Big Gov’t Embraced to Keep U.S. Generals Happy

Tap for Slideshow
Photographer: Kari Goodnough/Bloomberg

Lauren Kirby, 12, left, and Olivia Carroll, 12, learn to prepare a shuttle launching at the U.S Space and Rocket Center in Huntsville, Alabama, on Oct. 21, 2011.

Close
Photographer: Kari Goodnough/Bloomberg

Lauren Kirby, 12, left, and Olivia Carroll, 12, learn to prepare a shuttle launching at the U.S Space and Rocket Center in Huntsville, Alabama, on Oct. 21, 2011. Close

Lauren Kirby, 12, left, and Olivia Carroll, 12, learn to prepare a shuttle launching at the U.S Space and Rocket... Read More

Photographer: Kari Goodnough/Bloomberg

A sign welcoming visitors and residents stands outside of the U.S. Space and Rocket Center in Huntsville, Alabama on Oct. 21, 2011. Close

A sign welcoming visitors and residents stands outside of the U.S. Space and Rocket Center in Huntsville, Alabama on Oct. 21, 2011.

Photographer: Kari Goodnough/Bloomberg

A Saturn V replica seen from highway 565 stands outside of the U.S. Space and Rocket Center in Huntsville, Alabama. Close

A Saturn V replica seen from highway 565 stands outside of the U.S. Space and Rocket Center in Huntsville, Alabama.

Photographer: Kari Goodnough/Bloomberg

Attorney Joe Ritch, founder of the UAH Ice Hockey program, stands for a portrait in front of the Propst Arena at the Von Braun Center in Hunstville, Alabama. Close

Attorney Joe Ritch, founder of the UAH Ice Hockey program, stands for a portrait in front of the Propst Arena at the... Read More

Photographer: Goodnough/Bloomberg

Veteran Quinten Walton sits inside his home in Huntsville, Alabama. Close

Veteran Quinten Walton sits inside his home in Huntsville, Alabama.

Photographer: Kari Goodnough/Bloomberg

Tommy Battle, mayor of Huntsville speaks with Jay Stowe, chief operations officer of Huntsville Utilities, right, and Michelle Jordan, economic development director of Huntsville, during a breakfast meeting in Huntsville, Alabama Close

Tommy Battle, mayor of Huntsville speaks with Jay Stowe, chief operations officer of Huntsville Utilities, right, and... Read More

The two-star general’s new home came with granite countertops, hardwood floors, stainless appliances and high expectations. It was a gift to the U.S. Army from the taxpayers of Huntsville, Alabama.

Major General James Pillsbury and wife Becky moved into the house during November 2003. The 4,200-square-foot (390-square- meter) brick villa was built using city paving funds. It was the first of 10 costing a total of $3.8 million that the city donated to the Army to enhance nearby Redstone Arsenal as the Pentagon prepared to close bases around the country.

“It’s what we affectionately call ‘pass-through pork,’” says James Link, a retired Army three-star general who was commander of the arsenal in the 1990s.

Luxury quarters for generals were just part of a leave- nothing-to-chance strategy led by Joe Ritch, a 61-year-old lawyer. Armed with campaign contributions and lobbying funds, his network of politicians, boosters and defense executives helped Huntsville expand its military presence, win billions of dollars in Pentagon contracts and add thousands of jobs. Per capita defense spending climbed to 13 times the national rate, creating an oasis of prosperity in a lackluster U.S. economy.

Huntsville helps show why it’s difficult to slash defense spending. Congress and the president have told the Pentagon to find $450 billion in cuts over the next 10 years. The Defense Department’s past efforts have fallen short. In 2005, the military promised to save $36 billion by consolidating bases and missed its goal by almost two-thirds, according to a January 2009 Government Accountability Office report.

Ike’s Warning

Fifty years ago, President Dwight D. Eisenhower warned against “the acquisition of unwarranted influence” by “the military-industrial complex” of defense contractors, lawmakers and Pentagon officials. The local advocacy groups represent a new spoke on the wheel that keeps military spending rolling.

“I used to call it the Huntsville Army,” says Hans Mark, 81, the Pentagon’s top technology official under President Bill Clinton and a former secretary of the Air Force. “We had some distinguished, powerful senators from there that wouldn’t let us stop” spending on defense programs, he says.

Republican Richard Shelby, a fifth-term senator, helped find taxpayer money to offset military business that Huntsville lost in the 2005 Base Realignment and Closure proceeding, known as BRAC. In August, he and junior Republican Senator Jeff Sessions voted against the Obama administration’s deficit- cutting deal with Congress, saying it didn’t go far enough.

