Tuesday, March 12, 2013

Support for Lockheed Martin Corporate Welfare Sinking // They're Trying to Hoodwink Taxpayers Into Paying Them Twice

BACKGROUND: Earlier this week Maryland Juice cried foul over attempts by some lawmakers in Annapolis to give Pentagon weapons manufacturer Lockheed Martin millions of dollars in corporate welfare. Lockheed has been claiming that a $100 million private hotel and conference center they built should be exempt from Montgomery County's lodging and hotel tax, even though every other visitor and conference attendee in MoCo must pay this lodging tax. Lockheed is headquartered in Montgomery County, but ironically so are the Marriott and Choice Hotels corporations. Over the objections of County Executive Ike Leggett, the County Council twice rejected this proposal, and did so again for a third time on Monday:

Below Maryland Juice provides several updates on the quickly exploding story, followed by a deconstruction of Lockheed's B.S. arguments:

LAWMAKERS RETREATING FROM LOCKHEED PROPOSAL (KIND OF) - The proposal to give Lockheed a handout has sparked outrage across Maryland and is now making national news. Meanwhile, some lawmakers are quietly tiptoeing away from the Lockheed handout.  Our sources in Annapolis indicate that though the bill was on the verge of passage in the State Senate earlier this week, Senators have delayed a final floor vote and are trying to pass a half-assed "compromise" with Lockheed Martin. Instead of giving Lockheed $1.8 million in handouts, plus $450,000 a year, Maryland lawmakers are now proposing to eliminate the $1.8 million cash payment and "only" give Lockheed $450,000 a year. This "compromise" is unacceptable, as it still amounts to Montgomery County paying Lockheed Martin $4.5 million every ten years. Aren't we struggling to find funding for the Purple Line, Corridor Cities Transitway and other transportation projects?

LOCKHEED MARTIN TRYING TO GET HOTEL TAXES REFUNDED TWICE - Notably, 82% of Lockheed's revenue already comes from taxpayer funding, and company lobbyists have admitted that they are already being reimbursed by the Feds for a very large percentage of the MoCo hotel tax! A May 4th County Council analyst memo includes an admission from Lockheed that they already get 50%-75% (or more?) of their hotel taxes reimbursed by the Feds (aka taxpayers):
LOCKHEED MARTIN: The CLE lodging tax is rolled into our overall corporate overhead costs and those costs are allocated to different businesses and to different contracts based on what the contracts are and what form they take -e.g., fixed-price, cost-plus, etc. In addition, different contracts have different cost reimbursement rates.... There is a range of reimbursement for contract costs, depending on the contract vehicle and what the Federal Government has agreed to reimburse. That range can vary greatly - for some contracts its 50%, for others it might be 75% -- it depends. The significant point is that we build corporate overhead costs into our contracts in advance when we seek to do business with our customers....
Lockheed Martin wants taxpayers to pay them THREE TIMES for this hotel tax. First, Lockheed's "customers" are government agencies funded by taxpayers. The Huffington Post noted last November that 82% of Lockheed's funding comes from taxpayers (excerpt below):
HUFFINGTON POST: [The] U.S. government is essentially Lockheed's only customer. Last year, a full 82 percent of their sales came from Uncle Sam directly while a good portion of the remaining 17 percent was funded by the federal government through our support for foreign military sales and local and state government security contracts. Put another way, nearly every penny that Lockheed earns comes directly from you and me.
Second, Lockheed (by their own admission) is already getting reimbursed by the Feds (aka taxpayers) for most of the MoCo hotel tax -- an outrage in itself. But it is simply incomprehensible that after all this free taxpayer money, Lockheed also wants Montgomery County to give them the same amount of money they've already been refunded by the Feds. In short, Lockheed Martin's lobbyists are trying to pull a fast one on Maryland lawmakers and clearly cannot be trusted.

Bethesda Now's poll on the Lockheed welfare plan
SENATORS PLANNING ON VOTING AGAINST LOCKHEED WELFARE PLAN - A bipartisan group of State Senators is planning on voting against the entire Lockheed Martin welfare proposal, including Jamie Raskin, Brian Frosh, Karen Montgomery, Paul Pinsky, Bobby Zirkin, Jim Brochin, Bryan Simonaire and more. But there are potentially more "no" votes for the Lockheed welfare plan in the Senate, given that in a vote last Friday, the group of Lockheed opponents listed above was joined by Senators Lisa Gladden, Barry Glassman, Nancy Jacobs, Allan Kittleman, Anthony Muse, E.J. Pipkin, Ed Reilly, Jim Rosapepe, and Norm Stone in trying to slow down the attempted shotgunning of the Lockheed bill through the legislative process.

Notably, State Senator Brian Frosh is running for Attorney General in 2014, and two of his Democratic Primary opponents (Del. Jon Cardin & Bill Frick) are sponsoring the Lockheed Welfare bill in the House. It seems clear that passage of the Lockheed Martin handout could become a serious political liability for candidates running for office in 2014. Notably, Lockheed's private hotel is located in Bethesda, Maryland, but the Bethesda Now website is running a poll on the topic, and it appears that the vast majority of readers view the welfare proposal negatively (see screenshot at right).

