Senate panel approves $37.5 million tax credit for Northrop Grumman

Erin Cox
Contact ReporterThe Baltimore Sun
An incentive pushed without fanfare by Hogan would give Northrop Grumman a $37.5 million tax break.

A Senate panel approved $37.5 million in tax credits Wednesday for Northrop Grumman Corp. over the next five years — an incentive pushed by the Hogan administration on top of $20 million lawmakers already intend to award the aerospace company for staying in Maryland.

The Aerospace, Electronics or Defense Contract Tax Credit, approved on a bipartisan vote, would benefit just one firm. Critics called it "corporate welfare."

Without it, supporters said, other states could lure Maryland's largest manufacturer away with better incentives.

"We're foolish if we do not try to do something," said Sen. James E. "Ed" DeGrange Sr., whose district includes a Northrop Grumman divisional headquarters in Linthicum.

The Anne Arundel County Democrat said the proposal is "much less than other companies are getting in other states."

The proposal would give the Falls Church, Va.-based defense contractor $250 a year for every job it retains or creates in Maryland, provided that it has at least 10,000 workers in the state who earn at least $85,000, including benefits. The annual cost to taxpayers: up to $7.5 million.

Northrop Grumman spokesman Tom Delaney said that "the funds would help stabilize our workforce in Maryland." He declined to answer several questions about the proposal, but said "we don't have plans to leave the state."

Sen. Richard S. Madaleno voted against the tax credit. He said it wasn't necessary.

"These jobs aren't going anywhere. This isn't Northrop coming to us and saying, 'We need this money in order to stay.' That's never been their comment to us," the Montgomery County Democrat said. "If you were to look in the dictionary under 'corporate welfare,' this is what would be pictured."

Several supporters expressed disappointment that Republican Gov. Larry Hogan did not publicly endorse the tax credit. He did not mention it during the news conference he called Tuesday in part to urge lawmakers to take action during the last week of session on his marquee issues and avoid spending mandates.

Other tax credits Hogan pushed, he announced with fanfare. This one was filed late, in just one chamber, and presented as a department initiative.

"I'm not thrilled about the fact that it was a priority for the governor and he did not publicly come out to say anything about it," Sen. Nancy King said before voting with the majority of the Budget and Taxation Committee to approve the proposal.

"I don't think Northrop Grumman should pay the price for that," the Montgomery County Democrat said.

The bill could go before the full Senate as early as Thursday. The legislature adjourns Monday.

A Hogan spokesman said that "of course, the governor supports this legislation" — he just let the Department of Commerce take the lead on pushing the bill.

"No governor routinely testifies on most departmental bills," spokesman Matthew A. Clark said. "That's the exception, not the rule."

Clark said Maryland is fortunate to have Northrop Grumman employing 10,000 workers and indirectly creating jobs for 15,000 more.

"The tax credits, along with accountability measures in this bill, will help to ensure that Northrop continues to deliver on its promises to the state," he said.

The General Assembly passed a budget last week that included a $20 million conditional loan, also proposed by Hogan, for Northrop Grumman. It would be forgiven if the defense giant invested $100 million in capital projects and retained at least 10,000 jobs over the next decade.

The company would have to repay some or all of that loan if it did not meet those benchmarks.

Northrop Grumman's newly established 1,000-worker Mission Systems divisional headquarters occupies two office buildings in Linthicum near Baltimore-Washington International Thurgood Marshall Airport.

The division employs thousands of workers who make navigational and other systems for the military.

The details of the loan still have to be reviewed by a legislative committee. The tax credit approved Wednesday would require Northrop to meet employment and investment benchmarks.

"This isn't something new," Sen. George C. Edwards said during committee debate.

"We're going to spend oodles of money on an interchange" trying to lure FBI headquarters to Maryland, the Western Maryland Republican said. "We've done this. We do this."

Sen. Bill Ferguson, one of three committee members who voted against the tax credit, said it creates a bad precedent.

"I just can't get over the fact that it's a policy for one company," the Baltimore Democrat said. "What is the company next year that asks for it?"

Added Sen. Roger Manno, a Montgomery County Democrat: "To do it for one manufacturer is something that we can't justify back home."

Clark, the governor's spokesman, said the tax credit creates an opportunity for the state's Commerce Department "to secure thousands of jobs and significant investments."

Madaleno, who has emerged as one of the governor's chief legislative critics, said he believes Hogan is reluctant to publicly embrace the policy.

"He is trying to keep his fingerprints off of this, I'm sure, because I don't think the public would really be happy to know he's giving [Northrop Grumman] a $57 million thank-you card for doing nothing additional in the state of Maryland."

ecox@baltsun.com

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