A RI taxpayer giveaway to Electric Boat?

Jun 24, 2013

At this time of the RI General Assembly session every year, when the State House gets as hot as a sauna and the rhetoric boils over, lawmakers are confronted with money items tucked into the arcane language of the state budget that don’t seem to have received much discussion but have an impact on state taxpayers.

One that for the most part has dropped below the media radar is what appears to be some very favorable treatment for a huge defense contractor that doesn’t really need state financial help, the Electric Boat division of General  Dynamics.

Electric Boat has about 11,000 employees split between facilities Quonset Point in North Kingstown and Groton, Conn. They make some of the world’s most sophisticated submarines and have Rhode Island’s largest manufacturing work force. This company provides some of the very best skilled, blue-collar jobs in New England.

But do they really need a state tax break? Tucked into the budget is a provision known as Article 24 that appears largely to help just one Rhode Island manufacturer – Electric Boat. The proposal includes a tax break – worth $500 off state business taxes for every new worker a company hires – if a company invests at least $10 million in real estate, machinery, equipment or other capital purchases as well as creating at least 100 new full-time jobs.

Well guess what. Electric Boat is probably the only Rhode Island manufacturer big enough to meet those thresh holds. As William McCourt of the RI Manufacturers Association told the ProJo, the requirements probably cannot be met by the smaller state manufacturers who really need help.

``For folks like Electric Boat looking to expand, its good….but 10 million is a lot for other folks to deal with,’’ McCourt said.

House Republican Leader Brian Newberry of North Smithfield says it ``looks like a giveaway for Electric Boat’’ that doesn’t do enough for smaller companies.

Electric Boat makes billion-dollar submarines that are at the heart of the nation’s military defense. These jobs aren’t going to be moved to China or Mexico; the technology is too valuable to our military to expose to foreign nations. The jobs aren’t moving out of Rhode Island either, particularly in light of the fact that Sen. Jack Reed is in line to become the next chairman of the U.S. Senate Armed Services Committee. And the jobs in Quonset are non-union, while the bulk of the Groton work force is unionized.

Reed is already senior on the Armed Services Subcommittee on Military Construction, Veterans Affairs and Related Agencies.  In this role, he has been a major voice in steering $5.8 billion in federal appropriations for the Virginia-class submarine program, including two subs in 2014 and advance funding for two ships planned in 2015. The recent defense bill winding its way through the Senate also supports the 10 boat five year contract under negotiations between the U.S. Navy and Electric Boat. according to Reed's office.

Reed is running for reelection in 2014 and he will be reminding constituents that there is a lot of Rhode Island in Jack Reed and a lot of Jack Reed in Rhode Island, particularly the defense contracts that he has influence over.

Electric Boat has already committed to hiring more workers and is negotiating for more land at Quonset Point to accommodate building more submarines. Rhode Island taxpayers already support Electric Boat with their federal taxes. Do we really have to subsidize them with state taxes as well?

Gov. Lincoln Chafee is known to be upset about this provision, which Newberry says was part of an economic package pushed by House Finance Chairman Helio Mello, D-East Providence. Sometimes if a budget article looks like crony capitalism and walks and talks like it, well, it is crony capitalism.

Robert Hamilton, spokesman for Electric Boat, says the company does not comment on the impact of legislation until it is signed into law by the governor. Hamilton also said he is not familiar with details of the bill and that the company has not been involved in drafting it.

In a budget that does little for higher education and cities and towns and proposes to cut 6,500 low-income Rhode Islanders from RiteCare medical coverage, lawmakers should be asking some tough questions about a tax break for a huge defense contractor.