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Fullerton Fights Odds to Keep Hughes Plant : Jobs: City touts low tax rates as grounds for big employer to stay, but its high property values could be deciding factor to leave.


FULLERTON — A week after Hughes Aircraft announced that it might close one of four defense electronics plants, including its Fullerton operation, a contingent of half a dozen leaders representing the city marched into Vice Chairman Michael Smith's office at Hughes' headquarters in Westchester, near Los Angeles International Airport.

There, Rep. Ed Royce (R-Fullerton) and Fullerton City Manager James L. Armstrong, among others, spread out on a table their analysis of the situation.

Fullerton's big advantage, they argued on that May day, was the city's significantly lower tax rates. For a 10,000-employee firm with 2 million square feet of office space, $4 million in annual utility bills and $1 billion in sales (parameters Hughes meets in Fullerton except with fewer employees), they said, the overall business license and utility taxes in Fullerton would cost just $90,000 a year, versus $455,000 in Long Beach and $1.9 million in El Segundo.

That, the Fullerton contingent reasoned, was a strong sales pitch. But as Hughes Aircraft Co. nears a decision on its facilities consolidation plan, there's a common feeling among public officials, real estate brokers, analysts and union representatives that tax advantages just won't be enough. The main reason: Hughes has extremely valuable real estate holdings in Fullerton.

Unlike Hughes' two facilities in El Segundo and its smaller plant in Long Beach--which are also being evaluated as part of the streamlining plan--Hughes' 350-acre Fullerton site is totally owned by the corporation. It's very valuable and easily salable.

The impending consolidation is likely to have the biggest effect on El Segundo and Fullerton because the company's Long Beach center is a leased field support office with 970 workers. At Fullerton, Hughes produces ship-based radars, air traffic control equipment and large-scale air defense systems. The two El Segundo facilities make radars and electrical-optical devices such as sensors, and have a combined employment of about 7,800.

Based on property tax records, the Fullerton site's assessed value is $75 million--a figure real estate analysts say is conservative. Yet only two-thirds of its 3 million square feet of working space is being used because of diminished defense work; the remainder sits idle.

Though the company also has surplus space at its two complexes in El Segundo, which has a combined working space of 3.3 million square feet, it is not thought to be nearly as much. And one of the El Segundo plants is half the age of those at Fullerton, and the other in El Segundo is on a long-term lease.

"It's mostly a real estate problem," acknowledged Fullerton Mayor A.B. (Buck) Catlin, who is a member of the so-called red team attempting to keep Hughes in Orange County. Catlin worked for Hughes in Fullerton in the early 1960s, a few years after it opened, and he has unhappily watched its employment dwindle to 6,800 today from a high of 14,500 in 1986. Though Catlin said he doesn't think Hughes will abandon Fullerton, he and others fear more shrinkage of jobs.

"It's the kind of industry people would kill for," said Gary A. Chalupsky, director of Fullerton's Redevelopment Agency. Most of the nearly 7,000 jobs are white-collar, such as computer programming and engineering; the rest are manufacturing positions that pay up to $15 an hour.

Hyrum Fedje, director of planning and building safety for El Segundo, says he already sees indications that the Hughes consolidation will benefit his city. Last week , Fedje said, his staff was completing plan checks on an 80,000-square-foot tenant improvement project by Hughes in El Segundo. That's a fraction of the more than 3 million square feet now there, but 80,000-square-foot can still house 400 workers.

"The signs are that they're about to consolidate more and more people in El Segundo," Fedje said.

Hughes spokesmen at headquarters said they are unaware of this particular project, and stressed that no decision has yet been made. Company officials say consolidation recommendations are being studied by senior officials and that an announcement is expected later this month or in early September. Company officials have said the realignment is likely to result in job cuts of about 3,400--or 10% of the company's overall employment in California. And the consolidation could affect other Hughes facilities, spokesmen said, even though the review is focusing on these four.

"There undoubtedly will be a reduction in the whole space," said Hughes spokesman Richard Dore, noting that cutting surplus space is a primary objective.

The four defense facilities being considered for streamlining are part of Hughes Aerospace & Electronics Co., a corporate division formed in March. The consolidation reflects the latest efforts by General Motors-owned Hughes to simplify its operations amid continued defense cutbacks.

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