Official: Sikorsky deal could be among state’s ‘best investments’

A new incentive agreement with Sikorsky reveals Gov. Ned Lamont’s administration is doubling down on an earn-as-you-go philosophy that avoids borrowing money, but carries the risk of other states poaching prized manufacturers with deals that promise cash up front.

If approved by the General Assembly, Sikorsky and Lockheed Martin would receive $75 million in sales-tax exemptions and tax credits, subject to ongoing audits to ensure compliance with jobs and baseline expenditures on its Connecticut suppliers. That would be on top of the $220 million awarded the company in 2016, as it prepared to produce a new helicopter fleet for the U.S. Marine Corps.

Sikorsky and Lockheed Martin are vying with the Texas-based Bell, a subsidiary of Textron Industries, on a future replacement for the Sikorsky Black Hawk utility helicopter. Sikorsky is teaming with Boeing on the Defiant-X, while Bell is offering the V-280 Valor, featuring tilt-rotor technology it pioneered with the V-22 Osprey.

The Defiant-X is designed to improve on the maneuverability of the nimble Black Hawk, but will not hit the cruising speed of the Bell V-280, which swivels its wing-mounted rotors to fly like an airplane. The Pentagon has yet to give any indication whether it could choose both the Defiant-X and the V-280

Valor, which would give field commanders extra mission flexibility — while providing steady work for Sikorsky and Boeing as well as Bell.

“The hope is that the next-generation Black Hawk is the Defiant-X, and you have that same ... 50-year run that the Black Hawk had,” David Lehman, commissioner of the Connecticut Department of Economic and Community Development, said in an interview Tuesday. “In that case, this will be one of the best investments Connecticut’s ever made.”

Sikorsky and Bell are also bidding to produce a new armed scout helicopter for the

U.S. Army. Sikorsky’s Raider-X prototype is a smaller version of the Defiant-X, while Bell is proposing Invictus, a modernized take on traditional helicopter design.

Sikorsky has about 8,100 employees across its Connecticut facilities at a Stratford headquarters plant, a Bridgeport factory, offices in Shelton and Trumbull, and a North Haven warehouse. Under the 2016 deal, the company agreed to have about 8,500 workers as of 2032.

The new incentives target is set at 7,750 additional jobs if Sikorsky wins both contracts, or 500 fewer if the company receives only one of the bids. The deal sets a baseline of 7,000 jobs in every year of the agreement if Sikorsky wins contracts for both helicopters, and 6,000 jobs if the company only receives one of them.

The deal also includes a commitment by Sikorsky to spend more than $1.1 billion over the next decade with its nearly 250 suppliers dotting Connecticut, including in Bridgeport, Stamford, New Haven, Hartford, Danbury, Middletown, Torrington and New London.

Wider spending by the company and workers under the agreement would support 30,000 jobs in all, according to estimates by Hickey & Associates, generating some $70 billion in economic activity from payrolls, capital expenses, taxes and other spending.

Lockheed Martin would max out the full Connecticut incentives only if the Pentagon chooses Sikorsky as the winning bidder on both the Black Hawk replacement and the armed scout helicopter. The Connecticut deal drops to $50 million if the manufacturer only gets one, according to Lehman.

If there’s a delay by the Department of Defense initiating production, DECD would have the option to extend the window of time that Lockheed Martin would be eligible to claim incentives.

Lehman said the Lockheed Martin pact marks a departure for Connecticut, by awarding incentives that are contingent on a specific contract award. He added he envisions the deal could serve as a model for similar packages, lessening the state’s need to borrow to support incentives to companies adding jobs.

“I think this is new,” Lehman said. “If they win the contract, the agreement would be in place.”

Former Gov. Dannel Malloy suggested in 2016 that Lockheed Martin considered “numerous” states to build CH-53K King Stallion helicopters for the U.S. Marines, prompting Connecticut to offer the $220 million incentive package.

To date, Lockheed Martin has tapped less than $45 million of that amount, as it slowly ramps up production of the King Stallion. The Pentagon wants as many as 200 of the cargo helicopters for the Marines. Lockheed Martin also envisions international sales of the King Stallion over time, starting with the Israel Defense Forces.

The new $75 million package remains sizable by national standards. Wavteq noted just a dozen larger state incentive packages of more than 2,200 it recorded nationally as reported in February by Site Selection.

But other states have been willing to increase cash grants to land the most soughtafter new factories, most notably Tennessee, which last year extended $500 million in grants as part of an $884 million package to win a Ford electric vehicle plant that will support nearly 6,000 jobs.

While Lockheed Martin committed to keeping Sikorsky in Connecticut through 2042, there is no contractual obligation to do so, Lehman confirmed Tuesday. Should another state dangle a massive package to support construction of a new Defiant-X factory, Lockheed Martin would have the option of paying Connecticut back for any incentives it had earned and leave the state.

There is recent precedent for that in the Northeast. After General Electric took a 2016 package to move its headquarters to Boston from Fairfield, the company returned millions of dollars to Massachusetts after scaling back its staff projections.

Lehman said he does not envision any such scenario with Lockheed Martin, considering the company’s continued investment in Stratford and its experienced cadre of Sikorsky workers who might be reluctant to move.

“You have a sticky capital investment and a work force, which is doing very specialized things,” Lehman said. “We are significant to Lockheed, and broadly in defense, which I think is a real strength of the state.”