Boeing: Will 7E7 leading edge work invoke tax?


Much trumpeting about Boeing's announcement that, if Boeing decides to build the 7E7, their Tulsa facility will get work building leading edge parts for wings, creating about 500 jobs. (Here's the Whirled's front page, story continued here.)

It's good news, if it happens, although a key qualification lurks at the end of the story:

Asked if Boeing's commitment to Tulsa meant the 7E7 was a "go," [Boeing spokesman Lori] Gunter said such an assumption was "premature."

"These are the decisions that have been made," Gunter said. "The board will look at the market interest and the business case we have. There are still a lot of decisions to be made about the airplane. It's too early."

The story reports that elected officials are claiming that this is another positive result of the Vision 2025 tax, which goes into effect January 1. At the same time, they say that the $350 million incentive package that was on the Vision 2025 ballot is only for the final assembly facility, if we get it. Still, officials are quoted as saying that Tulsa's willingness to tax themselves is why Boeing is bringing the jobs here.

I'm assuming that Boeing makes rational business decisions based on maximizing shareholder value, not based on sentimental reasons. Steve Hendrickson, a local Boeing exec, gave these reasons for the work coming to Tulsa:

"We do comparable work here in Tulsa on the (Boeing) 737, 777 and 747," Hendrickson said. "We got this work because of our hard-working and talented employees, the quality of the work we do on existing programs and the affordability" of Tulsa-produced components, he said.

Good workers, relatively low wages, and experience in working on comparable components. Nothing about financial incentives.

The only way the Vision 2025 tax would have influenced Boeing's decision is if Boeing had some assurances that some of that money would come their way.
And in fact, it could.

Here is the relevant text from the first item on the September 9th ballot, for a 4/10 cent sales tax for Boeing:

... such sales tax commencing on the first day of the calendar quarter following execution of an agreement by the Board of County Commissioners with Boeing or an affiliate to locate a new 7E7 aircraft manufacturing/assembly facility in Tulsa County, Oklahoma, and continuing thereafter for thirteen (13) years from the date of commencement of such tax?

Note that the phrase "final assembly" doesn't appear, nor is there a minimum number of jobs or any other stipulation.

Since we don't have a 7E7 facility at all right now, any facility to build 7E7 parts would qualify as new under that language. Boeing would not necessarily get all $350 million, but the full 4/10% tax would kick in. Boeing and the County would just have to sign a piece of paper saying they're bringing these 7E7 leading edge assembly jobs to Tulsa.

I can see the Commissioners negotiating with Boeing -- if you'll sign such a piece of paper, we'll give you some proportion of the full amount you were going to get if Tulsa got the final assembly plant and 800-1200 jobs. This would be a great deal for the County Commissioners: They get a tax that will raise at least $400 million, probably closer to $500 million, but they might only have to give away, say, $200 million; the rest they can use for any project that comes under the broad heading of "promoting economic development".

What might that be used for? Bob Dick said back in 2000 that he'd like to condemn the neighborhood west of the Fairgrounds and expand the Fairgrounds all the way to Harvard. At the time he said he didn't think the taxpayers would give him the money to do that, but this kind of deal would give him all the money he would need. (And yes, the County can condemn land within the city limits of Tulsa. That's how they built the jail.)

I think this is a consolation prize and more likely to be an indication that we won't get the final assembly plant than that they will. Boeing's expected to announce their site selection on December 16.

About this Entry

This page contains a single entry by Michael Bates published on November 22, 2003 12:05 AM.

Web world roundup was the previous entry in this blog.

City names Vision oversight committees is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.



Subscribe to feed Subscribe to this blog's feed:
[What is this?]