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50 years ago, a modern shipyard changed Mississippi’s struggling economy

The story began 50 years ago this month — how Mississippi, the governor, Jackson County and its Port Authority worked together to attract a new, modern shipyard to the west bank of the Pascagoula River.

It was a complex puzzle of legislation, bond issues, union negotiations and a public vote that all had to be completed within nine months in 1967 in order to steer the shipyard here, rather than Florida or New York.

At that time, Mississippi was primarily an agricultural state with racial issues. Litton Industries had a yard on the east bank of the Pascagoula but was looking elsewhere to build a new, modern yard, the first since World War II.

This is a story of an unprecedented deal that pioneered an economic-development tool praised by the Wall Street Journal at the time as “innovative” and “surely, one for the books” — and still used today.

George Howell, vice president and general counsel at Ingalls in 1967, was the chief negotiator for Litton and Ingalls. Howell, now 90 and living in Gautier, tells the story that culminated in a groundbreaking in January 1968 for a shipyard that has employed thousands of people over the decades, attracted hundreds of support businesses, paid billions of dollars in additional salaries (with a peak employment of 24,000) and generated hundreds of millions in taxes for schools and other entities.

“The economic impact? It’s hard to imagine,” Howell said. “Now, when I cross the high-rise bridge into Pascagoula, I get a panorama of the area, the shipyard, and I know it was once all mud lumps.”

Here’s how it all came together.

Navy wanted more ships

In 1966, Ingalls shipyard got a new president who ordered a market study on the future of shipbuilding.

The result: The conclusion that most of the ships of the future were going to be larger than Ingalls could build in its existing yard, a 120-acre slim strip of land on the east bank of the Pascagoula River.

Newer ships would be too long and, if they were launched, would get stuck in the mud across the river.

As a result of that study, Litton — parent company of the small Pascagoula yard — decided to consider building a larger shipyard.

About that time, Robert McNamara, who’d left Ford Motor Co. to become President John F. Kennedy’s secretary of defense, wanted more ships.

“We were in the Cold War and the Vietnam War,” Howell said, “and McNamara and the Navy decided they needed an expanded Navy and a new, modern shipyard in the U.S.”

They offered the possibility that if a company would build a new shipyard, it would award contracts big enough — by number of ships and money — to justify the investment.

Litton decided to compete for the ships, but was thinking of putting any new yard in Tampa, Florida.

Mississippi and Jackson County approached the company and Litton agreed to come to Pascagoula if the state could put it all together.

A first since WWII

It would be the first brand-new shipyard since World War II. And it was pitched as modern by Litton.

It would change the way ships were built in the United States.

Under the old way, Howell said, you laid a keel and built the hull, the superstructure, on top of it. They laid the keel on an inclined ramp called a shipway, built the compartments and installed a good deal of the machinery before it was launched by sliding it down the shipway into the water.

Then the ship was towed around to outfitting docks for completion.

The new yard was to design the ship and build it in prefabricated sections that are joined together.

“Imagine a loaf of bread,” Howell said.

The ship could be built in different parts of the yard and the sections moved together by a system of railroad tracks. Electrical, plumbing and other fittings in each section would have to fit when the parts came together.

Ingalls builds them that way today.

What it took

Once alerted to the study that projected the older Ingalls yard could lose as many as 5,000 employees in the coming years, Mississippi Gov. Paul B. Johnson pledged every available resource to develop a package to attract Litton’s new yard, Howell said.

The genius of what they did came from an idea borrowed from the 1936 Mississippi Balance Agriculture with Industry Act that authorized cities and counties to use bonds to build facilities to attract industry.

In this case, it would be the state issuing the bonds — $130 million, which is more than $1 billion in today’s dollars. Jackson County didn’t have that kind of financial capacity.

The state would pledge its full faith and credit to back the bonds, and would own the shipyard and lease it to Ingalls. The lease payments would cover the bond payments at no cost to the state. But it would take a vote of the Legislature.