FOUR STEPS TO DEFEAT LOCKHEED'S CORPORATE WELFARE PLAN - If activists want to kill this bill for good, now is the time to act. The State Senate is due to vote on the measure again tomorrow (Wednesday), and if the bill is not killed, it will next head to the House of Delegates Ways & Means Committee. Advocates are planning a four-step process to kill this legislation:

NATIONAL MEDIA OUTLETS COVERING THE LOCKHEED WELFARE SCANDAL - Interest in Lockheed Martin's corporate welfare proposal has attracted interest from the national news media, including a pair of articles in The Huffington Post. The outlet's corporate welfare reporter Paul Blumenthal provided a quick snapshot of the rapidly escalating opposition to the Lockheed bill (excerpt below):
HUFFINGTON POST: In an age of budget cuts and hard choices, state lawmakers in Annapolis, Md., are pushing a benefit for the world's largest defense manufacturer that would lead to lower funding for other programs in one Maryland county....

On Monday, the Montgomery County Council voted to oppose the legislation. Lockheed Martin had previously tried and failed to push the tax exemption through the council: Once it was included in County Executive Ike Leggett's budget, and another time Leggett (D) attempted to use state grant money to reimburse the company for past paid taxes....

"There's simply no reason why everybody else who comes to Montgomery County for a conference or a training and stays overnight should pay the lodging tax, but not people who are staying at their conference and training center," state Sen. Jamie Raskin (D), who represents parts of Montgomery County, told HuffPost.

If the legislation is enacted, the county will need to find savings in its budget immediately, according to [Montgomery County Councilmember George] Leventhal. "It would be $1.8 or $1.4 million [in a onetime payment] and $450,000 every year that would not go to fund Head Start, day care, police, fire and all the other functions of government," Leventhal said....

Over the past year, Lockheed Martin has doled out $30,000 in campaign contributions to Maryland state political candidates and entities, including $1,000 to state Sen. Mike Miller and $500 each to state Sen. Robert Garagiola and Del. Bill Frick, all Democratic sponsors of the legislation. The largest contribution was a $25,000 donation to the Democratic State Central Committee of Maryland....
Huffington Post columnist Lawrence Wittner provided additional details on the Lockheed corporate welfare proposal (excerpt below):
HUFFINGTON POST: At this time of severe cutbacks in government funding for food stamps, early childhood education, and meals on wheels, some Maryland legislators are hard at work looking out for the welfare of one of the world's wealthiest corporations....

It should be noted that, when Lockheed Martin's employees stay at the hotel, the company can usually pass on the costs to the appropriate federal contract. Thus, in most cases, the federal government already compensates Lockheed Martin for any hotel tax it pays.

In 2012, Ike Leggett, the County Executive, spearheaded a new effort to subsidize Lockheed Martin by proposing that the corporation be given a no-strings "grant" of $900,000 to compensate it for the hotel taxes it paid in 2011 and 2012.... Ultimately, the County Council refused to allocate the grant to Lockheed Martin.

Lockheed Martin maintains that its conference hotel is a "private" facility, solely devoted to training its employees, and for this reason its guests should not have to pay the tax. And it is true that Lockheed Martin decides who can reside there.

But the 183-room hotel is not, in fact, limited to Lockheed Martin employees. It is available for contractors, vendors, and anyone else the company welcomes. For example, the business school of the University of Southern California held a conference there in October 2012, with attendees offered the option of staying at the hotel for $225 per night or finding their own accommodations. Benchmark Hospitality International, which manages the facility, advertises it online as "a private, full-service business-class lodging and conference center," with a sports bar, fitness facility, lounge, and other amenities....

LARGE COALITION OF ACTIVISTS MOBILIZING AGAINST LOCKHEED WELFARE PROPOSAL - Maryland's progressive activist community has sprung into action to try and stamp out the Lockheed Martin corporate welfare proposal. Last night, advocates fanned out and met with Maryland lawmakers urging them to kill the Lockheed handout, including members of Common Cause, Peace Action, SEIU, Progressive Maryland, Progressive Neighbors, the firefighters, teachers, police and more. Below you can see the flyer they were distributing in Annapolis:

National activist groups are also beginning to weigh in on the Lockheed plan. The online civil liberties group RootsAction published an alert about the Maryland corporate welfare bill, noting Lockheed's recent and high-profile acts of corporate malfeasance (excerpt below):
ROOTSACTION: What's the world's biggest war profiteer to do if it already owns the federal government but is having trouble kicking around the local government of Montgomery County, Maryland, where it's headquartered?  Why, hire the state of Maryland to step in, of course....

