The Everett City Council will vote after the holidays on a New Year’s gift for the Boeing Co. — a break in city business and occupation taxes worth an estimated $34 million over 20 years.
The proposal is part of the package of incentives that state and local governments offered Boeing to persuade it to build the 7E7 Dreamliner in Everett.
It was key to the deal, according to Everett Mayor Ray Stephanson.
Everett was the only one of the cities in contention for 7E7 production that had a B&O tax, he said. The question — give up some of the tax revenue, or face losing all of it.
"We were at a tremendous disadvantage," Stephanson said. "Had we not made this concession … eight, 10 years down the road, and commercial airplane assembly wouldn’t be done in Everett. That was the reality, it seemed pretty clear to me."
The proposal was part of the package signed by Stephanson, Gov. Gary Locke and other local government officials last week, during a ceremony inside Boeing’s Everett factory.
The deal commits Boeing to building the jet in Everett, in return for incentives including tax breaks, road and runway improvements and help negotiating the state and local permit processes.
Boeing considered the entire package as it weighed whether to build the new jet here or elsewhere, said spokesman Peter Conte.
"Every aspect of that proposal was very important to the selection decision, he said, adding that the city tax break "showed great commitment from the Everett leadership."
Everett now levies a 1 percent city B&O tax on businesses’ gross receipts. The tax is expected to bring in about $11 million in the coming year. That’s down 5 percent, largely because of anticipated drops in deliveries by Boeing, which is by far the city’s largest B&O tax payer.
Under the proposal in the 7E7 package, the city would continue to levy the 1-percent tax on all companies that have less than $6 billion in sales. Boeing, or any other company that eclipses the $6 billion mark, would then pay only a 0.25 percent tax on sales after that.
The tax break would take effect in 2006, and would not affect the coming year’s budget, Stephanson said.
Boeing doesn’t reveal actual sales prices for its planes, and doesn’t split out annual revenue by factory.
But $6 billion in sales would be equal to the sale of about three dozen 777s at list prices.
And if you do the math — taking the number of Everett-built planes Boeing delivered through the end of November, and multiplying that by the absolute minimum list price — it would appear that Boeing’s Everett deliveries will be worth about $11 billion this year.
Both mayor Stephanson and former mayor Frank Anderson worked on the proposal, city spokeswoman Kate Reardon said.
Stephanson said some City Council members have been briefed on the proposal. "They have bought in, in principle, in terms of what we’ve done."
Stephanson defended the tax break: The more jets Boeing builds in Everett, the more it will benefit from the tax break, and the more jobs it will create in the community.
The break could even be an incentive for Boeing to reconsider moving 737 production from Renton to Everett, the mayor said. "We think we’ve structured it in a way that makes sense."
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
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