Airbus v. Boeing?


In October of 2009, South Carolina celebrated Boeing’s decision to locate a production line in North Charleston and bring an untold number of jobs. This year, it’s Alabama’s turn. Airbus, Boeing’s European competitor, has chosen Mobile for its North American headquarters.

It’s worth asking, then, what kind of “deal” Alabama got on its investment, and whether it compares favorably to the “deal” South Carolina got in luring Boeing.

Despite all the fanfare Boeing’s decision prompted in South Carolina, the Policy Council has long criticized our state lawmakers for (a) showering the multibillion-dollar company with tax favors, loans, and grants, and (b) for keeping the whole thing as secretive as possible. Even now, more than two years after the announcement, taxpayers aren’t permitted to know what they’ve paid.

In turn, a variety of observers have criticized SCPC for our stance on Boeing’s incentive package. The company’s bringing “thousands” of jobs, we’re told, and that’s worth virtually any price. (How many jobs are at the North Charleston plant now? Neither government nor Boeing officials will say. Who’s filling them: South Carolina or out-of-state workers? Again, we can’t get an answer.)

In 2010, The Nerve conservatively estimated Boeing’s incentive package to be around $500 million.

That included $270 million in bonds (or $360 million, accounting for interest over fifteen years); $75 million in tax credits (assuming the company creates the promised 6,000 jobs); an estimated $34 million in worker training; an unknown amount in sales tax exemptions on construction materials, computer equipment, and fuel; and another $5 million for site preparation. And after the original deal, the Budget and Control Board also provided the aerospace giant with a bridge loan of $102 million.

And that’s just state incentives. If we’re counting local incentives, we’d have to include a fee-in-lieu-of-taxes agreement that could save the company as much as $71 million in property taxes.

These numbers are hard to gauge, in large part because of the secrecy surrounding the deal. In any case, the Charleston Post & Courier estimated Boeing’s total incentive package to be around $900 million.

So – how does that compare with the Alabama-Airbus deal?

An Associated Press report published in the Montgomery Advertiser reveals that Airbus is receiving $158 million in incentives. Now, the report says that number doesn’t include “tax breaks on sales, use, income and property taxes,” but it does include “bond expenses, site preparation, road improvements, building expenses and worker training” from both state and local sources.

It’s virtually impossible to make an accurate comparison here (for example, does the AP’s figure include interest on the bonds? And how many years’ worth of worker training does the figure include?). But, if we excluded tax favors from Boeing’s incentives deal, a very rough comparison would suggest that, whereas Alabama paid $158 million to get Airbus, South Carolina paid around $400 million to get Boeing.

Again, we don’t know the details of the Alabama deal (and indeed, two and a half years on, we still don’t know the details of the South Carolina deal). Nor are we suggesting that it’s okay to dole out taxpayer dollars to specific private companies as long as it’s a “good investment.” Still, if we were allowed, hypothetically, to distinguish between good and bad incentives deals, we would conclude tentatively that Alabama got a steal of a deal, and South Carolina got taken to the cleaners.

But what’s a few hundred million? Boeing brought thousands and thousands of jobs, right? For the sake of South Carolina’s taxpayers, we sure hope so.

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