Talk of the future resounds at Boeing S.C.

The Post & Courier
Brendan Kearney
May 13, 2013

Friday’s ceremony in North Charleston was supposed to be about “Phase 2” of Boeing’s local expansion — a $1.1 billion investment and 2,000 more jobs in exchange for a government incentives package that includes $120 million from the state.

And it was, as a series of top elected and Boeing officials, looking out over the complex from an observation deck, marveled at how the 787 Dreamliner plant has progressed since the first major government-backed expansion here in 2009, and what the next round will include.

Then Michael Luttig, Boeing’s general counsel and a part-time Kiawah Island resident, articulated what many outside the company have suspected about its long-term plans for the Lowcountry.

“As we lay the foundation for Phase 2, does anyone doubt there will be a Phase 3 and Phase 4 … ?” the former federal judge asked.

The politicians who followed him on the program certainly didn’t.

“Judge, I hope we’re here a couple years from now,” House Speaker Bobby Harrell said.

“We look forward to Phase 3, 4, 5 … however it goes,” Charleston County Council Chairman Teddie Pryor said to chuckles.

And just as Gov. Nikki Haley was moving to ceremonially sign the bond bill that will defray Boeing’s infrastructure costs over the next eight years, she sounded a final note on the theme.

“I have it on video that you said Phase 3, 4 and 5,” she said to Luttig. “So it’s not a matter of if, it’s a matter of when.”

“So I’ll send you that video often,” the governor, a vocal Boeing backer, joked.

The sunny ceremony came a day after the governor of Boeing’s historic home state, Washington, floated his own incentives proposal to the aerospace giant.

Late last month, Boeing CEO Jim McNerney praised the South Carolina operation and said the company had not yet decided where to build or source parts for the revamped version of the wide-body 777.

Those comments, combined with the company’s decision just days later to officially offer the re-engined, composite-winged 777X to customer airlines, set off speculation that Boeing might be looking beyond Everett, Wash., for 777X production or design.

Boeing now builds most 787s and all 777s in Everett.

Senator Boeing

It was in that context that Washington Gov. Jay Inslee appeared Thursday at the Boeing-sponsored Future of Flight Center in Everett and, according to Seattle-area media reports, proposed reviewing Boeing’s existing tax breaks, improving transportation arteries around its factories and maybe paying to train workers for Boeing, like South Carolina does.

“I think every state has to do what they can to get jobs, to keep companies and to be successful,” Haley said Friday when asked about her Pacific Northwest counterpart. “Washington’s doing what they have to do, we continue to just be a good partner with Boeing, show a strong relationship and keep our workforce ready.”

State Sen. Hugh Leatherman, who helped broker the first incentives deal four years ago and has called himself “Senator Boeing,” said he read that Inslee didn’t make a money pledge like his state has.

“So he’s not serious,” the Florence Republican and Senate finance chairman said.

Haley would not say whether the state planned to offer additional incentives to land some part of the 777X, simply pledging to “keep talking” to Boeing.

Defending incentives

Meanwhile, an economic development delegation from the Palmetto State, including a handful of people from the Charleston area, happened to be in the Seattle area this week, Claire Gibbons of the Charleston Regional Development Alliance said.

The entourage was out West prospecting for Boeing suppliers and other aerospace companies and trying to “raise the profile of Charleston as an aviation hub,” Gibbons said.

Back on the observation deck, Haley offered a spirited defense of the state’s regular use of incentives to lure or retain businesses. Critics of corporate incentives argue that governments should invest in public education or social services instead of profitable companies such as Boeing.

“When we do incentives, we only do it for infrastructure,” she said. “It is only site-ready. We make sure that we give them the proper site — water, sewer, everything built — and we make sure that everyone they hire, they only get the credits after they hire the people.”

She said the system offers “true accountability.”

“We don’t throw additional money,” she said. “We don’t have additional money to throw. But it is important for us to always remember that it is government’s role to take care of infrastructure so companies be at home.”

Back in the air

When Boeing announced in 2009 that North Charleston would become the site of its first commercial aircraft assembly plant outside Washington, the company committed to invest $750 million and create 3,800 jobs in exchange for incentives The Post and Courier valued at as much as $900 million.

Having surpassed those goals — Boeing has invested more than $1 billion and employs more than 6,000 people in North Charleston — the company came back to the state this year to help finance its future expansion plans around Charleston International Airport.

The Legislature fast-tracked the incentives bill, and Haley signed it into law April 23. In addition to the state bond money, Charleston County is now one vote away from approving its part of the package.

It is an “unbelievably euphoric time for Boeing” and its 787 program, according to its top local executive Jack Jones.

The Federal Aviation Administration grounded the 787 in mid-January after smoky battery malfunctions on a pair of in-service planes. No one has been able to identify the cause of the overheating incidents, but Boeing devised a multi-part fix its executives have called comprehensive, and the FAA officially accepted it last month.

The high-tech plane has returned to the air, and deliveries likely will resume soon.

Six mostly finished 787s sat on the Boeing South Carolina flight line Friday. Luttig and Jones said there are six more jets moving through the massive final-assembly factory.

Boeing announced this week that it is now making seven 787s per month between its North Charleston and Everett factories, and is on track to be making 10 per month by the end of the year.

Meanwhile, the expansion of the local complex is well underway, including add-ons to the aft- and mid-body factories and office-upfitting on the fourth floor of the centerpiece final-assembly facility.

Luttig, described by Jones as the company’s “closer,” claimed to be as excited Friday “as I was four years ago.”

“Today we stand at the threshold of a new stage of our partnership together,” Luttig said. “It is a proud day for Boeing, it is a proud day for South Carolina, it is a proud day for Boeing South Carolina.”

The Boeing incentives deal

Boeing’s pledge: The company will invest $1.1 billion and hire 2,000 more workers in South Carolina over the next eight years.

State help: The S.C. government agreed to contribute $120 million in public money, raised by a bond offering, for infrastructure purposes, such as acquiring land, preparing sites for development and road work.

County tax relief: Charleston County Council is one vote away from adding Boeing’s expansion to the company’s preexisting “fee-in-lieu of taxes” arrangement. That effectively allows the company to pay less than a fifth of what its tax burden would otherwise be on its buildings, land and machinery over the next 30 years. Instead of the 10.5 percent industrial assessment rate, Boeing will pay 4 percent, and get half of it back through what’s called a special source revenue credit. The expansion also qualifies Boeing to claim $2,500 in state job tax credits per net new employee rather than the usual $1,500 per employee.

Boeing’s plans: The company is already expanding its local aft- and mid-fuselage factories and component paint shop and upfitting office space inside its final assembly factory. Boeing has bought the former S.C. Research Authority buildings and agreed to buy 320 more acres across International Boulevard from its complex. Legislators have said perhaps half of the 2,000 promised jobs could be information technology positions with the rest being engineers and production workers.

Reach Brendan Kearney at 937-5906 and follow him on Twitter at @kearney_ brendan.

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