Will $28-million tax incentive be enough for Boeing?

OLYMPIA—Gov. Gary Locke Monday unveiled his tax incentives package to help the state land final assembly of the Boeing 7E7, stressing the huge economic impact the project would have on the state.

Locke, while unveiling his tax incentive package, said the assembly of the Boeing 7E7 in Washington will create 1,200 jobs directly related to the assembly and thousand of other related jobs.

"This is about the future of the aerospace industry in Washington—our state's most dominant industry," Locke said. "Our efforts will make our state even more competitive and, in turn, help Boeing and its supplier network reduce their costs and compete even more effectively with Airbus."

The total expected economic impact of building the 7E7, and its derivatives, in Washington state include:

• as many as 150,000 jobs, including suppliers and other multiplier effects; and

• as much as $540 million in tax revenue per year.

Details of Locke's tax incentives package include:

• B&O rate reduction for the aerospace industry;

• B&O tax credit for Research and Development;

• Sales tax exemption for computer hardware and software used in design and engineering of airplanes and their components;

• Sales tax exemption on any new construction or improvement either in Everett or Moses Lake; and

• Property tax relief on new facilities and equipment for Everett or Moses Lake.

The entire tax incentives package would be worth about $28 million to the aerospace industry in the 2003-2005 biennium if the project were built in Everett and $108.5 million in the 2005-2007 biennium. The impact in the later years will be about $120 million per year.

The entire package, however, is contingent upon Boeing choosing Washington as the site for final assembly of the 7E7.

"This is a thoughtful package to address how Boeing will do business in Washington in the future," Locke said. "It also addresses the entire aerospace industry in our state—Boeing and all its suppliers."

Martha Choe, director of the state department of Community, Trade and Economic Development (CTED) supported the governor's tax incentives package.

"This tax incentives package is critical to the long-term competitiveness and economic vitality of our state," she said. "The Action Washington team continues to develop a creative, aggressive proposal to convince The Boeing Company that Washington is the best place for final assembly of the 7E7."

Meanwhile, Locke urged business, labor and legislators to continue talks on unemployment insurance and injured workers' compensation reform. He stressed the need to balance competitiveness and fairness in the unemployment insurance reform.

"Unemployment is a vital safety net for working Washington citizens and it is also a significant cost of doing business for Washington employers," Locke said. "Washington needs an approach that will boost our competitive position relative to other states while safeguarding the most important principles of our economic safety net."

The Legislature is currently considering several proposals.

Locke said he would only support unemployment insurance reform that:

• retains as much current eligibility as possible;

• includes a gradual phase-in of all cuts and benefit reductions to mitigate displacement;

• meets solvency requirements and makes the system stable and resilient; and

• provides safeguards for part-time workers and those fired because of illegal acts of employers.

Office of the Governor release, June 9

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