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Originally published Tuesday, January 30, 2007 at 12:00 AM

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Aerospace tax break may rest on union neutrality

A powerful group of Democratic lawmakers on Monday introduced bills in the House and Senate that would tie new strings to a multi-billion-dollar...

Seattle Times staff reporters

OLYMPIA — A powerful group of Democratic lawmakers on Monday introduced bills in the House and Senate that would tie new strings to a multi-billion-dollar aerospace tax-incentive package approved four years ago.

Labor leaders are pushing the legislation, which would bar aerospace companies from collecting hundreds of millions in state tax breaks unless they agree to remain neutral toward union-organizing efforts.

Leaders of the Machinists union helped write the proposed legislation after several Boeing suppliers in the state fought off union campaigns to organize. Another spur to the proposal came when Boeing gave a contract for work traditionally done by Machinists to a nonunion company from North Carolina.

"We've set the bar on what wages and benefits and working conditions should be," said Mark Blondin, District 751 president of the International Association of Machinists (IAM). "We're not going to stand by and let our industry go out to the lowest bidder.

"If these companies are going to take state incentives, the taxpayers expect a fair family wage and decent health care," he said.

In 2003, as part of a bid to persuade Boeing to build its new 787 jetliner in the state, then-Gov. Gary Locke and the Legislature enacted a tax-incentive package worth more than $3 billion over 20 years. Those tax breaks were expanded last year.

Under the new legislation — Senate Bill 5700 and House Bill 1828 — aerospace companies would be disqualified from the tax breaks if they "choose to encourage or discourage unionization."

State's aerospace tax incentives

Luring the 787: The state Department of Revenue (DoR) estimated the total incentive package passed in 2003 to secure 787 final assembly would be worth about $3.2 billion to local aerospace companies — Boeing and its suppliers — over the entire 20-year life of the tax plan through 2024. The incentives included:

Business and Occupation (B&O) tax relief: Big reductions in the tax rate charged on profits to aerospace companies. Through the end of 2009, DoR projected the state's aerospace companies would benefit by about $280 million.

Research and development tax relief: Tax credit for R&D, including sales-tax exemption for computers and software used in development and B&O credit for tax paid on computer-equipment sales prior to 2003. Through the end of 2009, DoR projected aerospace companies would benefit by about $106 million.

Property-tax relief: B&O credit for state and local property taxes paid on new construction related to the 787. Through the end of 2009, DoR projected the state's aerospace companies would benefit by about $5.6 million.

Source: Dept. of Revenue

"There's no reason why we should reward employers in Washington state with gigantic tax breaks if they aren't willing to allow their employees to freely choose for themselves whether they want to unionize," said David Groves, spokesman for the Washington State Labor Council.

If someone suspected a company had violated that neutrality requirement, a complaint could be filed with the state Department of Revenue.

Repayment penalty

If violations were found, the state could require any claimed tax breaks to be repaid. The state could also impose civil penalties and bar the company from applying for the same tax break the following year.

Union lobbyists said the bill has been in the works for several months.

There's no indication yet whether Gov. Christine Gregoire or Democratic leaders will support the measure.

But nearly three dozen legislators — all but one of them Democrats — are sponsors, including Sen. Margarita Prentice of Renton, chairwoman of the powerful Senate Ways and Means Committee.

Support from the Machinists, which represents Boeing production workers, was key to passing the tax breaks and other measures aimed at keeping Boeing jobs in Washington.

"The Legislature really pulled out all the stops to try to encourage Boeing to stay in this state," said Larry Brown, lobbyist for the Machinists.

Brown said about 85 companies have benefited directly from the tax incentives, but that union membership has not kept pace.

"We're not against the growth of the aerospace industry. In fact, just the opposite is true. We just want to make sure that workers aren't left behind," he said.

3 companies

Blondin cited three examples that spurred the Machinists' legislative push: TMX Aerospace of Auburn; Toray Composites of Frederickson, Pierce County; and New Breed Logistics of North Carolina.

The first two are Boeing suppliers. New Breed will manage delivery of spare parts to the 787 assembly line in Everett.

Blondin said TMX fired one employee involved in an organizing effort last summer. The employee was later ruled to have been fired illegally and TMX paid him $50,000 in compensation, Blondin said, but his firing "killed the organizing drive."

Toray, Blondin said, citing filings with the National Labor Relations Board, spent $247,000 on consultants to give "anti-union" presentations to its employees, and additional money on lawyers.

And New Breed, which has opened a new facility close to the Boeing plant in Everett, will do 787 work at lower pay than is the norm for Machinists doing that spare-parts delivery work for current airplane programs.

TMX Vice President Jeff Luckasavage said he couldn't comment on the union's allegations but confirmed an employee was fired and paid compensation.

A Toray executive, who asked not to be identified because he was not authorized to speak, said the IAM failed twice with organizing efforts.

He said the company resisted the attempts to unionize simply by "presenting the facts to the employees, as we see it."

New Breed spokesman Joe Hauck, speaking from North Carolina, said he couldn't comment on the legislation because he hasn't seen it.

Chris Villiers, Boeing labor-relations spokesman, said the company was aware of the legislation but hadn't analyzed it.

Ralph Thomas: 360-943-9882 or

Dominc Gates:

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