(In his latest newsletter, Rep. Mike Kelley, R-Lamar, writes about the Boeing special session and his dislike of companies pitting states against each other.)
The Special Session called by Governor Nixon to work on a package of incentives to bring jobs to Missouri came a little closer to completion this today. Acting with surprising speed, the Senate passed a measure that would authorize about $150 million per year in tax breaks and other subsidies for Boeing if they locate their new production plant for the 777x commercial airliner. The 777x is Boeing’s newest commercial airplane and is capable of carrying 400 passengers. The company already has firm orders in hand for the plane, so it is going to be built somewhere.
Boeing was originally planning on locating the facility in Seattle Washington where they already have a strong presence. That fell through after the machinists union in Seattle voted to not give concessions Boeing was asking for. At that point Boeing asked for proposals from about a dozen states, including Missouri, as to what incentives they could offer in exchange for bringing an assembly plant there. Such a plant would provide anywhere from 2000-8000 high paying jobs depending on how much of the assembly would be done in that state. Missouri was asked to make a proposal in large part because of a Boeing assembly plant already located in St. Louis that makes military fighter jets.
While I dislike the idea of a company playing states against each other in an obvious attempt to see which one will put the most taxpayer dollars on the table, and truly dislike what I would call corporate welfare, but the sad fact is that is how economic development is done these days. Yes, companies also look at items such as a skilled work force, infrastructure, and quality of life, but it also takes hard cash incentives in the form of tax breaks, training funds, tax increment financing, and other instruments to convince a company to locate a facility there. Once one state began making the offers, the rest had no choice but to follow.
On the upside, under the bill passed by the Senate, Boeing would get no money upfront until they actually create the new jobs, so no loss in state funds or budget reductions. Benchmarks have to be met in order for the subsidies to kick in. This is in contrast to what has happened in some Missouri communities where subsidies were handed out upfront and there has been no economic activity of any kind has taken place. One community, Moberly, now finds itself embroiled in a lawsuit over bonds it backed to bring a factory to its town that never materialized.
Many economic development experts don’t give Missouri much of a chance at landing this facility because we are not willing to put the kind of money being offered by other states. For instance, Washington passed an $8.7 billion incentive package in an effort to have it built there. Missouri’s total incentives would come to about $1.7 billion stretched out over two decades. However, just that we were asked to submit a proposal gives hope to the project. Boeing has asked for all proposals to be finished by December 10, 2013. They expect to make a decision in early 2014 as to where they will locate.
The bill is now in the House and will go through our committee process. Debate and voting could be finished this weekend. If there are changes to the bill, it will need to be again considered by the Senate. Otherwise the outcome will depend on a final up or down vote in the House.
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