War of words between Boeing, unions at tax-break hearing

OLYMPIA — The Boeing Co. and some of its employees squared off Tuesday on whether state lawmakers should impose new conditions on the massive tax break that helped land the 777X program in Everett.

In a two-hour hearing, a Boeing executive and Everett’s mayor led the opposition to a bill requiring the aerospace company maintain a certain number of jobs in Washington or risk losing some — or all — of the tax incentives that were extended by lawmakers in 2013.

Bill McSherry, the company’s vice president of state, local and global corporate citizenship, and Everett Mayor Ray Stephanson insisted to the House Finance Committee that the aerospace giant is holding up its end of the two-year-old bargain.

“Boeing has kept its word to Washington. We are investing more than a billion dollars in the massive 777X composite wing center in Everett, as promised,” McSherry said. “Do not allow proponents of this bill to drive a wedge between this company and this state. We all have too much to lose.”

Machinists, engineers and the prime sponsor of House Bill 2638 argued that the company is not upholding its end of the deal. They said lawmakers presumed Boeing would maintain and add jobs but the company has pared 4,057 jobs — some going to other states in order to qualify for their tax breaks.

“Everyone who voted on it thought it was going to keep and grow jobs in the state of Washington,” said Rep. June Robinson, D-Everett. “In fact no one at that time imagined that in two short years we would be sitting here with Boeing having moved 4,000 jobs out of state.”

James Raskob, of Lake Stevens, an engineer who works for Boeing in Tukwila, said the depleted ranks in his office are a cause of constant worry.

“Those of us who are here look at the empty desks and wonder who is going to be next,” he said.

Tuesday’s hearing marked the second in two years on legislation sponsored by Robinson. The bill has two Republican co-sponsors: Rep. Cary Condotta, of Wenatchee, and Rep. Richard DeBolt, of Chehalis. Robinson and Condotta serve together on the finance committee.

House Bill 2638 targets the incentives which could result in $8.7 billion in tax savings through 2040 for the aerospace industry, including Boeing. The tax incentive legislation does not prevent Boeing from shipping jobs out of state.

It would tie the amount of incentive with the size of Boeing’s workforce in Washington. It sets a baseline of 83,295 jobs, which is the number Boeing reported employing in the state at the time the tax break extension was approved.

If the company’s total employment here drops between 4,000 and 5,000 below that baseline, it loses half of its preferential business and occupation tax rate and tax credit. If employment declines by more than 5,000 jobs, the tax break goes away.

The first threshold has already been crossed. Boeing’s latest workforce report shows 79,238 jobs in Washington as of Dec. 31 — which is 4,057 fewer than when the tax break got extended.

The International Association of Machinists and Aerospace Workers District 751 and the Society of Professional Engineering Employees in Aerospace helped Robinson craft the bill, as they did with last year’s version.

The two unions contend the state gave Boeing too good a deal by not clawing back any of the tax breaks when the firm ships jobs out of state.

Jon Holden, president of IAM 751, said they supported extending the tax breaks in 2013 as a means of boosting jobs and promoting economic development. They didn’t expect job losses, he said.

“Unless we address the lack of job guarantees in the current legislation we are at risk of continuing that trend,” he said.

Opponents, meanwhile, worried that while the bill applies only to Boeing, it poses a threat to hundreds of aerospace suppliers that do business with the firm. And, they said, passage would cause businesses to consider leaving the state and deter others from locating here because of worries that the state will renege on any deals it makes.

“Every business is asking … where do the clawbacks stop,” said Tim Morgan, chief executive officer of TTF Aerospace in Auburn.

Following the two-hour hearing, the committee’s chairwoman said she’ll advance the bill “if the votes are there.”

“We had bipartisan sponsorship of the bill. We will see if we have bipartisan support to get it out of the committee,” said Rep. Kristine Lytton, D-Anacortes.

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