Washington's residents are smarter, its aerospace taxes are lower, its unemployment fund more stable, its aircraft industry infrastructure is more extensive, its work force more experienced and its quality of life superior.
So why would Boeing consider opening a second 787 Dreamliner assembly line in South Carolina or any other state?
That’s the question Washington Gov. Chris Gregoire asks in a new report aimed at persuading Boeing to open that second Dreamliner assembly line here.
Gregoire presented that report recently to Jim Albaugh, the new head of the company’s Commercial Airplanes Group. She released it to the public Monday.
“Washington provides Boeing with the best location for the second line. Washington is the highest quality location Boeing could possibly identify for additional 787 production,” said Gregoire in an introduction to the new report.
While the report enumerates Washington’s supposed advantages, it mentions no new incentives to turn Boeing’s head. Boeing said it appreciated the compilation of the state’s advantages, but the company believes unemployment and workers’ compensation taxes are too high.
“While Washington state has made progress, there is still work to do to deal with the high costs of doing business,” Boeing spokesman Bernard Choi told The Associated Press.
Washington state Senate Minority Leader Mike Hewitt, R-Walla Walla, concurred that more needs to be done.
“While this report is beautiful and glossy and filled with rankings, is there really any substance here that Boeing hasn’t already considered? I want the company to stay in Washington as much as everyone else, but it’s time to stop resting on rankings and look at where we really are on the ground,” he said in a news release.
Hewitt said the Legislature needs to consider workers compensation reform to cut taxes that are due to rise this year.
Boeing received huge tax breaks when it searched for the site for the first 787 assembly line six years ago. Washington produced a $3 billion package of tax cuts and infrastructure and education enhancements to lure the assembly line to Everett. The tax cuts are still in place.
But Boeing has already dropped strong hints that the second assembly line could be located somewhere other than Everett.
The company has applied for building permits in Charleston, S.C., where it recently purchased a plant from Vought Aerospace Industries that builds major sections of the 787 fuselage. The company says those building permit applications aren’t indicative of the company making up its mind. It just wants to be ready to build a new plant if the decision favors South Carolina.
And Boeing executives have said that unless they get some assurance of labor peace here, they may just open that other assembly line in another state. Boeing suffered a two-month Machinists Union strike that shut down production of all of its commercial airplane lines here.
The report notes that the subject of labor peace is the subject of negotiations between Boeing and its unions. Those unions have been talking with Boeing about how to ensure better relations.
But beyond labor issues, Gregoire’s report enumerates several reasons why Washington outshines its rival states, though it leaves the question of labor costs and labor peace as a brief item in the report.
The report contends:
• Washington has a superior business climate.
In ratings by half-a-dozen independent sources, the Evergreen State earns higher marks consistently than rival states.
In the Kauffman New Economy Index, which amalgamates 29 different indicators, Washington is ranked second. South Carolina is 34th.
Forbes Magazine also rates Washington fourth in business climate compared with 25th for South Carolina fifth for North Carolina and eighth for Texas.
• Washington has lower taxes for an aircraft assembly plant than any of the other states under consideration.
Total yearly taxes of a new plant would be $11 million in Moses Lake, an alternative site for the plant, $11.3 million in Everett and $11.8 million in Charleston.
Washington real and personal property taxes are lower in Everett than in potential plant locations in North Carolina, South Carolina, Texas and Kansas, the report claims.
Washington’s sales taxes on construction are higher than those in competing states, but the state charges no sales taxes on machinery and equipment or components, the report notes.
• The state’s unemployment insurance fund is healthy while rival states’ funds are insolvent.
Washington unemployment insurance rates may be higher than other states, but the result is the most financially healthy fund among the competing states. Both North Carolina and South Carolina funds are insolvent and borrowing money from the federal government. Texas’ fund could be broke in two to three months. Rival states’ unemployment rates are likely to rise to meet their obligations.
• Washington has the world’s largest cluster of aerospace companies and workers. Other states’ resources are small compared with Washington’s.
• Boeing can take advantage of the experience Everett workers and suppliers have gained already putting the first 787s together. No other state’s work force has that experience.
• The state has improved its highway and mass transit infrastructure greatly since the 2003 competition, and more improvements are being built.
• Washington students consistently outperform students in other states on college readiness evaluation tests. Average ACT scores for Washington are 22.8 compared with South Carolina’s 19.8. Scholastic Aptitude Tests give Washington students a similar edge. Washington students average 531 scores on SAT math tests versus 496 in South Carolina and 506 in Texas.
• The state’s quality of life rankings surpass South Carolina’s. In the 2008 CNBC Top States for Business ranking, Washington rated ninth place. South Carolina was 39th. The 2009 Most Livable States Award rated Washington 18th versus South Carolina’s 49th.
John Gillie: 253-597-8663