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Home » Opinion » Capitol Report: By Gary Cross

Capitol Report: By Gary Cross

Capitol Report: By Gary Cross

  December 14, 2013

Legislature Convenes for Extraordinary Session to Pass Incentives for Job Creation

As we enter the holiday season that many refer to as the season of giving, the legislature and the governor have come together to push forward a legislative proposal that will potentially give Missouri the gift of thousands of new good-paying, family-supporting jobs. News first broke just a little more than a week ago about the opportunity to bring Boeing’s production line for the 777X airliner to Missouri. While we had few details, we did know that as many as 8,000 direct jobs, and thousands more indirect jobs for construction, suppliers, etc., could be created through this outstanding opportunity.

While most of us were focused on Thanksgiving plans with our families, the governor and legislative leaders quickly came together to discuss a package of incentives that could possibly make the Boeing opportunity a reality. Within a matter of days it was decided that the legislature would convene for an unprecedented December extraordinary session to try to turn these ideas into a legislative package the governor could sign into law. With that, we all changed our holiday plans and made the trek to Jefferson City to answer the governor’s call.

Details for the Boeing Project Continue to Be Revealed

One of the big issues most of the members of the General Assembly had when first considering this issue was simply that substantive details for the project were not available. In essence, we were being asked to come to the state Capitol to work on a piece of legislation to entice a project we knew almost nothing about; other than it would potentially lead to more jobs in our state. That was especially concerning when considering the fact we had a timetable of just a little more than a week to put a legislative package together.

The good news is that the information began to flow much more freely once we convened for session. As time went on we learned that if Boeing were to pick Missouri as the site to manufacture the 777X airliner, it would lead to the creation of more than 8,000 jobs paying an average annual salary in the range of $75,000. We also learned that even if Boeing chose not to manufacture the entire plane here in the Show-Me State that we could still be selected to produce the wings, which could generate between 2,000 and 3,000 new jobs.

In regard to a specific timeline, Boeing has said it would start building its facilities in November 2014 with the goal of beginning production of the 777X in July 2016. If Missouri were to land the full plant, it would start with 3,250 employees in 2018 and eventually employ as many as 8,500 Missourians by 2024. If Missouri were instead to land only the wing production plant, it would employ 1,075 workers to start and eventually move up to as many as 2,760.

Statewide Impact of the Boeing Project

When discussing this Boeing project it may be easy for some to dismiss it as nothing more than a benefit package for St. Louis. While it’s true that Boeing is located in the St. Louis area and any new facility would naturally land there as well, this project is one that would provide a significant stimulus to our economy and create jobs across the state.

Right now Boeing employs nearly 15,000 direct jobs in the St. Louis area, but it also has generated tens of thousands of jobs across the state with its suppliers and vendors. In fact, Boeing has nearly 700 suppliers and vendors in 24 counties all around Missouri. When taken in total, Boeing supports as many as 30,000 direct and indirect jobs here in our state.

Now, as we look to bringing a new Boeing project here, it is important to realize that, whether it is 2,000 or 8,000 direct jobs in St. Louis, thousands of new jobs will be created in other parts of the state as well. At least one economic analysis we have seen indicates that as many as three jobs could be created outside the Boeing plant for every one created in it. This is an important fact to keep in mind when talking about the statewide economic impact this Boeing project could have.

More Details Regarding the Specifics of What Boeing is Seeking for a Location

As we talk about the realistic possibilities of bringing the production of the 777X to Missouri it is important to seriously look at the factors the company is weighing when deciding where to locate its facility. The reason this opportunity is in play right now is because of a disagreement the company had with the machinists union in the State of Washington. Despite the fact the Washington legislature put a nearly $9 billion incentive package on the table, the labor disagreement was enough for Boeing to look elsewhere to produce its new airliner.

Right now, a number of states are competing for this opportunity with many of them working to put together economic incentive packages meant to entice Boeing. In addition to these incentive packages, the company is looking at a number of other factors in deciding where to locate production of the 777X.

We know that Boeing seeks a 4.2 million-square-foot facility that would build the entire airplane, costing $7 billion to $10 billion for the building and equipment. Alternatively, Boeing would utilize two plants in different places: one at 3.1 million square feet, costing $4 billion to $6 billion, for fuselage and final assembly, and a second, 1.1 million-square-foot plant, costing $2 billion to $4 billion, to build 777X’s 114-foot-long carbon wing.

Furthermore, the company has stressed the importance of transportation as one of the most critical determinants. The company is specifically looking for an area with air, road and rail links, and specifically an airport with the capability of landing the 777X and freighter airplanes; easy access to a major highway; and a dedicated direct rail spur. All of these are things we can offer in St. Louis. And while we don’t have the seaport that the company views as desirable, the other positives we offer are significant enough to continue to make us a viable option for this opportunity.

Boeing also is looking for a state that will share in its cost of capital expenditures to get its plant up and running. Furthermore, it is placing a heavy emphasis on the overall cost of doing business in a state as well as the availability of skilled workers and a stable regulatory environment. Again, these are all things that Missouri has in place, or will have in place with the passage of this new economic incentive package, which make us an extremely attractive option for Boeing.

