Boeing on S.C.'s radar

Legislators approve massive incentive package

ashain@thestate.comOctober 28, 2009 

  • Incentives package

    The legislation, which expands existing law, would:

    Exempt from sales tax fuel used in test flights and flights to transfer aircraft between manufacturing facilities

    Exempt computer equipment purchases from sales tax

    Allow a qualifying company to immediately pay no sales tax on construction materials, rather than wait for a 2011 phase-in

    Ensure the company could negotiate with state officials to pay little corporate income tax for 10 years

    Allow the state to issue up to $170 million of economic development bonds that would allow a company to build using a lower interest rate, making the project cheaper

    WHAT'S NEXT

    The measures require another perfunctory vote in the Senate before heading to the House today. The package is expected to go the governor today or Thursday.

South Carolina lawmakers are preparing for Boeing to land in North Charleston.

While not mentioning Boeing by name, the Senate voted unanimously Tuesday for a massive incentives package that appeared geared toward winning a new assembly line for Boeing's 787 Dreamliner.

The exact amount of the incentives was not made public, though one of the measures allowed the state to spend up to $170 million on economic-development bonds for a single project.

Other incentives include sales-tax breaks on construction materials, computer equipment and fuel for test flights and transporting aircraft.

Winning Boeing would be one of the state's biggest development coups, on par with the BMW production plant in Greer. BMW chose South Carolina for the plant in 1992. The plant, which employs about 5,000, was won with $130 million in incentives at the time.

"It puts us on the map," USC economist Doug Woodward said. "There are not a lot of big economic development announcements anywhere these days."

Boeing has narrowed its choices between North Charleston, which already has two plants that make and assemble pieces of the 787, and the Seattle suburb of Everett, where the aircraft maker already has a 787 assembly line.

A second line is needed because production of the aircraft -built to save fuel while going as fast as bigger planes - is two years behind schedule.

A new assembly line could employ about 900. About 2,500 already work at two North Charleston fuselage plants Boeing owns or co-owns.

State Sen. Hugh Leatherman, R-Florence, said that according to a hypothetical analysis by budget officials, first-year payroll of a company bringing about 5,000 jobs could exceed $175 million.

But officials in Washington state are fighting to keep Boeing major assembly from leaving Washington state for the first time.

Boeing officials are negotiating with the machinists union in Washington on a 10-year no-strike guarantee. Recent strikes by Boeing workers in Washington are the main reason the Chicago-based aircraft maker is interested in South Carolina.

Workers at Boeing's North Charleston plant voted to throw out the union last month. South Carolina also is a right-to-work state that, by law, does not require workers to join a union.

Boeing's board of directors met Monday in Chicago without deciding on the location of the second line, The Seattle Times reported. Efforts to reach Boeing officials Tuesday were unsuccessful.

During the Senate deliberations, Boeing's name never came up, but the approved incentives were geared to the large-scale investment expected from the aircraft maker.

Three amendments to existing state law exempting or reducing sales taxes were specifically for companies that will generate 3,800 full-time jobs and $750 million in capital investment over seven years.

These were in addition to the exemption of manufacturers from the state fuel tax for test flights and transporting aircraft.

Some incentives would go into effect Saturday, just days before Boeing's expected announcement.

Asked if the changes were incentives for Boeing, Leatherman, who chairs the finance committee that gave initial approval Tuesday, said only that it would help the state win a potential large employer.

"This will help us with jobs as we come out of the recession," he said after the meeting. "We're not as competitive as other states. Now we're going to be more competitive."

Gov. Mark Sanford has agreed to the incentives, Leatherman said.

That's a change since Sanford has opposed some targeted incentives in the past, preferring broad changes to the state's taxes and regulations that would benefit all businesses. Most notably, Sanford vetoed a bill in 2007 that provided tax breaks to a Cabela's outdoor store.

Otis Rawl, president of the S.C. Chamber of Commerce, said South Carolina has not been on a level playing field in recruiting businesses in recent years because of Sanford's stance.

"In the past, the executive branch has wanted to let market forces work and said incentives would not bring companies to the state," Rawl said. "If Alabama puts $250 million on the table, we couldn't beat that commitment."

Sanford spokesman Ben Fox said the governor has discussed this incentives package with lawmakers, but stopped short of saying he supported the bill.

"We are aware of the legislation," Fox said. "We're in support of using tools in the tool kit in recruiting jobs and investment."

Leatherman said he asked state Commerce Secretary Joe Taylor at a hearing six months ago if he wanted to boost economic-development bonds to draw business.

The bonds, repaid with tax revenue from a project, can be used for building construction as well as road and utility work. State law limited the amount of bonds that could be issued based on state debt, Rawl said.

About a month ago, Taylor said he would like the state to have access to the funding, Leatherman said.

"South Carolina is well positioned for the future," Commerce Department spokeswoman Kara Borie said. "As we emerge from this recession, we want to make sure that, as a state, we have the all the tools needed to recruit the finest companies in the world."

Asked about whether the state had been offering enough incentives to recruit business, the state Commerce Department cited recent industry awards for job recruitment and would not elaborate.

Lewis Gossett, president of the S.C. Manufacturers Alliance, said Tuesday the resulting tax revenue from Boeing "will far exceed whatever the state puts in. The package will be substantial, but the state will certainly come out ahead."

The House is expected to pass the incentives today and send them to the governor's desk.

Staff writer John O'Connor and The Associated Press contributed.

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