Citizens take on DC Government over Tax Giveaways to Defense Contractor Northrop Grumman

"I
originally supported the $25 million offer to Northrop Grumman, but I
have since had second thoughts. With the city facing a $200-300 million
deficit, I see no reason to subsidize a multi-billion-dollar war
machine."
--DC City Councilman Marion Barry, March 10 in a telephone interview

A major struggle is brewing in the nation's capitol about the city's
proposal to offer of $25 million in subsidies and grants to the mammoth
defense contractor Northrop Grumman. The legislation was originally
sponsored by seven of the City Council's 13 members and supported by
Mayor Adrian Fenty, but now that the DC community is mobilizing against
the corporate giveaway, council members are having second thoughts.

On January 4 newly-hired CEO Wesley Bush announced that Northrop
Grumman would move its headquarters from the Century City area of Los
Angeles to the Washington metropolitan area by 2011. Bush wants his
executives closer to lawmakers on Capitol Hill and to officials in the
military and intelligence communities that make up the vast majority of
Northrop's business.
The company has already has been buying influence in Washington through
an army of lobbyists, outspending its larger rivals Lockheed Martin and
Boeing by more than $25 million between 1998 and 2008, according to the
Center for Responsive Politics. The move will only increase its ability
to land lucrative defense contracts.

Washington D.C., Maryland and Virginia have all been wooing the
company. DC officials pitched the city's proximity to Capitol Hill
power brokers; Maryland promoted its highly-educated workforce; and
Virginia touted a business-friendly environment that includes a 6
percent corporate tax rate, compared with 8.25 percent in Maryland and
9.97 percent in the District (Forbes has ranked Virginia as the best
state for business four years in a row).

But
that wasn't enough. This company with $34 billion in revenue and $2.5
billion in profits--most of it coming from government contracts--wanted
a government handout. Company spokesperson Randy Belote said it is
looking not only for the most suitable site with an abundance of
amenities but also the best financial incentive.

That
set off a bidding war. DC was the first to come up with a corporate
welfare package of $25 million--$19.5 million in real estate tax breaks
and up to $5.5 million in grants to pay for relocation costs, including
build-out, furniture, equipment, technological upgrades and
construction.

Championed by Councilmember Jack Evans, the offer did not come with any
analysis of the benefits for the city, nor any comparison of what the
funds invested elsewhere could generate. It requires that the company
employ a minimum of 250 people, leaving the city paying a whooping
$100,000 per job, but does not even stipulate that the jobs be given to
DC residents. Evans admits that most jobs will be filled by executives
and staff relocating from Los Angeles, with only about 100 new jobs
created, and the new employees may well live outside the city.

The
taxpayer giveaway has incensed small businesses, watchdog groups and
peace activists, who formed a new coalition called CENTS--Coalition to
End Needless Tax Subsidies. They have been meeting with the mayor and
councilmembers, testifying at hearings, holding press conferences and
educating the public.

Key to the new coalition is the owner of the bustling restaurants
Busboys and Poets, Andy Shallal, who employs as many people--250--as the
Northrop headquarters is projected to employ. Shallal is angry that
scarce taxdollars are being offered to a Fortune 100 company. "Let's
face it: $25 million for a $34 billion company is chump change. But
small businesses, the engine of our city's economy, are struggling to
pay their taxes and secure loans--and many are going out of business,"
says Shallal. "The city should be giving support to small businesses,
not to huge corporations that don't need the help."

Think Local First DC, an organization that represents 160 DC small and
local businesses, called on the city to reject the proposal. "The
proposed incentives to Northrop Grumman highlights a growing trend of
providing large tax abatements with little accountability while
neglecting investments that could be made in small businesses," said
Director Trisha Clauson. "With unemployment at crisis levels of over 12
percent citywide, the city needs jobs. Small businesses can generate
more jobs and support a locally-driven economy where money stays in the
community."

Think Local First has been pushing the city to pass the "Exemptions and Abatements Information Requirements Act",
which would require a financial analysis of all proposed tax
abatements and would require businesses to specify the benefits they
would bring. This legislation has languished in the Committee on
Finance and Revenue.

D.C.
Councilmember Jack Evans, who chairs the Committee on Finance and
Revenue, doesn't think such reviews are necessary. At a March 8 hearing
on the Northrop Grumman package, Evans stated that the city didn't need
a cost-benefits analysis. "I know this stuff--I've been doing it for 19
years and I know what works," he scoffed, insisting the company would
attract subcontractors and would contribute to the arts as it has done
in Los Angeles--claims he is unable to substantiate.

Washington Post business writer Steven Pearlstein, in an article
entitled "A wrongheaded race for Northrop Grumman's headquarters,"
takes Evans to task. "Every credible study finds that using taxpayer
subsidies to chase after corporate locations rarely pays off," he wrote.
"For the District, which is looking at a $200 million budget shortfall
next year, getting into this bidding war is particularly loony."

Opposition to the Northrop Grumman deal is also coming from the city's
peace community. The third largest U.S. military contractor behind
Lockheed Martin and Boeing, Northrop Grumman is best known as the
producer of the hugely expensive B-2 Stealth bomber, fighter jets such
as the F-14 Tomcat, and nuclear-powered submarines and aircraft
carriers. Most recently, Northrop Grumman has been specializing in
unmanned aerial vehicles, which are the drones that have killed so many
civilians in Afghanistan and Pakistan. According to CODEPINK testimony
at a DC Council hearing, the company specializes in "making weapons we
don't need for wars we shouldn't be in."

Charlie Cray of the Center for Corporate Policy told the Council that
DC should not stand for Defense Contractors and submitted to the
Council a litany of the company's abuses of public funds, including
grossly overbilling the government, violating the Arms Export Control
Act, knowingly installing defective parts and releasing hazardous
waste. "Northrop Grumman has had to pay over $820 million in fines
since 1995," said Cray. "It would be scandalous to give DC tax dollars
to a company with such a long record of waste, fraud and abuse."

The efforts of the Coalition to End Needless Tax Subsidies are starting
to pay off. Councilwoman Mary Cheh, a cosponsor of the legislation, is
wavering, as is Kwame Brown. Cosponsor Marion Barry now says he'll vote
against the deal. The vote is likely to take place in the next month.

The coalition is also reaching out to like-minded groups and elected
officials in Virginia and Maryland, encouraging them to oppose the
corporate giveaway in their states as well. Surely all three regions
can come up with better uses of scarce tax dollars than, as Councilman
Barry put it, "subsidizing a multi-billion dollar war machine."

For more information and ways to participate in the Northrop campaign, see https://www.facebook.com/group.php?gid=342167038431&ref=ts.