On Dec. 10, Gov. Jay Nixon held a news conference at the James S. McDonnell Planetarium in St. Louis to sign a package of tax incentives worth $1.7 billion designed to entice aerospace industry giant Boeing to invest in Missouri. However, one industry analyst sees three states as more likely to land the jobs.
The newly inked Senate Bill 1, the result of a special session called by Nixon, offers payroll breaks stretched over a 23-year period for Chicago-based Boeing Co., which could create up to 8,000 manufacturing jobs. According to Springfield Business Journal research, at least 10 states are courting Boeing with tax breaks and other incentives as it plans to start production on its next generation of commercial aircraft, the 777X. Boeing officials did not return calls for comment by press time.
“Just as workers right here in St. Louis helped our nation reach for the stars by building the Mercury space capsules a half century ago, today we send a clear message that Missouri is ready to open the next great chapter for high-tech aerospace manufacturing in our state,” Nixon said at last week’s news conference.
The bill, signed with bipartisan support in the House and Senate, offers up to $150 million annually for an aerospace project that creates at least 2,000 jobs under four of the state’s economic development programs: Missouri Works, Missouri Works Training, Missouri Build and the Real Property Tax Increment Allocation Redevelopment Act.
State Sen. Bob Dixon, R-Springfield, who serves as vice chairman of the economic development committee, said the incentives are smart because nothing is given away upfront.
“We were able to craft this in such a way that we are not going to be taking money out of the pockets of other taxpayers in order to bring these jobs here,” Dixon said. “Boeing funds the incentives when it brings the jobs here, so it is not like we are giving it tax money. It will be able to keep the employee portion of the payroll taxes, so it is a break once it starts making payroll on the jobs.
“It won’t get a dime until the jobs are actually on site.”
The work of state lawmakers could be in vain, according to one Washington analyst who follows Boeing.
Scott Hamilton, managing director of Seattle aerospace consultancy Leeham Co., said the Show-Me State was among a group of second-tier options to secure the jobs. The main reason, he said, is Boeing workers in St. Louis also are members of the International Association of Machinists & Aerospace Workers, the union fighting with Boeing in Washington over pension concessions the manufacturer wants the workers’ group to make. Those talks led Boeing to start shopping production of its 777X planes.
“Your St. Louis plant is IAM. Granted, it is District 837 rather than District 751, but given Chicago’s distaste for the International Association of Machinists, why would you trade one district for another?” Hamilton said. “The most compelling reason to take the work out of Washington is the union.”
Boeing currently employs about half of its workforce in the Seattle area.
Hamilton said Long Beach, Calif., where large transport aircraft already are produced, make it a better fit for the company, though a separate union of workers there came together to strike against Boeing in 2010.
He said Boeing’s nonunion operations in San Antonio focus on transport planes, but it doesn’t perform assembly. Boeing’s St. Louis workers produce military jet fighters, which is much different than manufacturing commercial planes, Hamilton said.
While California and Texas are frontrunners, he said Washington has a leg up on the competition because Boeing was founded there in 1916, it already produces 777S planes, and the state’s $8.7 billion proposed tax incentives appear to be enough.
“All the industrial and economic logic skill sets stay in Washington. I think that’s the decision (Boeing) would come to, but it all depends on [CEO] Jim McNerney,” Hamilton said. “After those three, it drops off pretty quickly.”
While Missouri might not secure the jobs, Dixon said it is important the state make a run.
“We believe we are competing in the top-tier of states,” Dixon said, pointing to Washington’s business-prohibitive taxes, such as a gross receipts tax, that he believes level the playing field. “There is no guarantee that we will win the business, but we ought to compete.”
He said Missouri’s incentives were designed to give Boeing $1 for every $1.90 in private investment.
In the Springfield area, Dixon said companies that already feed into Boeing’s supply chain – such as Custom Metalcraft and Positronics Industries – stand to benefit from 777X production, whether direct jobs are awarded to the state or not.
“It could be a good thing for Springfield and all of Missouri, not just St. Louis,” said Dwayne Holden, president and CEO of Custom Metalcraft, which produces stainless steel tanks and components for Boeing. “I understand there is no giveaway upfront, and that was the thing I was concerned about.”
Boeing announced last week it plans to add some 400 jobs in the St. Louis area, though they aren’t related to the 777X positions. The company employs 15,000 in Missouri, and the new jobs are in research and technology to support its St. Louis County operations.
Still, Dixon said the 777X proposition couldn’t be passed up.
“It is one of those unique opportunities that really only come along once in a generation,” Dixon said.
