Momentum for Strong Aerospace & Defense Strategy
Sometimes a shock can be a good thing. When leaders in Tucson learned that aerospace & defense giant Raytheon Missile Systems selected Huntsville, Alabama as the location for its $75 million manufacturing plant, they didn’t take the news sitting down.
Local leaders quickly began discussions to determine what actions we as a region need to take to stay in the game. It was agreed that change was necessary. In fact, it was imperative.
But before you can change, you have to assess where and how you can improve. It was with this goal in mind that a group of 15 local community and business leaders traveled to Huntsville to meet with community leaders to discuss “best practices.”
Raytheon chose the Huntsville location for many reasons, the most important being room to expand (not currently possible in Tucson). Incentives, too, played a significant role in the decision. Being close to the defense customer was also critical. Huntsville’s Redstone Arsenal is home to the U.S. Army Aviation and Missile Command, Space and Missile Defense Command, and major components of the Defense Intelligence Agency and the Missile Defense Agency.
Huntsville also is home to a cluster of defense contractors and aerospace companies within Cummings Research Park, one of the world’s leading science and technology business parks. The facility employs 25,000 people at some 285 companies. The research park serves as a central hub for aerospace technology and a technology incubator for the entire aerospace & defense industry.
Bruce Wright, head of the University of Arizona Science and Technology Park and the Arizona Bioscience Park, was on that two-day trip last July. He was impressed by the collaboration and cooperation that permeate Huntsville’s leadership.
“The community leadership is
all dedicated to a common effort,” Wright said. “Government, business, and community at large – they’re all on board to further aerospace & defense. It was pretty remarkable.” While Wright concedes that Huntsville (specifically Cummings Research Park) has some advantages over Tucson, he also said that we have our own competitive advantages.
Huntsville “has had enormous and sustained support from their congressional delegation. It has lobbied and advocated for defense installations in that community,” he said. “What Tucson has – and what Huntsville would like to have – is a much more diversified economy. There are many areas where we are competitive.”
The group zeroed in on the concept of developing a similar research park in Tucson. It’s an idea in the beginning stages. If it moves forward it could be located near the Tucson International Airport, Davis-Monthan Air Force Base or Raytheon’s current facility. It could serve as a hub of aerospace & defense innovation for established and emerging companies.
In conjunction with those initial discussions, another effort underway is the purchase of a buffer zone to reduce urban encroachment – a key reason for Raytheon’s selection of Huntsville over Tucson. This land is currently privately held. Pima County is having it appraised should the Board of Supervisors decide to move forward with the estimated $5 to $6 million land purchase.
A third effort is an upcoming Pima County Bond election. The overall package is an estimated $700 million and currently the economic development portion is $200 million – which proposes upgrades to major transportation corridors to aid in connecting new and existing employment hubs. If this vision is to become a reality, it will require the collaboration not only of the community and its business leaders, but also of the local government entities. The Pima County Bond advisory committee explored these issues at its Nov. 18 meeting. (See related story on p. 117)
County Administrator Chuck Huckelberry, who took part in the fact-finding trip to Huntsville, is a proponent of the initiative. “Historically, job centers (in Tucson) have emerged because of geographic chance, or their location,” Huckelberry said.
“The UA Tech Park exists because IBM purchased the land in the mid-1980s. When they left, they transferred the land to the UA, so it was kind of a fortunate accident.” Raytheon, too, evolved over the years, starting out some 60 years ago as Hughes Aircraft.
Huckelberry said community leaders were already in discussion about what was needed to keep businesses here, as well as to attract new businesses. But following Raytheon’s Huntsville decision, people got serious about it.
“The current effort is looking at how do we provide support for our largest employers and give them the opportunity to grow,” Huckelberry said. The discussion initially focused on Raytheon (Southern Arizona’s largest private employer) and Davis-Monthan. “We were able to define very specific things needed to keep them – land acquisition and roadway improvements,” he said. Naturally, these improvements will also assist efforts to attract companies to the region as well.
The commercial aerospace industry is projecting unprecedented growth in the next several years and that growth needs to locate somewhere. Local leaders want that “somewhere” to be Tucson. Geographic clustering has long-term benefits for both the companies and the region. Because of the complexity of the manufacturing process, national security concerns, and lengthy certification requirements, domestic expansion has many advantages – with speed to market being just one. The ability to provide a ready and skilled workforce for this industry is another Tucson advantage.
In addition, the proximity to Mexico for certain subcontractor work has advantages as well. Mexico is faster, cheaper and easier to work with than establishing subcontracting relationships in, for example, China.
Stephen G. Eggen, Raytheon’s CFO and TREO’s board vice chair said, “To protect and grow this sector, we need to ensure we have the right infrastructure in place. For us, that means roadways and appropriate land use around our facilities that doesn’t impede our ability to operate,” he said, alluding to the reasons behind Raytheon’s decision to select Huntsville over Tucson.
Eggen agrees that the financials must make sense, too. “For companies considering Arizona as a location, we need to be able to provide the tax incentives that make this area an attractive option. Incentives have certainly been a factor for us when we have made location decisions.”
If approved, the bond funds would also be used to develop critical infrastructure, making it easier for residents to access major employment centers.
Infrastructure improvements should not be limited to roadways, said Scott Still, Sargent Aerospace & Defense Company’s president and CEO. “Our infrastructure is lacking. It should not take longer than 30 minutes to get from place to place locally. We also need to have increased air travel options at more competitive rates. This greatly improves our competitiveness with other similar size cities.”
Still acknowledges that local government support is key to success and this support needs to come in many forms, he said. “Local governments need to take an industrial, pro-growth approach to attracting aerospace & defense companies. High-tech training programs, VOTEC, certification programs and support of continual improvement/LEAN/Six-Sigma initiatives would attract these companies.”
Raytheon’s Eggen also believes education is key. “A strong education system, both K-12 and higher ed, is also a critical factor,” he said. “When we are recruiting employees to Tucson, they always want to know about the quality of our education system. We also must protect our universities – not only for the graduates they produce, but for the research opportunities they provide.”
In the end, the community also needs to realize the economic impact that the aerospace & defense sector has on this region. Eggen confirmed that economic impact studies show the aerospace & defense sector represents a significant piece of Arizona’s economy.
Raytheon alone employs more than 11,000 people in Southern Arizona with an annual payroll of nearly $1.5 billion. With multiplier effects, that works out to a total economic impact on the state of more than $3 billion annually. The industry is simply too big and far too valuable for the region to ignore.
Sargent’s Still has his own views on why the aerospace & defense industry is vital to Southern Arizona and why the community needs to foster and support it. “This sector has been a strong, silent neighbor in Southern Arizona for many years. We know the employment derived from the industry is a stable foundation in our community. This provides economic security and opportunity for future generations.”