The list of abuses by Lockheed Martin includes contract fraud, unfair business practices, kickbacks, mischarges, inflated costs, defective pricing, improper pricing, unlicensed exporting to foreign nations (Lockheed Martin sells weapons to governments of all sorts around the world), air and water pollution, fraud, bribery, federal election law violations, overbilling, radiation exposure, age discrimination, illegal transfer of information to China, falsification of testing records, embezzlement, racial discrimination, retaliation against whistleblowers, bid-rigging, and much more....
Lockheed not only funds Republicans and Democrats alike with over $3 million per election cycle, lobbies officials for another $30 million, hires former officials, and shapes corporate news, but Lockheed Martin also creates local panics by threatening to notify every one of its employees that they might be fired if U.S. war preparations spending doesn't continue to grow....

Lockheed Martin is based in suburban Washington, D.C., in Montgomery County, Md.  For years, Lockheed Martin and its friends at the Washington Post have been trying to get the local government to excuse the patrons of Lockheed Martin's luxury hotel from paying taxes.  Montgomery County is home to terrific peace activists who can, of course, get virtually nowhere with Congress, but who can make their voices heard locally.  This has frustrated Lockheed Martin no end.....

YOUR TAX DOLLARS USED TO BAIL OUT LOCKHEED MARTIN'S PENSION FUND - It is not surprising to Maryland Juice to see so many public employee unions opposing the Lockheed welfare plan. After all, many government employees have been facing pension cuts, stagnant pay and more, and lawmakers have been arguing this has been necessary to stave off budget problems. But Mother Jones noted that while public employees are losing their pensions, taxpayers continue to fund Lockheed Martin's pension shortfalls (excerpt below):
MOTHER JONES: Government contracts with megafirms like ... Lockheed Martin ... require Uncle Sam to reimburse the companies when their workers' pension funds take a hit in the market. Over the past five years, Lockheed has secured $3.1 billion in taxpayer dollars for pension reimbursements; that's a significant chunk of the $21.8 billion in operating profits they reported over that period.

These payments are all the more troubling since politicians from the left and the right (including President Obama) have targeted military veterans' retirement benefits in their cost-cutting zeal. But vets make a whole lot less than contractors.... Morgenson reports that the current value of the top five Lockheed Martin executives' benefits is around $40 million....

But federal pension payments to contractors are increasing at a furious clip. The reason: These companies made some really bad recession-era investments with their workers' retirement dollars, and a margin call is coming. The Times reports that Raytheon's pension fund was underfunded by $4 billion at the end of 2010. That's nothing compared with Lockheed, whose pension is a whopping $10.4 billion in the red, and "[a]s Lockheed contributes money to make up for this shortfall, the government will reimburse it..."

LOCKHEED'S PRIVATE HOTEL AND CONFERENCE CENTER IS OBVIOUSLY A "LODGING" FACILITY - So after all of the aforementioned arguments, the only claim that Lockheed has left in its arsenal is a very legalistic definition of whether their $100 million private hotel and conference center (built off the profits gleaned from taxpayers) qualifies as a hotel or lodging facility. The company claims that their Bethesda facility is not a hotel or lodging facility, but this argument doesn't pass the straight face test. Below, Maryland Juice provides a very humorous example of evidence that Hotel Lockheed is indeed a lodging facility in the plain English meaning of the term. Travel review website Tripadvisor.com rates the Lockheed hotel #11 out of 12 hotels in Bethesda, and former guests at Hotel Lockheed indicate that they have been forced to book their lodgings there, even when cheaper and more convenient hotels are available:

2 of 5 starsReviewed December 18, 2010

people found this review helpful
Restricted web access, no facilities on the weekend (e.g. food, exercise, etc.). It's the greatest white-elephant Lockheed has thought up yet. Lucky LM employees who are forced to stay there even if other hotels are closer to their business needs, better, and a lot cheaper.
2 of 5 starsReviewed May 8, 2011

people found this review helpful
I literally spit Coke on my keyboard when I read the "minimum security prison" review, and had to add my own thoughts. I was stuck at the CLE for 6 days of "indoctrination" and felt like I had just checked into a cult! If the prominent "architectural water feature" didn't give it away, the fact that you couldn't go 10 feet without seeing pictures of prisms and rainbows made it clear what I had gotten myself into.

The CLE is probably the most expensive hotel in the area. The food and staff are great, but I was itching to leave after 1 night. The internet is restricted so you can't upload iTunes or watch any type of streaming videos; the cable TV is company propaganda; hallways are video monitored for security (but don't even think about leaving your room unless you're in a collared shirt); the jogging trails close at 5pm and security will escort you back inside the building if you're out after dark; and there's absolutely no signs if civilization within this office park wasteland.

My advice: If you're stuck at the CLE, get takeout meals from the cafeteria and eat them in your room so you don't get sucked into socializing with the corporate drones. Use the quiet time after classes to update your resume so you can make your escape!
Room Tip: Do not show up unshaven!

These humorous entries are just the tip-of-the-iceberg when it comes to evidence that Lockheed's building in Bethesda is a "lodging" facility. Maryland Juice will be happy to debate Lockheed on this point anytime, anywhere.


No comments:

Post a Comment