By Scott Hamilton
Oct. 1, 2020, © Leeham News: Washington Gov. Jay Inslee reacted today to Boeing’s decision to consolidate 787 production in Charleston (SC) with a threat.
“Boeing’s decision to take the 787 to South Carolina necessitates a review of our partnership and the company’s favorable tax treatment,” said in a statement.
Boeing needs to respect Washington taxpayers, he said.
The county executive and the city mayor where the Washington 787 Final Assembly Line #1 is located promised support and strengthening the relationship with an eye toward economic recovery and a future New Boeing Airplane (NBA).
This is no time for divisions, said Snohomish County Executive David Somers when asked about Inslee’s threat.
Everett Mayor Cassie Franklin agreed. She said it’s time to support Boeing, a “family member,” who is hurting in this economic crisis triggered by the COVID-19 pandemic.
Inslee complained that Boeing wouldn’t commit to returning the 787 to Everett if and when market demand recovers.
“I recently asked Boeing’s leadership what the company needs to keep 787 production in Washington state. In all our conversations, they never asked for anything. I understand the serious market forces Boeing faces today,” Inslee said in a statement. “What I don’t understand is why the company can’t commit to restoring production here when the market for this plane improves.”
Between 900 and 1,000 jobs will be lost at Boeing. For every direct job, three or four indirect jobs will be affected.
“Boeing’s decision to take the 787 to South Carolina necessitates a review of our partnership and the company’s favorable tax treatment,” Inslee said.
Somers was perplexed at Inslee’s tax treatment element. Boeing gave up all favorable taxes in April to clear adverse rulings at the World Trade Organization that Washington tax breaks were illegal under WTO rules.
As for Inslee’s thinly veiled threat, Somers said this is not time for division. It’s time to rally to Boeing’s side. He called Boeing “family” and in times of stress, it’s time to strengthen the relationship and plan for the future.
Franklin, the Everett mayor, agreed. Everett and Snohomish County will plan to support aerospace and Boeing to be ready when commercial aviation recovers, she and Somers said. The best guestimate is an economic and industry recovery around 2024-25.
“Mayor Franklin and I are committed to looking for the future,” Somers said. “We continue to see that as the best path for the future.”
The best way is to be supportive and understanding, Somers said.
In a press conference this afternoon, Inslee said that he has a responsibility as governor to seek fairness for taxpayers over past and current tax breaks to Boeing.
He criticized Boeing for disrespecting taxpayers by its refusal to discuss returning 787 production to Washington when the market recovers.
Boeing still benefits from $100m a year in tax breaks, Inslee said. These are relief in Business & Occupation taxes for pre-production and real estate, computers and new construction. Inslee said a review of these tax breaks will begin.
“We need The Boeing Co to show more respect for the taxpayers,” Inslee said.
Inslee objected to the characterization by Somers and Franklin that his statement is divisive.
“We cannot be a state that just takes orders from any company,” Inslee said. “We just can’t. We can’t be in a position where a company dictates to us. If anyone suggests this is divisive, I’d say it’s responsible. This is a two-way street. It is not a one-way street. We have to have The Boeing Co. realize this.”
Inslee has a somewhat contentious relationship with Boeing. He was governor when, in 2013, the state granted $8.2bn in tax incentives to land the 777X wing factory and FAL. Inslee later complained he felt mugged, because Boeing threatened to locate these outside Washington if the breaks weren’t granted. Boeing also refused to guarantee a certain level of jobs with the breaks. Afterward, Boeing relocated more than 10,000 jobs outside Washington, in some cases using these to fill jobs-for-tax break requirements in other states.
During Inslee’s brief run for president, he criticized Boeing for its tactics.
With Inslee complaining about Boeing tax breaks, the obvious question arises: did state or local governments in South Carolina offer any tax breaks to incentivize Boeing to consolidate production there?
The Charleston Post and Courier reported today the answer is “no.”
“Boeing has not received any new incentives to consolidate production at Boeing South Carolina,” the newspaper reports, citing a Boeing spokesperson. “This decision was driven by an objective review of market realities, production scenarios, and logistical considerations. We value our relationships across South Carolina and constantly work with those partners to ensure a long-term, competitive business environment.”
Gov. Henry McMaster also said no incentives were offered, the paper reports.
Somers, who said he talked with Boeing this morning, said there was no discussion about what Boeing will do with the empty space. Rumors within Boeing’s Everett plant suggest the 737 line might relocate from Renton to Everett. With production ticking along at low rates, a transfer could occur with relatively little disruption, in theory.
Somers said there was no discussion of this on his call with Boeing.