Lawmakers seek an airtight tax break for Boeing

OLYMPIA — Washington lawmakers set out Thursday to extend a tax break worth billions of dollars to the Boeing Co. to convince the firm to build its next jetliner in the state.

But they don’t want to get burned like last time.

After Boeing got incentives to build the 787 in Everett, the company opened a second assembly line in North Charleston, S.C.

Gov. Jay Inslee told a House panel Thursday that his bill would eliminate the tax-break extension if Boeing shifts production of the 777X out of Washington.

“We believe this will prevent the consequences of what happened with the second line in the Boeing 787,” the governor told members of the House Finance Committee.

The committee’s chairman, Rep. Reuven Carlyle, D-Seattle, said there was obvious anxiety and resentment tied to Boeing’s decision to open the new 787 line in South Carolina. In the more recent discussions, he said, the company acknowledged that dynamic.

Thursday marked the first day of a special session during which lawmakers are under pressure to approve several measures sought by Boeing in exchange for a commitment to homeport the 777X program in the state — and most likely in Snohomish County, where the present model of the 777 has been built for almost 20 years.

The tax-break bill, worth an estimated $8.7 billion over 16 years, is the biggest financial enticement being considered, and that brought Inslee before the panel.

“This is what the Machinists and Boeing Co. need to compete in the global marketplace,” said Inslee, who deemed the 777X the “linchpin for economic growth in the state of Washington for decades to come.”

Several Boeing lobbyists attended Thursday’s hearing, but no company officials testified.

Larry Brown, political director for the International Association of Machinists and Aerospace Workers (IAM), did testify. He said the union “strongly supports” the tax break extension, as well as legislation that would boost aerospace worker training and a $10 billion transportation package.

“I know this is a big ask for some folks,” he said. “It does involve a lot of considerations. It does involve a lot of money.”

Nearly everyone who spoke at the 90-minute hearing urged passage.

“This is going to be a tremendous game-changer for us,” said Snohomish County Executive John Lovick, noting that assembling the plane at Paine Field in Everett would mean “jobs, jobs, jobs.”

Under Inslee’s proposal in House Bill 2089, seven aerospace industry tax breaks that would otherwise expire in 2024 would be extended to 2040.

Inslee’s budget office estimates that affected firms will save $8.7 billion over those 16 years, the bulk of it accruing to Boeing. Roughly half would come from a significantly reduced business-and-occupation tax rate.

The extension is contingent on “a significant commercial airplane manufacturing program” getting sited in Washington by June 30, 2017. Translated, that means Boeing must turn dirt on some aspect of the program or it will lose the tax-break extension.

It also makes clear that the preferential B&O tax rate for such an undertaking would go away if final assembly, wing assembly or wing fabrication of the 777X and future derivations are moved outside Washington.

On Friday, lawmakers will begin debate on a separate bill to pump $18.5 million into education and training for future aerospace workers. House Bill 2088 includes money for 1,000 new enrollment slots in community and technical colleges and expansion of the Washington Aerospace Training and Research Center at Paine Field.

House and Senate leaders said they expect to approve the tax break and education funding bills on Saturday. Then they might adjourn — without acting on a transportation package.

Transportation has been a divisive subject for lawmakers all year. Inslee and fellow Democrats are pushing for action in the next few days but have been unable to negotiate an agreement with Republicans.

Representatives of Boeing and the Machinists are meeting jointly with lawmakers — or speaking with them on conference calls — to make clear it is an important piece.

Meanwhile, IAM members are preparing to vote Wednesday on an eight-year contract extension. About 22,000 Machinists in Washington and Oregon are affected. If the deal is not ratified by a simple majority, it is unclear how Boeing will proceed with the 777X.

The Associated Press contributed to this report. Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.