States assemble deals to attract Boeing

Missouri senate passes one worth $1.7 billion over 20 years; deadline is Tuesday; 777X is the prize

December 4, 2013 

— Missouri’s enticement package for a new Boeing assembly plant cleared its most daunting obstacle Wednesday as state senators passed a plan that could offer up to $1.7 billion of incentives over two decades.

The Senate’s 23-8 vote in a special session sends the measure to the House, where final approval could come as soon as Friday.

Then it will be up to Boeing to determine how Missouri’s offer stacks up.

Missouri is among more than a dozen locations invited by the company to bid on assembling all or part of its new 777X airplane. The cross-country competition includes states such as Alabama, South Carolina and Utah and comes after union machinists in Washington state rejected a proposed Boeing contract that sought concessions on benefits.

While his home state lawmakers were considering incentives, Missouri congressman Blaine Luetkemeyer met Wednesday in the nation’s capital with Boeing CEO W. James McNerney Jr.

“He didn’t tip his hand as far as whether Missouri was ahead or behind in regards to the decision to be made. Obviously, they’re going to wait until all the proposals have been received,” Luetkemeyer said. “But he was very supportive of the people who work for Boeing right now in St. Louis.”

Missouri already makes military aircraft in the St. Louis area, and Boeing employs about 15,000 people in Missouri, making it the state’s fourth-largest private-sector employer.

A Boeing spokesman has said the company isn’t commenting about specific proposals being developed by states, which are due by next Tuesday.

Most other states are crafting their proposals privately. But Missouri Gov. Jay Nixon called a special session because he wanted to offer more incentives than now allowed under state law.

Under Missouri’s plan, the amount of incentives Boeing gets would depend on the number of jobs created.

Supporters of the incentive package say Missouri could gain 8,000 additional Boeing jobs if it chooses to assemble the new commercial airplane in Missouri, and 2,000 to 3,000 jobs if Boeing decides to build only the airplane wing in St. Louis. Thousands of additional employees could be added at businesses that supply parts to Boeing.

Some of the senators who voted against the plan questioned the wisdom of tailoring tax breaks for a specific company instead of cutting taxes for all businesses or individuals. Nixon vetoed a broad-based income tax cut earlier this year.

“This public policy is not healthy for the long-term economic prosperity of Missouri,” said Sen. Brad Lager, R-Savannah.

TAX CREDIT PROGRAM KEY PART OF MISSOURI OFFER

One of the key ingredients in Missouri’s full-blast campaign to land The Boeing Co.’s 777X assembly line didn’t even exist six months ago. The Missouri Works tax credit program was created by lawmakers just this spring to help streamline the state’s massive menu of job-creation incentives. It combined four other programs and gave state economic development officials more flexibility to offer tax credits to smaller companies and high-tech employers.

Now just three months after its launch, Nixon wants to give Missouri Works a big boost to land a really big prize.

Nixon is proposing the addition of a combined $150 million per year to Missouri Works and a related job-training program, the Build Missouri program for infrastructure, and the state’s version of tax increment financing.

Unlike some state tax credits, all of these are based directly on job creation and mostly refund withholding taxes paid by employers for new jobs. That gives the state some protection, Nixon points out. If Boeing creates no jobs, it gets no money.

Still, the tab to taxpayers could wind up quite large. An analysis issued by Nixon’s office Tuesday projected that Boeing could receive as much as

$1.7 billion in tax credits over the next 23 years, with a smaller number if it builds a smaller facility. To receive the full amount, the aerospace giant would need to create 8,000 jobs and pay an average wage of $95,000 a year.

As big as those incentive numbers are, they are dwarfed by the $8.7 billion package Washington state lawmakers approved for the plant last month, before Boeing’s Machinists union in the Puget Sound area rejected a contract. Other suitors — especially big states such as California and Texas — are expected to offer packages that number in the billions, too. And some will be able to offer money up front, something Missouri law prohibits.

Missouri’s package is designed to help get production up to speed as fast as possible, said a state economic development official who helped craft the proposal but wasn’t authorized to speak publicly about it.

“This is assuming that they need to be in production by 2017 to deliver planes by 2020,” he said. “It’s a very short ramp-up time.”

There are other ways Missouri is trying to sweeten the pot.

EDUCATION, LABOR PUSH

Nixon says five community colleges in the St. Louis area have formed a consortium to train workers for advanced manufacturing jobs at aerospace companies. The Missouri Aerospace Training Consortium will be made up of East Central College, Jefferson College, Mineral Area College, St. Charles Community College and St. Louis Community College. The schools currently offer programs in welding, aerospace production and assembly, and robotics and automation. They have also committed to working to have minorities account for at least 10 percent of those receiving training.

Nixon earlier this week announced a deal with St. Louis-area construction unions, which agreed to work three eight-hour shifts building the plant, should Boeing choose St. Louis, instead of the usual one or two shifts. That would reduce overtime costs and could slice two years off the construction schedule, Nixon said.

This deal makes a lot of sense with unemployment among St. Louis-area construction workers still hovering around 25 percent, said Jeff Aboussie, executive secretary-treasurer of the St. Louis Building and Construction Trades Council.

“We’ve got plenty of people available to work. What better way to get them back to work than shift work and completing a project in record time?” he said. “I’d think it would mean we could start making wings and fuselages quicker.”

COMPETITION FROM KANSAS, ALABAMA

Meanwhile, Kansas Department of Commerce spokesman Dan Lara said Wednesday that the agency’s staff was working on completing its own Boeing package, but he declined to disclose details. He said Boeing reached out to Kansas and other states to bid on the work after the Washington developments. The Kansas package would likely span several years and be worth tens of millions to Boeing through credits and other financial incentives.

However, Kansas is relying on existing economic incentive programs related to job training, workforce development and provisions that could allow the expensing of new equipment purchases over several years.

Gov. Sam Brownback has said Kansas would make a run at landing the contract, which could result in between 7,000 and 10,000 new aviation jobs in the Wichita area, which has been greatly affected by aviation industry layoffs over the past decade.

Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University, said that while Kansas has a highly skilled workforce and lower labor costs than other states, the lack of a shipping port is a downside for locating a new plant.

Hill said even though Kansas is a right-to-work state, which factors in the comparison of overall labor costs, money still matters on the front end.

“In this environment of economic incentives, Kansas and Missouri are the least likely to pony up enough,” Hill said. “Other states can throw a lot of money at this.”

Gov. Robert Bentley said Alabama also will be among the states submitting a proposal to Boeing, and that package will stress more than just the money the state is offering.

“We are a right-to-work state, and that is vitally important,” Bentley said Wednesday.

David A. Lieb and John Milburn of The Associated Press, and Tim Logan of the St. Louis Post-Dispatch contributed to this report.

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