Last week the General Assembly met in special session to consider incentives for the construction of the new Boeing 777-x in Missouri. To quickly recap, this plane has some innovative features moving aeronautics into the next generation, and Boeing came to Missouri seeking a proposal to locate the manufacturing in our state.
Of course, Boeing is mostly located in the St. Louis area. Our opportunity is to have as many as 8600 jobs for this part of our state and this number is much greater when we consider the support services and suppliers in Missouri who do, or will do, business with Boeing.
I had three primary questions about this bill: are we giving away the farm, so to speak; are the incentives time limited; and will this benefit all of Missouri? The answer to the first question is the incentive programs take advantage of existing programs and raises the caps to make room for this particular situation, so this is nothing new. Economic development is a competitive process, like it or not, the jobs follow the incentives. Of course, the philosophy is the new jobs will produce economic activity that would not otherwise exist. Yes, Boeing is already present in our state, but the current production at Boeing Defense will end at some point. Also, by making a serious offer we hope Boeing will keep us in mind as they move to the next generation of long range bombers.
Secondly, all the programs included in this bill have sunsets, so it is not an open-ended offer. Also, if Boeing does not choose Missouri, the special provisions we have included will expire in mid-2014.
Finally, Boeing does business all over our state. One supplier is as far west as Odessa, so yes expanded economic activity will benefit the state as a whole. These tend to be skilled jobs that pay good wages.
Following is a quick look at the programs affected under this new legislation provided by the bill sponsor Representative Ann Zerr:
Missouri Works: Boeing would need to create at least 2,000 full time jobs before the company would qualify for any benefits. (For example, if they only created 1,999 jobs, the company would not receive any benefits under this program.) If the company did reach 2,000 new jobs, Boeing would be able to retain the amount of withholding tax paid by its employees for up to 9% of the payroll for those new jobs for 5 or 6 years. The benefit for this program then ends for Boeing. Any current jobs that would be 'reassigned' as new jobs within the same or related facility are not to be counted as part of the 2,000 new job threshold.
BUILD (Business Use Incentives for Large-Scale Development) Program: Boeing could receive tax credits of up to 5% of payroll of the new jobs it creates through this project for up to 15 years, for the purpose of offsetting the cost of infrastructure development, facility construction and equipment purchases. The benefit for this program then ends for Boeing.
State TIF (Tax Increment Financing): A local TIF is required when a state TIF is put into place, so the St. Louis region will also have a large stake in the incentive package. Up to 50% of the state withholding tax paid by the new jobs created through this project are allowed to help pay debt service on bonds issued by a city or county for a portion of the project costs, primarily
infrastructure development for the project. The benefit is equal to about 2% of the payroll those new jobs create over a period of 23 years. It is required in the bill that this TIF benefit is only to be used specifically for this aerospace project.
Missouri Works Training: The amount of withholding tax paid by the workers in new jobs can be diverted to repay the company for the cost of training workers through community colleges and on-the-job training. The total of the benefit is based on up to 1.5% of new payroll for a period of 6 years. The benefit for this program then ends for Boeing.
Also, each of the programs have requirements for a positive state fiscal benefit, meaning that state general revenue paid to the state as a result of the new job creation and capital investment exceeds the amount provided in incentives. At the end of 10 years, the Department of Economic Development is required to examine whether the return on the state's investment is indeed greater than the expense. If it is not, DED is required to make adjustments in the benefits package to assure that by the end of the project the state will realize a positive fiscal return.
They are performance-based, meaning the benefit is not awarded to any company until certain criteria are met. The actual amount of the incentive the company may receive is based on the actual number of new jobs created and the wages of those jobs, the amount of new capital investment, and the cost of training workers.
Although the cap is a total of $150 million in any given year, the programs utilized here have different ends to the term of benefits. For Missouri Works and Works Training: 6 years each. For BUILD, 15 years. For State TIF, 23 years. The highest benefit period would be for the first 6 years, beginning in 2018, when all 4 programs apply. Then Missouri Works and Missouri Training program benefits end. After that, the BUILD program and TIF benefits apply until year 15 when the BUILD program benefit ends. From then on only the remaining program, State TIF, remains. By function of the criteria of the programs, the first 6 years would be the highest amount of benefits earned per year over the entire time period of the project.
On a yearly basis the Department of Economic Development will be required to submit a report to the General Assembly on the benefits the state has received and expects to receive, as well as the number of minorities who have received training through this program. In addition, the aerospace project must report yearly to the General Assembly and to the Department of Economic Development its employment outreach efforts to women and minorities.
The bill passed the General Assembly with an overwhelming majority and bipartisan support. The governor held a bill signing ceremony in the St. Louis area.
It is an honor to serve the 51st District in the Missouri House of Representatives. Each week I will issue a capitol report to keep you informed of activities in Jefferson City and Missouri. Any concerns or issues you might have are of great interest to me. I look forward to your input and thoughts, so please feel free to contact me at any time if you have questions, concerns, or ideas to improve our state government and the quality of life for all Missourians. My telephone number is 573-751-2204 or you may contact me by email at email@example.com. Thank you for working me to make Missouri a great place to live.