N.C. proposed up to $683 million in incentives for Boeing
02/05/2014 11:45 AM
02/05/2014 10:51 PM
N.C. Gov. Pat McCrory scheduled a quiet meeting with Boeing Co. officials at an Arizona hotel last November, as North Carolina’s frenetic five-week quest for a new jetliner plant kicked into high gear.
“We will do ANYTHING we can to be helpful with your site selection process,” an aide wrote in summarizing McCrory’s message.
State officials considered offering up to $2.5 billion in state and local tax incentives to lure the jet maker, but ultimately made a top bid of $683 million, according to documents obtained by the Observer through a public records request.
The documents show the state willing to craft a sizable tax incentives package for sites in Charlotte, Greensboro and Kinston. The proposed incentives were far larger than those for other recent Charlotte projects, such as the $22 million that lured Chiquita in 2011 or the $27 million announced in December for Electrolux to expand its North American headquarters.
Still, the bid was ultimately dwarfed by offers from other states. And the effort ended up being moot when Boeing officials decided in early January to build the new 777X jetliner plant in Washington state after settling a labor dispute with the company’s biggest union.
The records also show apparent confusion over who was running Charlotte’s airport as the state was preparing its bids. Aviation director Jerry Orr had been pushed out earlier in the year after a battle over who should run the airport; Orr ended up helping with site selection anyway.
Emails between economic development staffers indicate local officials weren’t immediately comfortable with the size of the proposed package.
“I am a bit concerned that they don’t seem too excited about working to land this one,” Jeff Edge, of the Charlotte Chamber, wrote after a December closed-session meeting with Mecklenburg County commissioners to discuss the project.
“They seem to think that they shouldn’t have to put any incentives on the table for any deal. The numbers that this one will require will blow their mind as compared to others they have done.”
According to the records, North Carolina’s hunt for the Boeing plant began when a consultant named Phil Musser connected Commerce Department officials with the aerospace company. Musser, the former executive director of the Republican Governors Association, had a long history with McCrory and was a “political dork,” according to Jonathan Felts, an aide to McCrory at the time.
After a call with Boeing officials, McCrory agreed to an in-person session at the Phoenician Hotel in Arizona, where the Republican Governors Association was holding its annual meeting. The governor initially preferred a 3:30 p.m. time slot, but had to adjust when Musser said the Boeing team was meeting with another governor at that time.
After the meeting, Felts summarized the exchange. Boeing needed a strong labor pool, speed, a big runway and although they weren’t focused on financial incentives “they are not opposed to ‘love.’ ”
For his part, McCrory emphasized the state’s community college system and a labor pool packed with military veterans. McCrory “did say there would not be a lot of cash up front but they didn’t seem turned off,” Felts wrote. In summing up what Boeing wanted, he added: “Good labor force and, without saying this blatantly, one that is free of unions.”
Felts also suggested the state send Boeing thank-you notes, which McCrory did. “Look forward to next steps!” reads one handwritten postscript.
North Carolina and other states in the running received a request for proposals on Friday, Nov. 22, with a due date of Dec. 10.
North Carolina officials got to work on their bid, code-named “Project New Horizon.”
On Nov. 19, a commerce official, Rod Forsythe, said there were only three candidates in the state: the Global TransPark in Kinston, Piedmont Triad International Airport in Greensboro and Raleigh Durham International Airport. But he noted Raleigh’s site might be too small and the presence of a competitor, Airbus, at Global TransPark could be a turn-off.
On the same day, however, Forsythe sent an email to Orr, the Charlotte airport’s former aviation director, asking about available sites.
Interim deputy aviation director Jack Christine replied. “Jerry is out of the office for the foreseeable future,” he wrote.
But three days later, Forsythe wrote to say he was still working with Orr.
“I spoke again with Jerry Orr, Director at CLT and he is looking over his maps in order to provide a recommendation to meet the 400 acre requirement,” he wrote.
Orr could not be reached Wednesday. A spokeswoman for Charlotte Douglas said airport officials don’t believe there was any confusion.
As the project moved forward, Charlotte emerged as one of the three candidates, and Raleigh was dropped.
State officials prepared an incentives package that would have included a mix of job training programs, local tax rebates, refunds on building materials, site infrastructure development, machinery and equipment being exempted from sales taxes and possibly aerospace manufacturing tax credits.
An early spreadsheet summarizing the incentives showed North Carolina considered packages of $780 million for Charlotte, $882 million for Greensboro and $2.5 billion for Kinston.
But a final spreadsheet from Dec. 9 indicates the totals dropped to $632 million for Charlotte, $650 million for Greensboro and $683 million for Kinston.
The main difference: The final proposal didn’t include a possible tax credit for the aerospace industry that would have needed legislative approval. Under that proposal, Kinston would have been eligible for the biggest credit of $1.8 billion – compared with $211 million for Greensboro and $127 million for Charlotte.
The final bid to Boeing noted that the state had passed a tax reform law in July that reduced the corporate tax rate from 6.9 percent to 6 percent in 2014 and 5 percent in 2015. The state would also consider altering an existing statute that could change the company’s tax liability, according to the proposal.
Throughout the process, N.C. officials were aware they faced stiff competition. In a Dec. 8 email, Forsythe listed the possible rivals: Alabama, California, Missouri, Mississippi, Ohio, Texas and Virginia. South Carolina was not in the running, he wrote, because the state already had a high labor demand for its existing Boeing 787 plant in North Charleston.
The N.C. governor’s office also worked with officials in the legislature and at the local level, the records show.
Edge, who heads the Charlotte Chamber’s economic team, briefed Mecklenburg commissioners in a closed session and talked with city officials. He said he was trying to emphasize that the Boeing proposal was “unprecedented,” and would require an incentives package “commensurate with the size of the project.”
In the end, Charlotte proposed giving Boeing a site of more than 400 acres just south of the airport’s cargo facilities. The city owns 304 acres of the site, and was prepared to buy the rest and relocate 27 private buildings on the land.
Local officials emphasized Charlotte’s strengths, chief among them the airport’s new Norfolk Southern rail freight yard, offering easy access to shipping. And they emphasized the city’s other benefits.
“Charlotte also offers Boeing management and potential relocating employees a quality of life that is not only affordable but unparalleled,” wrote Bob Morgan, the Chamber’s president, extolling Charlotte’s low housing costs, sports scene, arts world and restaurant selection.
As the deadline approached, officials raced to proofread the submission, finding that Transportation Secretary Tony Tata’s name had been misspelled “Tada.” At 5:49 p.m. on Dec. 10, an official sent an email saying the proposal had been forwarded electronically to Boeing and that paper documents would be hand delivered to a FedEx office.
Ultimately, some 54 sites in 22 states vied to win the 777X plant, with many offering lucrative incentive deals.
Washington lawmakers approved $8.7 billion in tax incentives over 16 years if Boeing agreed to build the plane there. Missouri offered a $3.5 billion package. News reports revealed that sites in Missouri and Illinois made Boeing’s short list.
“We certainly felt like we made a strong offer,” N.C. Commerce Department spokesman Josh Ellis said in an interview. “But we did expect to have strong competition.”
On Dec. 20, North Carolina received the bad news. Forsythe alerted N.C. Commerce Secretary Sharon Decker and other commerce department officials in an email:
“I have received a call from a Boeing representative indicating that neither of our three locations are in the continued search for the 777X.” Staff writer Eric Frazier contributed.
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