Electric Boat promises jobs, construction in exchange for state support
New London — Gov. Dannel P. Malloy on Tuesday announced a "historic," long-term partnership between the state and Electric Boat that involves an $83 million investment by Connecticut, with a commitment from the submarine builder to add jobs and spend hundreds of millions on capital improvements in Groton.
The partnership will "build upon our investments that we've made with other defense contractors and quite frankly be supportive of a supply chain that touches every single portion of our state," Malloy said at a news conference at Fort Trumbull with a view of Electric Boat's construction bay, where a new fleet of attack submarines is being built, in the background.
Under the agreement, EB will grow its workforce in Connecticut by 1,881 jobs, bringing its total number of employees in the state to more than 13,000 by 2034. The company has about 11,000 employees between its facilities in Groton and New London. Last year alone, the company hired nearly 2,000 employees in Connecticut.
The company also will double the $250 million annually it spends with more than 700 in-state suppliers. Increased demand for submarines means EB will need even more suppliers in the state, and across the U.S.
To be able to concurrently build Virginia-class attack submarines, 15 of which have been delivered to the Navy, and a new class of ballistic-missile submarines that will begin being built in a few years, EB will spend more than $850 million on capital improvements at its Groton headquarters, including a new construction bay where the ballistic-missile submarines will be built.
Connecticut's portion of the deal includes $83 million in state funding to EB.
"This investment will allow EB to maintain its position as the highest quality provider of submarines to the United States Navy, thus capturing additional overhaul and repair work while continuing to deliver the Virginia-class submarines and growing jobs in Connecticut," Malloy said.
The state Department of Economic and Community Development will provide a $35 million loan for machinery and equipment with loan forgiveness based on supply chain spending and employment, and up to $20 million in sales and use tax exemptions from Connecticut Innovations for capital and new construction at EB's Groton campus. The department also will provide an $8 million grant for third-party workforce development initiatives to train advanced manufacturing workers for EB and its suppliers.
Finally, the state will provide $20 million for dredging in connection with EB's plans to construct a new dry dock and construction bay on the south side of its Groton campus. The U.S. Army Corps of Engineers dredges the Thames River, but not the area along EB's property line in Groton, according to Malloy.
Jeffrey Geiger, president of EB, said the state's investment will help "improve our competitive position and help us secure additional work in the future."
"This investment provides crucial support for the workforce development and facility expansion that will help Electric Boat grow, increase its economic contribution to the region and continue to deliver the world's most capable submarines to the United States Navy," Geiger said.
Between 2000 and 2016, more than $170 billion in defense contracts were awarded to Connecticut companies, according to Geiger. Nationally, Connecticut ranks second in per capita defense spending, he said.
The deal is a "mixed bag" for state Sen. Paul Formica, R-East Lyme, who said he was concerned about the budget implications for the state, namely that its debt payments would increase.
He added that the state should wait until it's on better financial footing before thinking about spending money on capital improvements at EB. However, Formica agrees with spending money on job training programs, and that Connecticut needs to send a message to the Navy that it's supportive of its submarine program. Formica and state Sen. Heather Somers, R-Groton, during this legislative session, have pushed for $10 million in state funding for workforce development programs.
"I'm hopeful it will all work out but it's a difficult time for corporate support of this magnitude," Formica said.
State Sen. Cathy Osten, D-Sprague, who introduced legislation that would provide up to $100 million for capital improvements at EB and another $50 million for workforce training programs, said she thought the agreement is a good deal. Osten supported the $220 million incentive package the state provided to Sikorsky in 2016, and said the deal announced Tuesday was "in the same vein."
Submarines have regained prominence in the U.S.' national security strategy, as officials worry about advancements made by Russia and China in their respective submarine fleets.
"We can put special operators on the ground. We can do surveillance. We can fire missiles. We can deter a nuclear attack. All of it through submarines, the very submarines that are built at Electric Boat," U.S. Sen. Richard Blumenthal, D-Conn., said, noting that about $7 billion was approved by Congress for submarine programs this fiscal year.
And federal lawmakers are poised to continue their support.
U.S. Rep. Joe Courtney, D-2nd District, noted that his colleagues already are beginning to make decisions about next year's defense spending. A congressional subcommittee with oversight of Navy shipbuilding, of which Courtney is the ranking member, is recommending the Navy build three attack submarines, as opposed to two, in the years 2022 and 2023. That's on top of construction on a ballistic-missile submarine in each of those years.