orders.

"Boeing is being bold. We'll work with them on anything that is possible," said Pat West, Long Beach's community development director.

Boeing asked for a state income tax abatement, but it doesn't exist, West said, adding that "we'll talk with legislators to see if it's on the table."

In addition to C-17 program managers, the red team includes representatives from the Los Angeles County Economic Development Corporation, the Los Angeles County Economic Development Commission, the state housing and transportation departments, executives with SCE and leaders with the Long Beach water department, planning and building divisions, community development and economic development managers and deputy city managers.

Dave Bowman, Boeing vice president and C-17 program manager, welcomed the community support. "We remain hopeful that the Pentagon will keep our nation's only wide-body airlifter assembly line open," Bowman said.

The team was formed in the fall by Long Beach Cit y Manager Jerry Miller and stepped up its work after Air Force statements that seemed to damper earlier enthusiasm that the C-17 program might get the earlier anticipated orders.

"We're forging ahead on an economic incentive package, ' said Robert M. Swayze, Long Beach Economic Development Bureau Manager. "We figure, whatever happens in Washington, happens in Washington."

The team will report on its progress at a Jan. 24 City Council meeting, and gathered last week to update its proposals.

"Boeing is such a regional presence in Southern California, " Swayze said of the team's potential success. "We're pretty optimistic that the program will continue."

With more than 9,700 workers, Boeing is Long Beach's largest private employer. Boeing facilities here include the C-17 factory, and a plant to build the commercial 717 passenger jet.

The 717 factory , however, will close in spring. Boeing executives have decided to shutter the 717 production line because of lack of sales.

The 717 is the last commercial plane-making facility in California.

The red team concept is one used whenever the city is trying to attract major employers, or keep a company in town, Swayze said.

Because of Boeing's sweeping influence among Southern California aerospace suppliers, and with companies around the nation, which also supply major components for the C-17, the decision was made to expand the red team with regional representatives, he said.

"This has been a pretty easy sell," West said.

Barbara Levine, senior regional manager with the Los Angeles County Economic Development Corp., said that the red team is a good way for the private and public sectors to get involved.

"We get to do some high-level brainstorming that hopefully will have the desired outcome, " said Levine, who is a member of the red team.

Among the ideas being explored: reducing airport fees Boeing pays for its facilities; sharing the $800,000 cost Boeing pays to use engine run-up ramps at the airport; and converting Boeing's paint hangar into a part-time commercial venture, handling work from private aviation companies.

The group is also studying four long-term leases Boeing has with the city, determining if allowing the company to prepay the contracts might and potentially saving tens of thousands of dollars in interest.

Property tax revenue rebates from Los Angeles County, retroactive up to five years, might also be a part of a package, and the city could extend the C-17 plant's designation as an enterprise zone.

Legislation that would amend an existing "joint strike fighter tax credit" is being considered in Sacramento. It would benefit not only Boeing, but every supplier and manufacturer linked to the C-17 program in the Los Angeles basin.

The credit, created by State Sen. George Runner, R-Antelope Valley, was designed to keep California competitive with other states by allowing $250 million in tax credits for wages and equipment used in the production of the Joint Strike Fighter.

Runner said it would be an effective way to benefit not only the C-17, but other government-bid programs and work planned for the next-generation Space Shuttle.

"I have no problem with it being expanded," Runner said. "California does not compare well with other states when you talk about the price of doing business for companies and contractors.

"Tax credits are a major business attraction," Swayze said. "The state of California has been at the table and been an active participant in this. This is something no city can handle alone. We need regional and state partners."

Through "lean manufacturing," and trims of its own at the C-17 plant which have included layoffs Boeing has been able to reduce the cost of building a C-17 from its initial $220 million price tag to $160 million.

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Copyright (c) 2006, Press-Telegram, Long Beach, Calif.

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Source: Press-Telegram

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