One of the key ingredients in Missouri’s full-blast campaign to land Boeing’s 777X assembly line didn’t even exist six months ago. Now it’s on tap for a big expansion.
The Missouri Works tax credit program was created by lawmakers just this spring to help streamline the state’s massive menu of job-creation incentives. It combined four other programs and gave state economic development officials more flexibility to offer tax credits to smaller companies and high-tech employers.
Now just three months after its launch, Gov. Jay Nixon wants to give Missouri Works a big boost to land a really big prize.
Nixon is proposing the addition of a combined $150 million per year to Missouri Works and a related job-training program, the Build Missouri program for infrastructure and the state’s version of tax increment financing. Currently, the four programs put together max out at $173 million, and help finance a variety of projects around the state.
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Unlike some state tax credits, all four of these are based directly on job creation, and mostly refund withholding taxes paid by employers for new jobs. That gives the state some protection, Nixon points out. If Boeing creates no jobs, it gets no money.
“There has to be return on investment,” he said in conference call with reporters. “There has to be job creation.”
Still the tab to taxpayers could wind up quite large.
An analysis issued by Nixon’s office Tuesday projected that Boeing could receive as much as $1.7 billion in tax credits over the next 23 years, with a smaller number if it builds a smaller facility. To receive the full amount, the aerospace giant would need to create 8,000 jobs and pay an average wage of $95,000 a year.
As big as those incentive numbers are, they are dwarfed by the $8.7 billion package Washington state lawmakers approved for the plant last month, before Boeing’s Machinists union there rejected a contract. Other suitors — especially big states such as California and Texas — are expected to offer packages that number in the billions, too. And some will be able to offer money up front, something Missouri law prohibits.
Missouri officials note that comparing incentive packages across states is tricky, because each state has a different tax structure. And they’re confident that their package of $150 million a year will be competitive.
Unlike Washington’s package, for instance, Missouri’s is richest early on, while Boeing would be getting production off the ground. For a couple of years, the state projects it will be in the red on the deal. But then, at the six-year mark, the Missouri Works credit winds down and state subsidies fall by more than half.
The whole thing is designed to help get production up to speed as fast as possible, said a state economic development official who helped craft the proposal but wasn’t authorized to speak publicly about it.
“This is assuming that they need to be in production by 2017 to deliver planes by 2020,” he said. “It’s a very short ramp-up time.”
There are other ways Missouri is trying to sweeten the pot.
Nixon on Tuesday also announced a deal with St. Louis-area construction unions, who agreed to work three eight-hour shifts building the plant, should Boeing choose St. Louis, instead of the usual one or two shifts. That would reduce overtime costs and could slice two years off the construction schedule, Nixon said.
With unemployment among local construction workers still hovering around 25 percent, said Jeff Aboussie, executive secretary-treasurer of the St. Louis Building and Construction Trades Council, this deal makes a lot of sense.
“We’ve got plenty people available to work. What better way to get them back to work than shiftwork and completing a project in record time?” he said. “I’d think it would mean we could start making wings and fuselages quicker.”
It could also effectively lower the cost of building here, which is generally higher than some of the other, nonunion, locations Boeing is reportedly considering.
There are likely to be local incentives offered, too.
The state’ tax increment financing, or TIF, would require a similar local TIF by St. Louis County or whatever municipality the plant is in. And large manufacturers in recent years have typically received county-issued bonds that give a break on property taxes for firms that create new jobs.
St. Louis County officials said Tuesday they’re not yet able to give a figure for local incentives. St. Louis is likely to offer low-cost land it owns at Lambert-St. Louis International Airport, Mayor Francis Slay told the Post-Dispatch on Monday. And local community colleges are working on a job-training program.
The whole mix, Nixon said, should be enough to get the Show-Me state taken seriously in this high-stakes economic development bake-off, without breaking the state’s bank.
“Missouri can bring a lot to the table,” he said.
