Bill to woo Boeing’s 777X work gains early speed in Legislature

But Machinists say they’re ready to reject labor end of the deal

Staff writerNovember 7, 2013 

Gov. Jay Inslee confers with David Schumacher, director of the state Office of Financial Management, before he testified in support of a bill that would extend $8.7 billion in tax breaks to Boeing in hopes of securing the aerospace giant’s long-term commitment as a Northwest jobs provider.

STEVE BLOOM — Staff photographer

An $8.7 billion tax-break bill aimed at keeping Boeing’s new 777X jet liner work in Washington for at least a quarter-century began its fast track movement through the Washington Legislature on Thursday.

In a special legislative session called on short notice by Gov. Jay Inslee on Tuesday to help Boeing, some objected to the haste of the bill’s passage toward law.

But it appeared late in the evening that Boeing’s push to win labor concessions and tax help from the Legislature hit a big snag. The Seattle Times reported that the Machinists’ District 751 president “Tom Wroblewski tore up a copy of Boeing’s contract proposal and said he would try to have it withdrawn.”

It was not clear what impact a Machinists rebellion has on the Legislature’s moves to improve the business environment for Boeing.

Boeing said later: “All of our options are still on the table, including those within Boeing and interest we have received from outside. We chose to engage in Puget Sound first, but without full acceptance by the union and Legislature, we will be left with no choice but to open up the process competitively and pursue other options for locating the 777X work.”

Earlier in the day, Inslee led a parade of political and business leaders who all testified in favor of a bill reducing business tax rates for Boeing, saying it cements Boeing’s role in the Northwest as a maker jobs provider.

Inslee, a Democrat, said 56,000 jobs are at stake long-term at a time that aerospace jobs have been leaving the Evergreen State. His budget office also released a report showing the $8.7 billion tax investment would produce

$21.3 billion in new state revenues over the period of 2024-40.

“We will reverse the outflow of advanced manufacturing jobs in the state of Washington and establish ourselves in the forefront of this dynamic industry and create thousands of jobs,” Inslee told a House Finance Committee that listened to 90 minutes of testimony on House Bill 2089.

Legislative leaders in the House and Senate appear to be in broad agreement about passing two bills Inslee is seeking. They said House and Senate votes on the tax measure and a second bill expanding aerospace training programs could occur as soon as Saturday morning.

What else lawmakers do in their special session that began Thursday morning — and whether they stay in Olympia to consider a transportation package next week — was still a major question. Senate Republicans said no action is needed right away on that, but Inslee aides said he was working to keep those talks moving.

Inslee wants the Legislature to approve a transportation tax plan worth potentially

$10 billion by Wednesday, which is when the International Association of Machinists District 751 members are scheduled to vote on a new contract with Boeing. The contract would commit Boeing to keep its next generation 777X jet assembly and carbon-fiber wing production in Washington in exchange for major pension concessions by the workers.

In a sign of Boeing’s political might in Washington, no one from the company spoke on the bill. But a series of aerospace suppliers did, as did a Machinists official.

“We think the investment is a 3-to-1 return on taxes if we build this 777X in this region,” said Larry Brown, government-affairs director for the Machinists union.

County executives from aerospace hubs King, Pierce and Snohomish counties sat shoulder-to-shoulder to deliver a unified message about the vital economic importance from Boeing’s operations and its hundreds of aerospace supply firms.

Pierce County Executive Pat McCarthy said the entire Puget Sound region is like a Boeing shop floor and that more than 80 supplier firms — and thousands of workers — would benefit from the tax breaks. McCarthy — who made a pitch for locating 777X wing work in Frederickson, where Boeing builds wings for the traditional 777 — said it is “the right time” to grant a 16-year extension of the aerospace tax breaks that were created in 2003 and expire in 2024.

The state tax package would continue those earlier tax breaks adopted when Boeing was considering where to build its 787 Dreamliner jet in 2003. That includes a business and occupations tax rate for aerospace manufacturing that is 40 percent lower than the standard business rate. Other favorable rates are set for allied aerospace activities, and a sales tax exemption applies to the construction of buildings for aerospace manufacturing.

David Manger with the Toray Composites America in Frederickson said the firm has saved $800,000 a year from the favorable aerospace tax rates. He said the tax break has allowed for onsite research and development and the hiring of 124 people in the past 12 months of expansion, and that more hires are planned.

Critics of the bill attacked the Legislature’s haste and some called for more accountability. Andrew Nicholas, senior fiscal analyst at the Washington State Budget & Policy Center, said the state should add a “clawback” to force Boeing and suppliers benefiting from the 777X tax breaks to pay the state for back taxes if they pulled out of the state in the future.

Spurring that call was the 2003 tax package for aerospace. The company later opened a second 787 production line in South Carolina.

Democratic Rep. Reuven Carlyle of Seattle sponsored the tax bill and said it is written in a way to ensure that Boeing loses its tax break if it moves any portion of the 777X assembly — or the new carbon-fiber wing assembly plant — to another state. But he also told The Associated Press that he would have liked to have seen stronger language in the deal to prevent Boeing from moving parts of its non-777X lines to other locations.

“I would have liked to see stronger language,” Carlyle said. “I couldn’t get overall consensus from all the stakeholders.”

Patrick Connor, state director for the National Federation of Independent Business, said he favored lower taxes but thought the bill should get a full five-day review before any votes.

“It gives the impression to the public that the rules don’t apply to Boeing,’’ Connor said. “If these bills are good public policy I submit they will still be good public policy in five days.’’

Brad Shannon: 360-753-1688
The Seattle Times contributed to this report.

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