On the trail: Boeing effort rekindles memories of incentive packages' past
This article first appeared in the St. Louis Beacon. - Long before the Missouri General Assembly became paralyzed over the scope and size of tax credits, it wasn't unusual for the Show-Me State's political leaders to reach economic development accords.
One case occurred in 2008, when the Missouri General Assembly and then-Gov. Matt Blunt agreed on a roughly $240 million incentive package aimed at enticing Bombardier to build civilian airliners near Kansas City.Despite some misgivings from a bipartisan group of legislators, the bill managed to come together relatively quickly – and was hailed as one of the big accomplishments of that legislative session.
But celebratory feelings deflated months later when the Canadian-based company did not choose Missouri. It became a prime example of how consensus in the realm of economic development doesn’t always lead to definitive results.
Flashing forward to present day, it’s hard not to feel bits of déjà vu as Gov. Jay Nixon and key legislators are poised to haggle over an incentive-laced deal to get Boeing to build its 777X airplane in Missouri. That possibility arose after a machinist union based in the northwest United States rejected Boeing’s contract to build that plane in Washington state.
Nixon said in Chesterfield last week that his economic development team is working quickly on a deal that could get Boeing to steer that plane to Missouri. Later in the week, Nixon called a special session that's set to begin later this afternoon.
Nixon's special session call tasked lawmakers with expanding four economic development programs. The legislative work will have to be conducted quickly, since Boeing's request for proposal is due on Dec. 10.
No matter what legislators eventually decide, the competition for the 777X is expected to be fierce. Several states are competing for the work, and the Seattle Times reported that Washington State is willing to shell out billions in incentives to prevent Boeing from jumping to another state. It remains to be seen whether anything Missouri puts forward will trump other states. And, therefore, it's an open question whether Nixon and Missouri lawmakers are going through a replay of the Bombardier episode.
But Nixon says the effort to woo Boeing is not a replication of what occurred in 2008. He told reporters after his Chesterfield speech that “there’s a significant difference between Boeing and Bombardier.”
For one thing, Nixon noted that Boeing already has a large presence in the St. Louis region, with 15,000 employees. He added the Chicago-based company “has a significant investment in this region – and our workers have performed in a very competitive way for them.”
“And you have, in essence, a hometown company. You can trace the roots back to McDonnell Douglas,” said Nixon referring to the St. Louis-based company that merged with Boeing in the 1990s. “So that’s much different from trying to lure in a greenfield company that hadn’t done significant business here in or had a presence here. So I think it’s much different.”
But competition may not be the only obstacle. Some of the states angling for the Boeing contract -- such as Utah and South Carolina -- are so-called “right to work” states. Nixon, for his part, said that Missouri's organized workforce is "trained, safe and competitive." That, he said, provides Boeing with "certainty" that the state could do the job.
Still, even if Missouri is a prime contender, organized labor remains a potent presence in the St. Louis area. And they could bristle at any deal they see as unfavorable.
Before Nixon's special session announcement, both Sen. Eric Schmitt, R-Glendale, and House Speaker Tim Jones, R-Eureka, offered cautious outlooks to any special session for landing the 777X production.
Schmitt said last Tuesday that Boeing “is a great company” that the state is “pretty fortunate to have … in the first place.” And he added that an expansion of the production of the 777X would seem to be a very exciting opportunity.”
But Schmitt – chairman of a Senate committee that would likely have jurisdiction over any incentive package – said "we need to make sure that any proposal’s prudent and pretty carefully vetted.
"I hope that the governor includes the legislature in that process, rather than sort of simply asking us to approve any idea in a short window,” Schmitt said.
Indeed, some lawmakers observed that Nixon was asking a lot of legislators to make significant expansions of economic development programs in a short time frame. Sen. Ryan Silvey, R-Clay County,sent out a Tweet after Nixon's special session call that the governor "usually takes longer to vet a [highway] naming bill" than what's being asked of lawmakers.
Jones also joined other Republican legislators in noting that Nixon waged an all-out blitz to stop the override of a tax cut in the summer and fall. But now, he said, he was going full-tilt to piece together an incentive package aimed at luring one company to the state.
(Lt. Gov. Peter Kinder -- who was a high-profilesupporter of the Bombardier incentives -- made a similar point late last week. While Schmitt was not in the legislature in 2008, Jones voted for the Bombardier bill.)
“I love the Boeing Corporation. I want more Boeing jobs here. I want Boeing manufacturing here," Jones said. "But I’ll tell you, I think the way we can best bring jobs and opportunity to Missourians to provide broad-based tax relief like the Missouri House and Missouri Senate proposed – and to make Missouri a [right to work] state.’”
Of course, as Nixon and others noted, Missouri has to compete in order to have a chance to get Boeing's work. By early next year, it will be known if the state's effort was enough to make the difference.
While the Bombardier legislation passed relatively easily in 2008, it didn’t get to the finish line without bipartisan opposition.
This ad in the 2008 election cycle was run against Republican David Pearce, who ended up winning election to the western Missouri-based state Senate seat in a landslide. It was a colorful example of how Democrats used the Bombardier legislation to attack GOP candidates then.
On one side were conservative Republicans – such as then-Sen. Matt Bartle, R-Lee’s Summit – who railed against legislators “preferring” a French-Canadian company “over every other employer in the state of Missouri.”
But some key Democrats also came out against the Bombardier proposal. They contended the legislation rewarded a big company at the expense of health care and education. Included in that group was then state-Rep. Jeff Harris, a Columbia Democrat who contended that the bill “looked to me that it was a corporate tax giveaway.”(Harris has served as one of Nixon’s top advisers for the past five years.)
Democrats even used the Bombardier bill to attack Republican legislative candidates during the 2008 election cycle. The most memorable instance of this was an attack ad against then-state Rep. David Pearce, which featured a stereotypical Frenchman mocking the Warrensburg Republican. (Why French-speaking Quebec was conflated in that ad with France remains one of Missouri politics’ greatest mysteries.)
When asked whether the incentive package amounted to corporate welfare, Nixon said "all of our economic incentives are based on economic analysis that would benefit the economy of our state."
"If we can’t put together a proposal that I am confident – very confident – that will yield a significant economic gain for the state, then we wouldn't do it," Nixon said. "Spending these limited public resources in the way that they can be the most effective for us is important. We'll be making sure we've got a solid return before we make any commitments."
On the Trail, a weekly column, weaves together some of the intriguing threads from the world of Missouri politics.