Olympia wants ironclad promise on 777X production
Lawmakers in Olympia say that in considering tax-break extensions for Boeing, they will make sure to require that the company build all 777X jets and future versions of the aircraft in Washington.
Seattle Times staff reporters
OLYMPIA — House Finance Committee Chairman Reuven Carlyle says extending tax breaks for Boeing is like recommitting to a long marriage.
But as lawmakers convene in a special session in Olympia, many can’t forget how the company’s eye wandered to South Carolina.
So this time they’ve put provisions in legislation expected to be voted on as early as this weekend that require the state’s largest private employer to build all 777X jets and future versions of the aircraft in Washington.
“They are committing in black and white, not only to the 777X but its descendant planes,” Carlyle said Thursday, the first day of a special session to deal with Boeing. “If there is an assessment ... that assembly has moved, or an element of that has moved, then the preferential rates for the 777X goes away. It’s pretty cut and dry.”
When the Legislature approved big tax breaks for Boeing and other aerospace companies in 2003, it was with the expectation that all 787 Dreamliners would be built in the state, lawmakers said. But the legislation had enough maneuvering room for Boeing to put a second 787 Dreamliner assembly line in South Carolina in 2009.
“Today’s Legislature learned a lesson,” said Carlyle, D-Seattle. “In this language, all means all.”
Senate Majority Leader Rodney Tom, D-Medina, agreed. “We need to make sure we’re getting what we bought,” he said.
A Boeing spokesman this week said the company would not comment on proposals before the Legislature.
Boeing has said it will build the 777X in Washington if members of the Machinists union vote next week to accept a new eight-year contract with big cuts in future pension and health-care benefits.
It also wants the Legislature to extend existing commercial-airplane tax incentives — due to expire in 2024 — until 2040; expand a sales-and-use tax exemption for construction of buildings used to manufacture airplanes; and boost enrollment in aerospace fields at colleges, among other actions.
The company has also stressed the need for lawmakers to approve a multibillion-dollar transportation-tax package.
Gov. Jay Inslee called the special session to fulfill the state’s side of the bargain. He appeared Thursday before the House Finance Committee to make the case.
You’d be excused for feeling a bit of déjà vu.
This is just the latest chapter of a long-running story that last climaxed in 2003 but dates at least to 1949, when the state freed airplanes used in interstate commerce from its sales tax.
The recurring plot line: Boeing signals directly or indirectly that it could leave, and lawmakers respond — with tax breaks, highway fixes, changes to compensation policies for workers injured on the job, or something else.
“It’s unfortunate that we have to live under the threat all the time about whether or not we’re going to have that company in the future,” said Lt. Gov. Brad Owen, a Democrat who has served in Olympia since 1977. “But it’s a reality, it’s a fact of doing business, and we have to be able to respond to it.”
Lawmakers say Boeing, although far from the only company that gets preferential policies in exchange for staying in Washington, is one of the most influential forces at the Capitol.
The company’s lobbying operation is famous in political circles, in part for its headquarters at a tan-and-green house just across from a state Senate office building.
Last year, the seven-person team got at least $414,000 in salary — more than any other private company shelled out, according to the state Public Disclosure Commission.
Boeing has focused on tax breaks but also on transportation issues, because it trucks a lot of materials between plants; and on workers’ compensation, growth-management and property-tax policies.
It has been very successful over the years.
The 1949 sales-tax exemption also applied to boats and railroad cars used in interstate commerce, but it primarily benefited the aerospace industry.
Among other moves by the Legislature that have helped Boeing since then was a bill, passed during a nine-hour special session in 1987, that helped block a hostile takeover of the company by Texas oilman T. Boone Pickens.
Boeing has also benefited from breaks not exclusive to the company, including a sales-tax exemption, approved in 1995, on new and replacement machinery and equipment.
In 1997, Boeing was a key backer of successful Referendum 47, which limited annual growth in the assessed value of property. And three years later, it led a campaign that persuaded the Legislature to reduce unemployment taxes on most businesses.
But those efforts pale in comparison with 2003, when lawmakers passed a $4.1 billion, 10-year transportation package the company helped push, and a tax-incentive package for the aerospace industry valued at $3.2 billion through 2024.
The eight breaks in the package have already saved the industry about $1 billion, according to the state.
This year, the industry is projected to save $173.7 million. Nearly $95 million of that is because of a 40 percent reduction in business-and-occupation taxes for commercial-aircraft sales.
Recently, Boeing has also turned its attention to other issues.
Last year, it drew attention for lobbying against a proposal to regulate drone aircraft, an emerging business line. The bill died.
Lawmakers said that in the case of the proposed tax-break extension — valued at $8.7 billion between 2025 and 2040 — it’s worth the money.
“The real question is: Is there a return on investment?” Carlyle said. “Is it a good deal for taxpayers? I think the data is compelling that the aerospace industry is a major driver of not only jobs and economic growth but our overall quality of life. Boeing is the central driver of that aerospace industry.”
Boeing’s current workforce in the state is 84,000.
An independent analysis released by the governor’s budget office Thursday projected that winning the 777X program would generate more than $21 billion in state tax revenue between 2025 and 2040.
Committee action on the tax-break extension and other Boeing legislation is scheduled for Friday, with a possible vote by Saturday.
It’s not clear if the Legislature will take up a proposed $10 billion transportation-tax package anytime soon. Several lawmakers have said Boeing indicated that a transportation deal, which has eluded the Legislature for months, doesn’t have to happen immediately.
Another wrinkle: A threat by the Machinists union to cancel a vote on a proposed eight-year deal with Boeing. Spokesman David Postman said Inslee would talk to Machinist leadership Friday.
Information from Seattle Times archives is included in this report.
Andrew Garber: 360-236-8266 or firstname.lastname@example.org. On Twitter @awgarber.
Brian M. Rosenthal: 206-464-3195 or email@example.com. On Twitter @brianmrosenthal