Ritch’s Role

Huntsville, in Madison County, “is a key defense and aerospace hub that has grown even more critical to our nation’s security as a result of the 2005 BRAC process,” Shelby’s spokesman Jonathan Graffeo said in an e-mail. “However, Senator Shelby has repeatedly said that all options for deficit reduction must be on the table, including cuts to the defense budget that may impact Huntsville.”

Attorney Ritch, the Huntsville-Madison County Chamber of Commerce and the mayor are working to make sure that Huntsville continues to grow. The group identifies defense-spending priorities by consulting with Shelby and senior military commanders, says Ritch, who worked on Shelby’s first Senate campaign 25 years ago.

Shelby, 77, the sixth-most senior Republican senator, always returns his calls, says Ritch, who has contributed at least $36,000 since 2000 to the lawmaker’s campaigns and his Defend America Political Action Committee, according to election finance records.

Ritch helped start the housing-for-generals project. He also organized an ad hoc committee that made sure the arsenal was a winner in the Pentagon’s 2005 reorganization.

Hockey in Alabama

“I like the competitive side,” says Ritch, who played ice hockey in a men’s league until a second Achilles tendon surgery seven years ago. “You make sure you outscore the next guy.”

Military contractors whose executives served on Ritch’s committee or in the leadership of the Chamber of Commerce have won $23.2 billion in Pentagon contracts since 2004, 56 percent of the area’s total, records show.

Overall defense spending in Madison County jumped 76 percent over a decade to $15,889 a person, the sixth-highest in the country, based on data compiled by Bloomberg. In the six years since the nationwide base realignment, military contracts in the area have swelled 48 percent to $32 billion, bringing in 4,650 new government jobs.

Madison County is two hours up Interstate 65 from Birmingham, the seat of Jefferson County, which filed the biggest municipal bankruptcy in U.S. history Nov. 9 with more than $3 billion in debt from a corruption-marred sewer project.

Oasis of Prosperity

While U.S. housing prices fell 28 percent over the last five years, values in Madison County climbed 5.3 percent. Median income and education levels are above U.S. norms, and unemployment is 0.6 percentage point below the national rate.

Huntsville’s new jobs came from moving the Army Materiel Command, the Army Security Assistance Command and the Space and Missile Defense Command from the Washington, D.C. area. The Missile Defense Agency also moved in.

While locating the missile organizations at one site builds on Redstone’s 61-year history in rocket development, the MDA has a mixed record, says the former Air Force secretary Mark. Its $35 billion defense shield in Alaska and California has failed almost half its tests without proving it can stop an intercontinental missile attack.

The deficit reduction Congress is now considering may push defense cuts to $1.1 trillion over the next decade if lawmakers can’t find savings elsewhere. The Pentagon is seeking $670 billion for fiscal 2012.

‘Large Impacts’

The spending rollbacks would erase as many as 200,000 civilian defense jobs and have “large impacts” on the economies of Virginia, Texas and California, according to the Republican staff of the House Armed Services Committee. Following Huntsville’s example, states and municipalities from California to Florida are planning influence campaigns backed by local taxpayer funds.

In October, Florida Republican Governor Rick Scott announced $2.5 million in grants for communities and local groups to spend in support of retaining defense installations. Monterey, California, subsidizes road maintenance and trash collection at the nearby naval air station. Connecticut has given the Navy $12 million since 2005 for construction at the New London submarine base.

Highest Stakes

“We don’t see anyone else in the country that has done it as well as Huntsville,” says Joe Snell, president of Tucson Regional Economic Opportunities Inc., an Arizona group that has twice sent delegations to Alabama. “We are going to be camped in Washington quite a bit after January.” Waltham, Massachusetts-based Raytheon Co. (RTN) is one of the largest employers in the Tucson region.

The stakes are highest in Winnebago County, Wisconsin, around the town of Oshkosh. Its military contracts climbed 12- fold over the past decade of wars in Iraq and Afghanistan, pushing defense spending in the county to $43,489 a person. That was the most in the U.S., based on data compiled by Bloomberg.

The 12,800-employee Oshkosh Corp. (OSK) makes armored vehicles there. As government purchases of blast-resistant trucks declined, revenue fell 12 percent in the fourth quarter, and the company cut its forecast.

“If you take Oshkosh Corp. out of the equation, that would cause an earthquake,” says John Casper, the president of the Oshkosh Chamber of Commerce. Nonetheless, he said, “going out to lobby in Washington is not in our immediate playbook.”

Nazi Rocket Scientist

Huntsville’s defense-driven boom began in 1950 with the arrival of Wernher von Braun, the former Nazi Germany rocket scientist who had been leading U.S. missile development at Fort Bliss, Texas. Von Braun didn’t like the dusty heat and wanted a location more like Bavaria, says Sam Worsham, 77, a deputy garrison commander in the 1970s.

