Boeing defends aerospace tax breaks at hearing

OLYMPIA — The Boeing Co. made clear Friday it’s concerned by efforts of state lawmakers to impose new conditions on the multibillion-dollar tax break that helped land the 777X program in Everett.

A Boeing executive appeared in front of a legislative committee to oppose a bill requiring the company maintain certain job levels in order to reap the full benefits of those tax breaks that were extended in 2013.

Bill McSherry, the company’s vice president of state, local and global corporate citizenship, cautioned that imposing such a new condition would damage Boeing’s century-old relationship with the state.

“Changing the incentives now after waiting until after Boeing has invested almost a billion dollars to deliver on our 777X promises threatens to undermine not only our trust in the state but the confidence of all businesses here, and those looking at coming here, that Washington will honor its commitment,” McSherry told members of the House Finance Committee.

McSherry appeared at a public hearing Friday on House Bill 2147 sponsored by Rep. June Robinson, D-Everett.

It would tie the value of Boeing’s incentives to the number of workers it employs in Washington. If that workforce shrinks — and it has since the law was signed in November 2013 — the tax break will, too.

“If the jobs stay, the tax break stays and if the jobs leave, the tax break incrementally goes away, Robinson testified. “I think that is fair.”

Snohomish County Executive John Lovick and Snohomish County Councilman Brian Sullivan also testified in support of the bill.

“The package approved in 2013 simply doesn’t protect taxpayers the way it should,” Sullivan said.

Friday marked the first — and possibly only — public hearing on the legislation drawn up by the International Association of Machinists and Aerospace Workers Local 751 and the Society of Professional Engineering Employees in Aerospace.

They contend Boeing got too good a deal in 2013. Those incentives could save the aerospace giant as much as $8.7 billion in taxes through 2040 yet doesn’t prevent the firm from shipping jobs out of state.

“No state has given so much money with so few strings attached,” said Tom Cafcas of Good Jobs First, a nonprofit research group that tracks tax incentives nationwide.

Under House Bill 2147, Boeing must employ at least 83,295 workers in Washington to earn all the incentives. Every year there will be a tally. Each drop of 1,000 below that baseline reduces the tax break. The incentives go away if the workforce reaches 5,000 or more below the baseline.

At the end of 2014, the company had 81,497 employees, according to figures provided by committee staff.

McSherry said supporters are focusing only on the past 12 months. The company has added 30,000 jobs in Washington since 2003, half of which are held by Machinists or engineers, he said. Today, more than half of Boeing’s workforce worldwide is in Washington.

McSherry’s appearance marked one of the few times a Boeing executive took part in a public hearing in this manner — and committee members noticed.

“I know we’ve had a little frustration in the past with the company not coming in, but Bill I really, really, sincerely appreciate you taking the risk and speaking on behalf of Boeing,” said Rep. Chris Reykdal, D-Tumwater, a sponsor of the bill.

“We love this company,” he said. “We’re trying to get this right. It is not lost on any of us that you are here.”

Robinson’s bill was one of two measures considered by the committee Friday that aim to reduce or eliminate incentives to aerospace companies that don’t meet certain wage and job requirements.

The other measure, House Bill 1786, would require aerospace suppliers pay employees at least the state median wage to be eligible for the industry tax breaks.

A fiscal analysis predicted 210 firms would not meet the standard, lose their incentive and wind up paying $309 million in additional taxes in the 2015-17 biennium.

Following the committee hearing, Sullivan acknowledged Robinson’s bill will have a tough time getting passed this year. The conversation should continue in future sessions, he said.

“The issue doesn’t go away,” he said. “I think trust but verify is really appropriate.”

McSherry declined to comment on the position staked out by Lovick and Sullivan.

“I am not going to react to what anyone else does or says. I am just going to focus on what we’re doing,” he said. “We’re thrilled to be growing not only in the state but in Everett and throughout the region.”

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.