Behind Gunmaker SIG Sauer’s New Hampshire Expansion, a $21M State-Backed Bond
Firearms manufacturer SIG Sauer is expanding its operations in New Hampshire with the help of a $21.1 million state treasury bond and nearly $2 million in other financial incentives.
The deal comes as SIG Sauer, already one of the largest firearms-makers in the country, races to fill a $580 million U.S. Army contract for hundreds of thousands of pistols, as well as other military orders and surging private sales.
While the overall financial strength of the privately owned company isn’t clear, SIG Sauer sought financial deals from the state of Arkansas, where it already operates an ammunition facility, and from Rochester.
Many free market economists oppose these types of incentives packages, arguing they favor larger companies that likely would have expanded without the perks dangled by governments eager to claim job growth.
New Hampshire’s deal for SIG Sauer involves the purchase of a 200,000 square foot plant by the N.H Business Finance Authority, a quasi-public entity, that would then lease the space to SIG Sauer for ten years. Under the arrangement, the BFA would float a $21.1 million tax-payer guaranteed bond to purchase the building, creating beneficial tax implications for the company that would save it approximately $8.5 million over the next ten years.
Along with state-level support, the city of Rochester is also proposing $1.7 million in additional cost savings through a negotiated payment made in lieu of property taxes that the company would otherwise owe if it purchased the building itself.
“This expansion will allow one of New Hampshire’s largest employers to continue adding high-quality jobs in the Granite State,” said James Key-Wallace, executive director of the Business Finance Authority. “New jobs are always needed in our communities, especially now given the impact COVID-19 has had on our economy.”
SIG Sauer’s new facility would create an estimated 150 new jobs, while an additional 150 workers in the company’s current Dover facility would be relocated to nearby Rochester, according to Key-Wallace.
The company didn’t respond to questions about the expansion, including which products it intends to manufacture at its new plant. But public officials describe the expansion as a clear boon to the public.
“We feel that adding SIG as an economic driver to our community will provide a ripple effect of benefits to the residents of the city,” said Michael Scala, director of economic development for the city of Rochester.
The financing package still needs approval by the Executive Council. If it passes, the Business Finance Authority would purchase the facilities at 7 Amarosa Drive in Rochester, the former home of Cabletron and more recently Stonewall Kitchen.
British defense contractor BAE Systems received a similar real estate-based incentives package through the Business Finance Authority in 2018 when it announced an expansion in Manchester.
These financing deals carry limited risk to taxpayers since the Business Finance Authority maintains ownership over the assets. That doesn’t mean the projects sit well with everyone, however.
Drew Cline with the Josiah Bartlett Center for Public Policy, a New Hampshire-based free market think tank, cautions that financial incentives “create a tilted playing field that advantages some types of businesses - typically larger ones - over others.”
“They spend tax money on projects that often would have been undertaken anyway,” said Cline. “There’s weak evidence that they stimulate economic or job growth. Even if one accepts that every job in an incentive-funded project was directly created by the incentives, the costs per job are typically astronomical and beyond what taxpayers would support.”
New Hampshire officials have backed the use of incentives in recent years, saying the size and scale of local efforts is far less than what other states typically offer. Gov. Chris Sununu praised the SIG Sauer announcement, saying it would expand economic opportunity.
In 2019, Ron Cohen, SIG Sauer’s CEO, pled guilty to charges in Germany that he helped orchestrate an illegal arms transaction that sent the company’s weapons into a war zone. Cohen received a suspended prison sentence and was ordered to pay $675,000 in fines. The company was fined approximately $12 million.
The Business Finance Authority and the city of Rochester said they had no concerns about working with Cohen despite his past legal troubles.