Situated in low mountains 20 miles south of the Tennessee border, Huntsville lies at the heart of cotton-growing farmland and was known for hosting the largest mule auction in the South. The Redstone Arsenal, once a storage depot for mustard gas, was slated for closure after World War II. As the rocket team moved in, Huntsville’s population surged.

“They tell stories of how people actually lived in chicken coops,” Worsham says, standing on the rough-sawn floorboards of the 132-year-old Harrison Brothers Hardware store in downtown Huntsville. “You could rent anything that had a roof on it because they were expanding so fast.” Madison County more than quadrupled over the next six decades to 331,545 people in 2010.

Wake-Up Call

Ritch and other civic leaders saw how the loss of a military installation devastated a local economy, when the Pentagon in 1999 closed Fort McClellan, a World War I-era base in central Alabama. The state lost 1,500 jobs.

“That was our wake-up call,” Ritch says.

Redstone survived. But the arsenal’s mid-century housing for top officers was substandard and the Army had no plans to improve it, Link told city leaders as the installation’s outgoing commander in 1997.

Ritch organized city and chamber officials to solve the housing problem, he says. A partner in the Sirote & Permutt law firm, he has never held elective office and occupies an appointive Chamber of Commerce board seat.

His committee proposed a “no strings” gift of three houses for generals at the arsenal. Raising the money through donations would have been no problem, says Bob Ludwig, a former publisher of the Huntsville Times who was chairman of the housing initiative. The obstacle was complying with the Army’s ethical guidelines.

Paving Funds

“The Army basically said we can’t have bankers fund this because they indirectly benefit from the arsenal,” Link says. “We can’t have defense contractors fund this for the same reason.”

So Ritch and Ludwig dropped the idea of a private fund- raising drive. The solution was using city money to build the houses. The group convinced the state to offset the expenditure. And they got the Legislature to pass a law enabling public entities to “donate” to the U.S. “any property of any kind.”

In December 2001, the city council diverted $1.05 million budgeted for street resurfacing to build the first three houses and in November 2005 authorized $2.75 million for seven more luxury homes to be built on federal land at the arsenal, according to city records. General officers’ quarters assigned by the Army are rent-free.

“That’s something the Department of Defense should pay for rather than having the city involved,” says former councilman Dick Hiatt, executive director of the Food Bank of North Alabama, one of two who voted against the plan. The food bank helps more than 100,000 Alabamians a year, including unemployed and impoverished military veterans.

Jobless Veterans

Veterans in Alabama earned an average of $14,653 a year as of December, 2010, according to Department of Labor data on former service members seeking employment through state career centers. That is below the poverty line for a three-person household and compares with Madison County’s $57,327 median household income. Last year, the jobless rate among veterans in Alabama who have served since September 2001 was 10.8 percent, more than a full percentage point higher than U.S. unemployment.

Quintin Walton, 45, a former Air Force sergeant who lives in Huntsville, says the city dismissed him as a part-time dispatcher in April 2009, just days before it would have had to hire him full time. Walton says he hasn’t held a regular job since, struggles to pay his $449 monthly rent and has contemplated suicide.

“No man wants to think he couldn’t sustain himself,” Walton says. “It’s not a wonderful feeling.”

‘McMansions for Generals’

The housing-for-generals project improved Huntsville’s competitive position for the 2005 BRAC, local leaders say. It was the Pentagon’s “biggest, most complex and costliest” consolidation, the GAO said in January 2009.

“Huntsville wouldn’t divert funds to build McMansions for generals unless the city was expecting a return on its investment,” says Melanie Sloan, executive director of the non- profit Citizens for Responsibility and Ethics in Washington.

Ritch organized and led the ad hoc Tennessee Valley BRAC Committee, representing 13 Alabama and four Tennessee communities, in the yearlong consolidation review by a nine- member civilian commission appointed by Congress. The group made presentations in Washington touting Redstone. The Defense Department conducted its own analysis and submitted its recommendations to the civilian commission.

Pillsbury participated in the Defense Department review in Washington in his role as head of Army Aviation and Missile Command a few months after moving into the city-donated house at Redstone.

‘Plop Them Down’

“I said, ‘I don’t care whether you close Redstone Arsenal, but if you do, you need to take all 66 headquarters and agencies and plop them down in the same location somewhere else because of the synergy that has developed there,’” says Pillsbury. Now 60, he retired from the Army in July as a three-star general and deputy commander of the Army Materiel Command, one of the government’s largest purchasing arms.