“This is 50 years ago,” Howell said. “And these big projects you see today, where Mississippi and Alabama give tax incentives and land big industry, was not commonplace in those days.”

Jackson County would add $6 million to industrial bonds it was issuing and use the money to widen and deepen the river around the 640-acre site on the west bank. It would pump the sand up onto the site in order to raise the level of the mud lumps there to 12 feet and create a ship-launching basin. But that would take a vote of the people of the county.

Utilities and rail lines would be extended to the site at no cost to Litton by the city and the power company. A resident, Ed Bacot, donated land for the U.S. 90 exchange and the state branch of the Small Business Administration built the access road. Banks made concessions and the local newspaper editorialized for it.

Litton wanted the unions to agree to an unprecedented five-year contract.

Howell and a team worked for a month on contracts, legislation and agreements between the state, the county, the Port Authority, Ingalls and Litton. When bound, the resulting documents weighed more than 10 pounds, he said.

On June 17, the governor called a special session of the Legislature over the proposal, persuading the whole state to obligate $130 million in bonds, and by June 26, the legislation had passed. On July 9, Ingalls and the unions reached an agreement for the five years and all 13 unions ratified it Aug. 9.

On Sept. 29, the state, county and the industry began signing the final agreements. Jackson County held a vote of the people Oct. 29, which passed 25 to 1, clearing the way to issue the state and county bonds.

The bonds were offered for sale Nov. 14 and were sold by mid-December.

“If you think of Mississippi 50 years ago, with all of its social and financial struggles,” retired Ingalls CEO Jerry St. Pé said, “this was pretty phenomenal.

“It was a major industrial project for a relatively poor, agricultural state. It got a lot of attention.

“Before I left, (after 40 years), the average employment at that yard was between 13,000 and 15,000 people. We had up to 24,000 in the summer of 1977.”

Working together

Everyone involved in the undertaking was working against a deadline. The bonds had to be sold by the end of the year because there was a Mississippi law going into effect that would restrict interest rates on its bonds.

“Getting the job done by December was a big factor,” Howell said. “There were people working in Mississippi, New York and California.

“And it was done. Looking back, I get excited. We had some glitches, but like any big project, you see what the problem is and fix it.

“I only had to fire one lawyer in New York,” he said with a smile.

This may have been the example that showed the way for many large developments in the South, he said. It required innovative public and private teamwork to generate economic development.

Later, Howell was on the school board when Pascagoula was financially able to pay for one of the first public school kindergartens, not funded by the state.

“I’m always touched by the impact,” he said. “I was given an assignment as the general counsel and then you get into it and realize what a magnificent project it was.

“Until I got into the project, I didn’t appreciate the impact of a major industrial development on a community. It was probably the most meaningful and gratifying experience of my legal career.”

There are very few of the key players still living:

  • Former Gov. William Winter was deeply involved as state treasurer at the time.
  • U.S. Sen. Thad Cochran was working for Watkins & Eager, representing the governor.
  • Locally, Carl Megehee was attorney for the Jackson County Board of Supervisors and the Port Authority.
  • George Howell was Ingalls vice president and general counsel.
  • Retired longtime Ingalls CEO Jerry St. Pé was in the public relations department.

The building of the west bank shipyard was the first time a state had pledged its full faith and credit for the construction financing of a major industrial project.

The innovative $130 million industrial development bond issue that financed the project established a model of public-private economic development that has been replicated countless times in Mississippi and across the country.

Here in Jackson County, that philosophy of public-private partnership is very much our heritage and, to this day, is the foundation of all our economic-development success.

— George Freeland, executive director Jackson County Economic Development Foundation

In his book ‘On Eagles’ Wings,’ retired Ingalls CEO Jerry St. Pé touches on the events in the late 1960s.

‘Securing the requirements to bring the new shipyard to reality was a major public relations undertaking. ... It was certainly an educational experience. It also provided me exposure to Ingalls and Litton senior management, executives who would later influence and determine my professional development ...’