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LAEDC Issues Support for AB 777 (Property Tax Exemption for Space Equipment)

By January 24, 2014 No Comments

January 24, 2014
Assemblymember Al Muratsuchi
State Capitol 4117
Sacramento, CA 95814

Re: Assembly Bill 777 (Muratsuchi) – SUPPORT

Dear Assemblymember Muratsuchi:

On behalf of the Los Angeles County Economic Development Corporation, an organization dedicated to promoting job growth, economic expansion, and preserving the overall global competitiveness of California and Los Angeles County, I am pleased to offer our support for Assembly Bill (AB) 777. We believe AB 777, which provides a property tax exemption for equipment used in flight travel, is critically important to retaining, expanding and attracting new entrants into California’s fast growing space commercialization industry – a “homegrown” California industry that is not only carrying on the state’s aerospace dominance, but continuing to push the creative limits by changing the contours of the aerospace industry and expanding the creative bounds of what is possible in privately-supported space travel.

The rationale for AB 777 is simple: the space industry, once dependent on defense, NASA and other federal appropriations, is taking off in California through privately-supported space commercialization. But we must not take it for granted and, in doing so, work hard to ensure it stays here. The space industry’s decision – meaning, it’s a choice – to be in our state is a great distinction and of great value, not only for our economy but also for our communities that benefit from the thousands of well-paying, high-skilled jobs, as well as the induced and indirect jobs, output, tax and investment impacts that flow to our regions.

Yet, the “newness” of this industry comes with its own set of challenges. For example, SpaceX, a Southern California stalwart in this emerging private space commercialization industry, employing more than 3,000 workers, received an unexpected and sizeable multi-million dollar tax bill for back property taxes on its propulsion systems (rockets)—chattel that was previously untaxed when space exploration and travel was a government-dominated field. At its core, AB 777 exempts from property taxes this and other types of equipment for use in space flight for a period of 10 years.

However, it does much more than that.

AB 777 is a friendly reminder that in today’s global economy, location is not permanent, but companies – especially those at the forefront of innovation and the technology revolution – have many opportunities to locate outside of California. We have already seen California’s aerospace employment decrease by more than two-thirds from over 321,000 in 1990 due to combination of factors. And here in Los Angeles County, we’ve witnessed first-hand the destructive effects that the industry’s decline from 189,000 workers in 1990 to fewer than 60,000 in 2011 has wreaked on our local communities. Not to mention the ancillary – but enormous – repercussions that the loss of aerospace programs has had on our nation-leading manufacturing base, as well as the state and local tax dollars lost due to these severe job declines – tax dollars that help fund critical community services and social programs.

Still, make no mistake; aerospace remains an incredibly vital industry to the economies and communities of California, Southern California, and Los Angeles County. So while the industry has suffered staggering job losses during the past 20+ years, the aerospace industry has also brought forth some incredible advances with companies like Northrop, Boeing, AeroVironment and SpaceX, which is not only revolutionizing space travel and leading – dare I say: “winning” – this generation’s space race, but designing and building over 70 percent of its vehicles in-house, making their Hawthorne, California headquarters one of the few places in the world where you can view an entire rocket or spacecraft being manufactured. And again, this is all being done right here, in California’s very own backyard. This should not be a business we slam with a very costly, past-due notice on a previously never taxed piece of equipment.

For all of the above reasons, the LAEDC commends your leadership on this and other important aerospace issues, and offers its support for AB 777—a much-needed property tax exemption that helps cultivate the burgeoning space commercialization sector in California while simultaneously sending a message to all current and future space companies that “California is open for business.”

Sincerely,

David Flaks, Chief Operating Officer
Los Angeles County Economic Development Corporation

Download the letter here.