Boeing gets lion’s share of millions in Aerospace tax breaks

  • By Jerry Cornfield Herald Writer
  • Tuesday, June 7, 2016 8:20pm
  • Local News

OLYMPIA — Aerospace companies avoided $553 million in tax payments the past two years by taking advantage of generous tax breaks the state offers the industry.

Although the Boeing Co. accounted for the lion’s share of the sum, dozens of other firms shaved a few dollars to several hundred thousand dollars off their tax bill as well, according to data submitted to the state Department of Revenue.

In all, 287 companies claimed one or more aerospace-related tax incentive in 2015, up from 262 claimants in 2014 based on information provided by the state agency in response to a public records request.

Topping the list is ElectroImpact Inc. of Mukilteo, a key Boeing supplier, which racked up $2.41 million in savings in the past two years, records show.

Other companies atop the list include:

Exotic Metals Forming Co. of Kent, which specializes in sheet metal components for aircraft, $1,777,254;

Astronics Advanced Electronic Systems of Redmond, supplier of lighting and safety systems, $1,412,423;

Senior Aerospace Operations, parent company for Absolute Manufacturing and Aerospace Manufacturing Technologies, both in Arlington, and Damar Aerosystems in Monroe, $1,519,002;

and Toray Composites America, a Tacoma supplier of carbon fiber materials, which reported $1,729,596 in 2015.

At the other end of the spectrum, 13 companies in 2014 and 24 companies in 2015 reported savings of less than $500 from an aerospace tax break.

State revenue officials caution the number of companies reporting and the amount of tax savings might change before the agency publishes its annual survey on tax breaks in December. Washington has an estimated 650 aerospace suppliers and 1,350-aerospace-related companies not named Boeing, according to the state Department of Commerce.

Firms had to turn in their financial information by the end of April. Some requested and received extensions and others may amend their filings before the year is out.

This year marks the first time the state is requiring firms to disclose the value of aerospace incentives first approved in 2003 then expanded and extended in 2013 to help convince Boeing to build its newest jetliner, the 777X, in Washington.

Disclosure doesn’t worry Matt Yerbic, chief executive officer of Aviation Technical Services of Everett, one of the largest aerospace firms in the state. It saved $545,810 in the past two years, according to state records.

“This is our government. This is our process,” he said. “The public has a right to know and understand what we’re doing.”

He hopes the public views the figures in the context of how they help companies like his stay competitive and remain in Washington.

The savings can be seen as money taken away from the state or it can be considered funds companies can reinvest into themselves and the community, he said.

“We like it here. We want to be here,” Yerbic said. “These are an important piece of the puzzle.”

Ben Hempstead, chief of staff at ElectroImpact, echoed the sentiment.

“People look at the numbers and think it’s a big giveaway but actually it’s not,” he said. “It’s very narrow and focused.”

ElectroImpact has not pursued some tax breaks because the cost of complying with reporting requirements outweighs the benefit of any potential savings, he said.

“It’s far from the public’s perception that it’s a giveaway,” he said. “ElectroImpact is not in the business of manufacturing tax credits. We’re in the business of making airplane equipment and tools for aircraft assembly.”

The incentives, which include a lower business tax rate, property tax credits and waiving of sales tax on some purchases, will run through 2040 and are projected to save the industry $8.7 billion.

Boeing will reap most of that. The firm reported $517.4 million in savings in 2014 and 2015 combined, which is 93.5 percent of the industry’s total savings in that period.

Boeing saved big because it spent big — an estimated $13 billion in the state in 2015. Most of that spending was salaries and wages, purchases from local suppliers and capital investments for the new 737 MAX and 777X airplane programs, according to statements by the company. The 777X is expected to go into production in Everett in 2017.

Just as they do for Boeing, the incentives can factor directly into decision-making of companies even if there is not as large a sum of money at stake, said John Monroe, chief operations officer for the Economic Alliance Snohomish County.

“If that $10,000 allows them to buy another piece of equipment or that $50,000 allows them to have another body, that is significant,” he said.

When the value is in the hundreds of thousands, he said, “I think they’ll buy larger pieces of equipment, hire more bodies and have more funds to reinvest in technology. These companies are not going to take the credit and run.”

There is increasing political pressure to rewrite terms of the 2013 deal embraced by Gov. Jay Inslee and a nearly unanimous Legislature that secured the 777X.

Since then, Boeing has slashed nearly 5,000 jobs. Aerospace Machinists and engineers want language added to require the company sustain a minimum of jobs in the state if it wants to keep receiving the full value of the tax breaks.

Inslee has said he will explore adding job accountability in 2017, raising concerns that such a change might negatively effect suppliers, many of whom have added workers since 2013.

John Thornquist, director of the state Office of Aerospace, said he knows from his experience in the private sector that incentives can “influence a business when they are thinking about coming to Washington or expanding in Washington.”

He said he’s not been directed to work on modifying the terms of the 2013 legislation. He said he is trying to gather information about the growth of the supply chain — including any increase in hiring — and making sure companies looking at relocating to the state are well aware of the bounty of incentives.

“We use it as a marketing tool,” he said. “In my opinion it’s working.”

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

What they saved

Here are some of the larger tax-incentive savings of aerospace employers other than Boeing for the past two years. This list could change as the state collects additional data from recipients of aerospace tax incentives. A final report from the state Department of Revenue is due out in December.

ElectroImpact Inc.: $2,406,661

Toray Composites America Inc.: $1,729,596*

Exotic Metals Forming Co. LLC: $1,777,254

Senior Aerospace Operations LLC: $1,519,002

Astronics Advanced Electronic Systems: $1,412,423

Kaiser Aluminum Washington LLC: $1,209,587*

Hexcel Corp.: $1,160,787

Primus Intl Inc.: $1,023,229

Alcoa: $1,004,382

Triumph Composite Systems: $790,097

Goodrich Corp.: $748,240

Aviation Technical Services Inc.: $545,810

Mitsubishi: $328,854

*2015 only

Department of Revenue

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