Program attracts businesses to offset installation expenses
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By Ed Tibbetts | Monday, June 09, 2008 |
Eight years ago, peacetime was killing the factory at the Rock Island Arsenal.
Running at about a fifth of its capacity, the historic manufacturing plant that churned out rifles, machine guns and howitzers during the nation’s world wars had seen its work force dwindle.
What’s more, a base-closing process loomed, and economic development leaders were scared.
In an effort to bolster the factory, the heart of the 7,000-person island work force, the Quad-City congressional delegation got approved a demonstration project aimed at enticing commercial firms to use vacant space on the installation.
Called the Arsenal Support
Program Initiative, or ASPI, the idea was to use federal funds to renovate vacant buildings and lure private firms to the island. They would then pay rent to defray the operating costs at the Joint Manufacturing and Technology Center, the formal name of the Arsenal’s manufacturing center.
Thus far, the payoff has been limited.
In 2007, the program sent nearly $300,000 to the factory, a fraction of its $318 million revenue. Next year, it will be $750,000, according to the Rock Island Arsenal Development Group, which markets space on the island.
The program’s income also is small compared with investment. To date, program savings amount to seven cents on every dollar spent.
Backers say the initiative is aimed at subsidizing the factory during lean times, knowing that, when wars such as Iraq come along, the facility will be around to react quickly when such things as armor for Humvees are needed.
They also say it’s only natural for it to take several years to pay a positive return on investment, much like a similar program to help ammunition plants, which now gets positive reviews. It took seven or eight years to turn positive, officials say.
“It’s starting to work,” said Sen. Dick Durbin, D-Ill., a longtime supporter. “We’ve got one company with 340 employees.”
AmCad Digital Conversion, which had been located in Rock Island, moved onto the island two years ago and has grown its work force. Just last month, it unveiled expanded offices in an old warehouse.
“I want to stick with it as long as it has promise,” Durbin added.
When ASPI was conceived in 2000, the Army opposed it, said Michael Hix, a senior operations research analyst at the Rand Corp., who wrote a book about Arsenals in 2003.
“They said they had higher priorities,” he said.
That’s continued. The Bush administration has never included the program in its budgets.
That’s left Congress to step in with earmarks, with the Quad-City delegation playing a major role in getting the funds. This year, the ASPI program for the Arsenal is the beneficiary of an $11.5 million earmark. There also is another $9.6 million, to be used by the Watervliet Arsenal in New York.
Between 2001 and 2007, $10.8 million in ASPI dollars were spent at Rock Island, most of it to renovate vacant space for about 20 companies with 461 employees.
They range from AmCad to a supply firm to several defense contractors. The return to the government, in the form of rent and other contributions, amounted to $709,000, roughly 7 percent of the investment, according to an annual report required by Congress. That’s about half the return for the program overall.
The report adds that ASPI is responsible for more than 900 jobs, direct and spinoff, with a nearly $25 million effect on the Quad-Cities.
Jim Morgan, program director for the Rock Island Arsenal Development Group, said eventually income will rise when escalator clauses in lease agreements kick in. Reduced rent is at times offered to companies in the beginning of their leases to lure them to the island.
Morgan said, in the meantime, the contributions to the factory are useful.
“It’s money they didn’t have before we were here,” he said. And he added that in lean times, when the factory’s operating costs might be a third of what they are now, the subsidy will look better.
“There’s going to be lean times again, pretty soon,” he said.
A critic of earmarks, while generally approving of the concept to lure private companies onto vacant military buildings, said such programs as ASPI don’t have the appropriate oversight.
“It’s not possible to say after the earmarking process that they’ve picked the best programs,” said Tom Schatz, president of Citizens Against Government Waste. “We’d like to have hearings on every earmark.”
A retired Arsenal executive who supports the program concept said it would probably pay a better return if it were included in the Army’s annual budget, rather than funded via “top-down” earmarking.
“I just don’t think it’s requirements-based,” said Fred Smith, a former executive with TACOM, which administers ASPI money.
Morgan said he’s not sure the regular budgeting process would work because it would take time, and prospects often aren’t willing to wait for space to be renovated.
Last year, the Quad-Cities’ congressional delegation succeeded in getting ASPI reauthorized through 2010.
It still must get funding through the annual appropriations process, however, and if the Army doesn’t include it in its budget, it will have to continue relying on congressional earmarks.
Ed Tibbetts can be contacted at (563) 383-2327 or etibbetts@qctimes.com. Comment on this article at qctimes.com.
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