Archive for Wednesday, June 11, 2003

Boeing poised for record tax break

Windfall in Washington state would be worth billions

June 11, 2003


— The Washington House gave enthusiastic bipartisan approval Tuesday to Gov. Gary Locke's bold multibillion-dollar tax break for the aerospace industry.

One lawmaker called it "a Hail Mary pass" aimed at winning the state's bid for assembly of The Boeing Co.'s proposed new jetliner, the 7E7. Another called it the necessary feeding of the state's "800-pound gorilla."

The House voted 79-13 in favor of the proposal the governor has dubbed the "Blue Sky Tax Incentives." It would be the largest business tax break granted to a single industry in the state.

A few critics questioned singling one company out for such a tax windfall, an estimated $3.2 billion over 20 years. Others complained that other businesses and individuals need similar dramatic relief.

But mostly the lengthy debate reflected lawmakers' zeal to land the 7E7 project and keep the state's pivotal aerospace industry thriving.

Fourteen states are competing for the project, with community bids due June 20, although it will be months before Boeing's board of directors makes the crucial decision on whether to proceed with the company's first all-new jet since the 777.

Boeing has been a fixture in Washington since 1916, but the state is having to compete with others that are busy approving incentive packages as well.

Locke has said the very future of the state's aerospace industry was at stake.

The tax package, available only if Boeing assembles the new 7E7 here, is worth about $400 million over the next six years, and perhaps $3.2 billion over two decades.

The largesse includes a 40 percent cut in business taxes, as well as research and development tax credits and lower property taxes.

The measure, House Bill 2294, was rushed to the Senate for likely approval. Lawmakers faced a scheduled midnight adjournment of their special session, which turned into a save-Boeing crusade in recent days.

Meanwhile, the Senate gave strong bipartisan approval to another major bill backed by Boeing and the state's business community -- a plan to revamp the state's expensive unemployment system. The vote was 33-12, including about half of the Democratic caucus.

The measure, Senate Bill 6097, went to the House.

Florida, Alabama, Texas and Georgia are considered the toughest rivals for the 7E7 work, state trade officials said.

In Kansas, Boeing Wichita would be eligible for $500 million in bonds from the state, through the Kansas Development Finance Authority, if the company were able to secure work on the 7E7 project and hire at least 4,000 employees related to the job.

Under the proposal, Boeing would pay back the principal of the 20-year bonds, perhaps through an extra charge on each of the manufactured 7E7s. The interest on the bonds would be paid back by the state income taxes withheld from employees involved in the project.

Locke said Washington would more than recoup the tax breaks if the state landed the new assembly plant.

Washington could lose 150,000 jobs in 20 years and $540 million in annual revenue if Boeing picks another state for the 7E7.

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