State pledges $9.9 million to GE Aviation jet project

Jul. 09, 2013 @ 05:44 PM

State officials say they’ll contribute $9.9 million to a multi-government business incentive package that’s helped convince GE Aviation to build a new line of jet engines in North Carolina.

Tuesday’s announcement came from Gov. Pat McCrory’s office, which said the move is about both retaining existing jobs and creating new ones. The package benefits four communities, including Durham.

“We’re serious about building on existing industries in North Carolina, and this project is a perfect example of our commitment,” McCrory said in the formal announcement.

The governor later tweeted that he’s “looking forward to seeing more ‘Made in North Carolina’ stamps” on engine parts.

The state’s pledge to GE comes close to - but doesn’t quite match - the $10.6 million the N.C. Department of Commerce reckons local governments in four counties have put into the package.

Durham County officials in May said that they believed the state would ultimately contribute more than local governments. They put in $200,000; Durham’s City Council pledged $600,000.

Commerce spokeswoman Beth Gargan said the state’s money comes from six different programs.

The largest piece is a $3.6 million “job development investment grant” that pays GE based on the number of new jobs it creates and money it spends on the expansion.

The grant is payable over 12 years. GE must file annual reports detailing its investment and staffing increases. The state expects the project to create 242 new jobs and require a $195 million capital investment by GE.

To collect, GE executives “have to create the jobs over a five-year period, starting in 2013, through 2017,” Gargan said.

GE is building a new line of engines to power next-generation models of the Boeing 737 and Airbus A320, the short- and medium-haul workhorses of the global airline industry.

Factories near Asheville, Wilmington and West Jefferson, N.C., will produce parts for the engines. Final assembly of the engines will occur in GE Aviation’s Durham plant, off South Miami Boulevard.

North Carolina’s community colleges will spend nearly $3.3 million to set up and operate job-training classes tailored to the needs of the four factories, Gargan said.

The Department of Commerce will offer a $1.3 million One North Carolina grant to as a match for local contributions. It’ll also make those payments over time, based on GE’s actual job-creation performance, Gargan said.

The company will also receive state credits worth $834,000 and a N.C. Rural Economic Development Center grant of $500,000. Rounding out the package will be a $435,000 grant to finance an on-the-job training program at the West Jefferson plant in Ashe County.

Not counting toward the $9.9 million in pledges to GE is a separate, $1.2 million payment by the state into a fund used to finance economic-development-related utility work in “distressed” counties with major unemployment problems.

McCrory’s office said the payment is a required offset of incentives benefiting the “more economically prosperous counties” in the deal, namely Durham, Buncombe and New Hanover counties.

As such, it will “pay for nothing that’s associated with this project,” Gargan said.

Media reports suggested the various city, town and county governments in the four communities had pledged nearly $20 million toward their end of the deal.

The difference between that and the $10.6 million the state reckons as their share seems largely down to varying assessments of the value of a land swap benefiting GE Aviation’s plant near Asheville. The state is using a lower value for it than newspaper reports out of Buncombe County have suggested.

The Asheville-area plant is key to the project because it will manufacture the “ceramic matrix composite” components of the new engine that are at the heart of GE’s Leading Edge Aviation Propulsion or LEAP project.

The ceramic-composite parts will be both lighter and more heat-tolerant than the metals traditionally used in jets.

Two major trade publications, Flight International and Aviation Week & Space Technology, say GE’s inclusion of composites in the LEAP engines sets the stage for more extensive uses of them in the powerplants it’s developing for a future generation of the long-haul Boeing 777.

The Durham plant assembles engines for the current generation of the 777.

GE in opting for the use of exotic materials is following a strategy opposite to that of one of its prime competitors, Pratt & Whitney.

Pratt’s future engine plans assume the use of traditional materials, in a new sort of internal driveline that uses gearing to achieve fuel efficiency. Each company has criticized the other’s technological approach.

The incentive deal for GE Aviation has prompted some criticism from conservatives opposed to governmental intervention in the economy. But Gargan said state officials want North Carolina to have a place at the forefront of aviation development.

“These are good-paying jobs in advanced manufacturing in an industrial sector, aviation, that’s very important North Carolina and that want to focus on,” she said. “This is the beginning of a new product line for GE Aviation, and it’s going to grow.”