State leaders talk about tax benefits for Boeing

Five years after a large package of tax benefits secured the Boeing 787 final assembly plant for Washington state, lawmakers and industry insiders are seeking a head start on the next big pitch, presumably the successor to the 737 line.

If they wait too long, this time the state may lose, said participants in a government and industry conference Wednesday.

"The expectation with the Dreamliner was that Washington state had to pull a rabbit out of a hat," state Rep. Jeff Morris, D-Mount Vernon, said. "So it's a good idea to have an earlier start this time."

Morris was one of a dozen legislators, some sporting airplane lapel pins, who joined lobbyists and trade representatives at the Museum of Flight to discuss the challenges facing the state's aerospace industry and how to maintain, or perhaps restore, its competitiveness.

The conference, hosted by the Aerospace Futures Alliance trade association, marked the first summit of the Governor's Aerospace Council and the Washington state Legislature Aerospace Taskforce, two government commissions created to boost this staple of the state economy.

"You have to pay to play," Tom Captain, a principal with the Deloitte consulting firm, told the group in his assessment of the state aerospace industry's position. "We did that [for the 787]. Now the imperative is, you have to pay to stay."

Since winning the 787 Dreamliner bid, Washington is "0 for 5," Captain said, on major aerospace projects in the U.S., which instead have gone to the Carolinas or other low-cost states. And, even after the Government Accountability Office's ruling last week in Boeing's favor, the Air Force tanker contract could be No. 6.

At risk now, Captain warned, is the almost $7 billion and 13,000 jobs created by production of Boeing's 737.

Those could disappear if the state cannot ensure that the jet's replacement stays in Washington.

Boeing officials said earlier this year that the target date for delivering the 737's replacement to airlines would be closer to 2020 than the previously expected 2015.

With today's computerized manufacturing processes, airplanes can be built anywhere by anyone, he said. Mere hometown allegiance won't be enough to keep businesses in the state, as lower-cost alternatives in the South and the developing world beckon.

"We have a disadvantage in all categories," Captain said, especially higher wages and costs of living. "The data says Washington is getting outgunned and is no longer competitive."

But the dollar's sinking value relative to the euro could actually help lower the cost of manufacturing in the United States, Captain said. The density and diversity of Washington's aerospace cluster could be another advantage by reducing transportation costs when suppliers are close to the final assembly facility.

With the legislators in his audience pining for solutions, Captain suggested favorable land grants for new facilities or business tax breaks. Other opportunities, he said, could include boosting specialized aerospace engineering programs at local educational institutions or finding a way to harness Seattle's high-tech talent pool toward the booming market for electronic defense technologies.

Tom Flavin, president and CEO of the public/private economic-development organization enterpriseSeattle, told the group how, on his third day as mayor of Burbank in 1990, Lockheed Martin, the city's largest employer and taxpayer, announced its move to Georgia.

California's aerospace presence proceeded to evaporate because of what Flavin called an "unfavorable business environment."

"Hopefully, we in Washington state can learn from their mistakes, because I don't want to go through it again," he said.

According to Captain's research, aerospace contributes $36 billion to Washington's economy, or 15 percent of the state's total output. Of every 1,000 Washington workers, 44 are employed in aerospace — a higher rate than anywhere else in the country.

"As aerospace goes, the state goes," Captain said.

Isaac Arnsdorf: 206-464-2397 or iarnsdorf@seattletimes.com