Creating a Fiscally Responsible Incentive Package

As we looked at the legislative proposal the governor put before us, it was immediately clear that he was advocating for an expansion of existing tax credit programs with no savings generated in other areas. That ran up a red flag for many of my colleagues who are opposed to the idea of simply handing out more tax credits. However, our initial skepticism was diminished as we looked at the big picture details of both the bill and the economic impact the Boeing project could have on our state.

What the governor proposed amounted to an expansion of existing tax incentive programs that would be directed specifically at the Boeing project. The legislative packaged he asked us to approved would expand the capacity of these existing programs by up to $150 million annually for large-scale aerospace projects. As the governor has noted, these four programs - Missouri Works, Missouri Works Training, Missouri BUILD, and the Real Property Tax Increment Allocation Redevelopment Act – are fiscally responsible and proven to work in attracting companies that will create good-paying, family-supporting jobs.

When looking at the big picture for this proposal we see that Boeing could receive approximately $435 million in incentives by 2040 if it adds only 2,000 jobs in Missouri. That number moves up to $1.74 billion in incentives if Boeing adds 8,000 jobs in that same time frame. While that is a huge number, keep in mind that economic analysis indicates Missouri’s economy would grow as a result of this project by an additional $2.9 billion over that same period of time. The realization that this project has the potential to have such a profoundly positive impact on our economy makes the idea of handing out targeted incentives to one company much easier to swallow.

What is even more important is that these incentives will only kick in if Boeing creates at least 2,000 additional jobs in Missouri over the next 10 years. With this we have no risk of wasting taxpayer dollars or making a bad investment. Quite simply, this incentive package will only go into effect if Boeing decides to come here and does in fact create the kinds of jobs it has promised. That to me is a great deal for Missouri taxpayers.

Weighing Broad-Based Tax Relief Against Targeted Tax Incentives

Even as we talk about the need to make a competitive offer to Boeing in an attempt to land these jobs, it is important to look at the opportunity we had earlier this year to create the kind of low-tax environment that would be enticing for all businesses. It was only a few months ago that the legislature returned for Veto Session to consider overriding the governor’s veto of a bill that would have cut taxes for Missouri businesses and for all working Missourians.

In opposing the bill the governor said we could not cut taxes without also jeopardizing funding for education and other vital state services. He actively worked to counter the arguments of proponents of the tax cut who said a lower tax burden would lead to more businesses and job growth and increasing revenues. The bill even had protections in place to ensure revenues went up before each new phase of the tax cut could be implemented. However, none of this was enough to sway the governor to support a tax cut for all Missourians.

Now, with a targeted tax incentive package, the governor is saying that reducing the tax burden for one company will certainly lead to economic growth. It is strange that he opposed tax relief for all businesses and families, but supports it for just one company. And while I do support the incentive package for Boeing, I do question how it can be better policy to provide tax relief for one rather than tax relief for all.

The bottom line is that companies like Boeing do heavily factor in things like tax burden when deciding where to locate. Efforts to further reduce our tax burden would not only mean more money in the pockets of Missouri citizens, but would also lead to even more businesses wanting to set up shop and create jobs within our borders. That is why we must continue to discuss the idea of lowering the tax burden here in Missouri. I hope the governor can open his eyes to this idea as we again consider the possibility of a tax cut during the 2014 legislative session.

Big Picture – Missouri Must Continue to Take Steps to Compete for Economic Growth Opportunities

Regardless of whether Missouri lands all or part of this Boeing 777X project, the big takeaway we all should have with this opportunity is that our state can be a major player for such projects. The fact that a Democratic governor and a

Republican-led legislature came together in the span of a few days to put a competitive offer on the table is indication that we do have the ability to work together effectively to promote job growth and economic development in our state.

It also has been extremely encouraging to see other groups here in Missouri come together to support this effort. Just this week we saw St. Louis-area construction labor councils agree to work a 24-hour work schedule and forgo overtime pay to construct Boeing’s facilities should the company choose to locate here. We also saw five community colleges in the St. Louis region come together to create a Missouri Aerospace Training Consortium. Their goal is to train thousands of Missouri workers for advanced manufacturing jobs at Boeing and other aerospace companies. While the incentive package put together by the legislature is important, the efforts of these groups are just as pivotal in our efforts to bring projects like the Boeing 777X to Missouri.

Whether Boeing chooses to come here or not, we can all take pride in the fact that Missouri put its best foot forward to make this deal happen. This will signal to other companies that our state is serious about creating an environment where they can build and grow, and will inevitably lead to even more economic development opportunities. We often talk about Missouri being "open for business" and I am confident that we have made that quite clear to the nation and the world with our latest efforts. That can only mean positive things for our great state in the future.

I do appreciate your input on matters of importance to you, your family, and community. If, at any time, you have questions, concerns or ideas to improve our state government and the quality of life for Missouri citizens, please feel free to contact me at 573-751-1459 or e-mail me at gary.cross@house.mo.gov. Thank you for taking an active role by voicing your opinions on our state and national government issues. Thank you for the honor to serve the 35th District.

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