State Bills Propose Tax Incentives for Military Bases, Fighter Work

In an effort to maintain defense production and to attract new businesses to California's deserted military facilities, Assemblymembers and Governor Wilson have formed task forces and supported legislation aimed at expediting base clean-up and creating tax-incentive focused "military enterprise zones," and one would provide state tax incentives for California-based jet fighter work.

Governor Wilson, in April 8 letters to California delegation members, seeks assistance in any way possible to help ensure that the presence of toxic contamination at all base closure sites in California is neutralized in a timely fashion so that the land can be leased back to the state and local communities. In a letter to Secretary of Defense William Cohen, Wilson notes that to date only three percent of Base Realignment and Closure (BRAC) property has been transferred by deed from federal ownership and only 19 percent leased to local communities pending clean-up of toxic contamination. Wilson also makes note of the importance of adopting the California Defense Conversion Council's recommendation that uniform, expedited procedures be used by all services to ensure the swift execution of interim leases.

In the California Assembly, Barbara Alby (Sacramento) recently introduced legislation that would provide tax incentives for McClellan Air Force Base in an effort to help diffuse the potential loss of over 2,000-plus jobs when the base is slated to close in 2001. The bill would establish a "military services privatization zone" on the portion of McClellan where those 2,000 jobs are centered. Although the base will close in four years, the Air Force has allowed two private contractors -- Boeing Corp. and AAI Corp. -- to bid on a major portion of McClellan's workload that generates an estimated 2,000 jobs. The third bidder is Hill Air Force Base in Ogden, Utah. If Hill were to win, the work and the jobs would move to Utah. If Boeing or AAI wins, the work will stay in Sacramento. The bill is designed to give the private bidders a competitive edge over the Utah bid.

And finally, in an effort to facilitate the Joint Strike Fighter (JSF) program, Assemblyman George Runner (Lancaster) has proposed to provide tax credits on gross sales to California contractors and subcontractors on the JSF program. The proposed credit would begin at 15 percent during the concept demonstration phase -- which includes the "fly-off" starting in 2000 at Edwards Air Force base between the Boeing and Lockheed Martin planes. The credit would drop to 12.5 percent during the manufacturing development phase -- the period when the winning design is refined and verified through flight tests -- and eventually to 10 percent during the production phase.

Volume 4, Bulletin 14 -- April 24, 1997