“Huntsville and Madison would come in and proactively describe the demographics, the capabilities they offered and make their case for why we should reposition certain organizations into Redstone,” says retired four-star Army General Kevin Byrnes, a Huntsville-based vice president of Raytheon, the world’s largest missile maker.

The housing project “helped a lot” with the Pentagon, says former Huntsville Mayor Loretta Spencer, a funeral home operator.

‘One of Best’

“Some of the generals in Washington would say, ‘So you’re the mayor that’s building the houses!’ and it was wonderful and increased our support in the military,” Spencer says.

While other cities and military hubs made presentations, Huntsville’s was “one of the best,” says Tony Principi, the commission chairman and a former secretary of Veterans Affairs under President George W. Bush. Principi says he was unaware of the housing-for-generals campaign and terms it “unusual.”

Members of Ritch’s committee and leaders of the Chamber of Commerce gave at least $1.32 million to congressional and presidential campaigns since 2000, according to election finance disclosures. Ritch donated the most: at least $165,550. While the contributions rose steadily, they jumped by almost 29 percent, to more than $140,654, in 2004, the year before the BRAC commission’s base-realignment decision.

Economic development groups from Madison County have spent at least $3.7 million lobbying Congress since 2004, according to data compiled by Bloomberg. The top 10 military centers, ranked by per capita defense contracts, spent a combined $9.2 million.

10,000 More Jobs

Huntsville boosters targeted agencies that would attract engineering, research and development work because those jobs account for a higher share of defense spending than manufacturing and are more stable, according to Michael Ward, the chamber’s vice president for governmental affairs.

Arsenal employment rose to 1,000 military, 15,500 contractor and 19,500 other civilian positions, paying an average of $87,000 a year, according to Sharee Miller, the garrison’s director of public affairs. The moves are projected to increase state taxes from the arsenal workforce by about 33 percent to $240 million a year, according to Ronnie Chronister, deputy commander of the Army Aviation and Missile Command.

As many as 10,000 more jobs are expected as contractors relocate, Mayor Tommy Battle Jr. said in an interview. In July, he flew to the Paris Air Show for meetings with defense contracting executives and politicians including Shelby. Battle, 55, is a former commercial real estate agent.

Careers Blossom

The careers of some of Ritch’s BRAC committee allies blossomed as Pentagon funds poured in. Link became president of Teledyne Brown Engineering, a Huntsville-based unit of Teledyne Technologies Inc. (TDY) after he retired from the Army in 2000. He was also co-chairman of Ritch’s group. Teledyne Brown has received $244 million in defense contracts in Madison County since 2004, federal contracting records show. Link, 69, retired from the company in 2008.

Joe Bergantz, who retired from the Army in 2004 after serving as a major general at Redstone, joined Ritch’s group. Bergantz, who lived in one of the gift houses, is now chief executive officer of Huntsville-based Sigmatech Inc., a closely held contractor to Army aviation and missile programs. The company has landed $177 million in military contracts in Madison County since 2004, contracting data show. Bergantz didn’t respond to telephone requests for comment.

Explosives School Lost

Not every decision went Huntsville’s way. Ritch’s group fought to save an explosives-disposal training school at Redstone. The BRAC commission backed the Pentagon and moved it to Fort Lee, Virginia, over the objections of Senators Shelby and Sessions.

Nonetheless, Shelby sent millions of dollars for similar training programs at Redstone using congressional earmarks and his seat on the Senate Appropriations Committee.

Taxpayers will continue to support Huntsville’s prosperity. The National Aeronautics and Space Administration in September made it the site for development of a program that will take humans deeper into space than ever before. Spending on the Space Launch System will total $35 billion through 2021, NASA says.

At a Sept. 30 breakfast briefing for 894 business and military leaders and politicians in Huntsville, Senator Sessions, 64, swapped stories about the deficit-cutting debate in Washington. He warned against “the illegitimate threat” that “a greatly disproportionate share of cuts could fall on the Defense Department.”

Sessions said savings might be found in the 300 percent increase in spending on food subsidies to the poor in the past decade. While unemployment has risen in recent years, he said, “that cannot possibly justify” the “stunning” level of food assistance.

The jobless Huntsville veteran Walton calls it a lifeline.

To contact the reporters on this story: Elliot Blair Smith in Washington at esmith29@bloomberg.net; Gopal Ratnam in Washington at gratnam1@bloomberg.net; Danielle Ivory in Washington at divory@bloomberg.net.

To contact the editors responsible for this story: Robert Blau at rblau1@bloomberg.net; Mark Silva at msilva34@bloomberg.net; Jon Morgan at +1-202-654-7370 or jmorgan97@bloomberg.net.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.