News: CJ Exclusives

State Offered Boeing $534M at GTP

CJ records request yields details on incentive offerings, Boeing decision

North Carolina offered Boeing more than $534 million — “probably” the state’s largest incentives package ever tailored to a company, according to state officials — if the aircraft manufacturer would build its new 7E7 jetliner at the Global TransPark in Kinston.

Information about the state’s 20-year proposal to Boeing was released Monday night by the N.C. Commerce Department after Carolina Journal prepared to file a lawsuit and other newspapers requested documents about the incentives package. Boeing selected Everett, Wash., for its new plant two months ago.

Included in North Carolina’s incentives were 539 acres of land at the GTP, valued at $10.8 million, and $280 million in tax-exempt bonds for a building provided by the state and “a third party.” Among other unusual inducements were $20 million for the University of North Carolina system to provide a masters-level curriculum for Boeing workers and $40 million for workforce training, including a new high school that would specialize in aviation training. Other significant incentives were a $20 million tax grant by Lenoir County, a $42 million tax credit for machinery and equipment, a $28 million grant for job development investment, and a $45 million grant for a property-tax exemption.

Boeing’s $900 million plant at the GTP would have created 1,200 jobs, and its suppliers would have employed about 500, said Secretary of Commerce Jim Fain.

North Carolina’s proposal did not constitute a commitment, state officials said, but rather a basis for a final negotiation of terms. Those terms would be subject to final approval of the governor as well as the review and approval of the General Assembly, local government jurisdictions, and various other board and authorities. To get that approval, Gov. Mike Easley said on Dec. 12, he would call legislators back to Raleigh for a special session if Boeing chose the GTP.

“I have asked Boeing officials what it will take to bring the 7E7 to our state,” Easley said. “If it makes sense for North Carolina, we are ready to make it happen.”

The state assembled a team of about 100 people from different agencies, local jurisdictions, regional and local economic development agencies, and the private sector to develop the proposals for Boeing.

Fain said the Boeing proposal “was as large and complex a program as we’ve ever worked on. From what I know, this is probably the largest, or among the largest, incentives proposals we’ve ever offered in a state and local effort.

“But you’ve got to compare apples to apples,” he said about the half-billion-dollar price tag. “This is 20 years of support.”

Many states entered the competition for the Boeing plant after the company announced last June that it planned to build the 7E7 Dreamliner aircraft. Many of the states, including North Carolina, raised the amount and value of incentives in each new round of bidding for the project.

But North Carolina officials thought they had an edge. “North Carolina was uniquely qualified for this project” because the GTP was “shovel-ready,” Fain said.

The Commerce Department worked with the governor’s office to prepare the incentives package, called “Project Olympus,” over a period of months, starting in early summer. “The governor talked with project leaders regularly,” Fain said.

At first, the state’s response to Boeing was not incentives, Fain said, but rather “site-focused.”

After winnowing a list of possible sites in North Carolina offered by the Commerce Department, Boeing settled on the GTP as a finalist in its nationwide search. Boeing officials had visited North Carolina “five or six” times during its search, Fain said.

The state offered a series of escalating proposals during that time, the last a letter Dec. 14 from Easley to Henry Stonecipher, president and CEO of Boeing, and Lewis Platt, chairman of Boeing’s Board of Directors.

“I believe that you and the Board will agree with me that there is a compelling case to locate the project in Kinston, North Carolina. We believe we offer the lowest-cost site and we have a flexible workforce that will allow the project to meet the competitive demands of the Boeing Company and its customers,” Easley wrote.

“Throughout the process I have asked Mike Bair [a Boeing senior vice president] what the Boeing Company requires to locate the 7E7 project in North Carolina. He informed me some time ago that the Board of Directors will have final approval on the site location decision.

“I want the Board to know that I am prepared to take the necessary steps to meet those requirements if it makes sense for both Boeing and the State of North Carolina. As your discussions ensue, you may identify what those requirements are. I ask you to contact us and we will respond immediately. Our Commerce Secretary Jim Fain and my Senior Fiscal Policy Advisor, Dan Gerlach, are available twenty-four/seven. If the Board approves the authority to offer, we know that meeting a time schedule will be incredibly important.”

But Everett, Wash., where Boeing builds its entire wide-body line of 747s, 767s, and 777s aircraft, won the 7E7 project in the end with a total incentives package of $3.2 billion.

Although it had been widely reported that the GTP was on a “short list” of contenders for the project, state officials had “no way of knowing how many other states were competing against North Carolina,” Fain said.

Fain said that state officials learned some lessons in their quest for Boeing and that they were heartened “this very discerning global enterprise found the GTP to be a very attractive site.” The amount of interest Boeing showed for the GTP will generate a lot of “public relations exposure” that will attract other projects to site, he said.

Some of the other incentives included in the package were $3 million for road improvements, $2 million for site preparation, $10 million for water-sewer improvements, $1 million for a day-care facility for Boeing employees, $28 million for transportation infrastructure, $20 million to upgrade airport operations and services, a $17 million credit in real property improvements, and $8 million for a sales tax refund on materials.

Carolina Journal’s attempt to gain access to records on the Boeing-GTP incentives began Dec. 19 with a phone call to the Commerce Department’s Linda Weiner, assistant secretary for communications and external affairs. Weiner said that some of the information would be made available, as allowed under North Carolina’s Public Records Law, after the Christmas and New Year’s holidays. She also said that much of the records were “confidential,” such as trade secrets pertaining to Boeing, that were exempt from the public records law.

Carolina Journal followed up its telephone call with a letter on Dec. 29 again requesting the information. Weiner responded with a letter. “As you and I discussed during our phone conversation of Dec. 19, 2003, the records you have requested relate to an economic development project involving private industry. Such records often contain confidential information protected from public disclosure under various provisions of the North Carolina Public Records Act,” she wrote. “As you know from our conversation, the NC Department of Commerce is currently in the process of reviewing and evaluating records relating to this project to identify those records, which may be released consistent with the confidentiality provisions of the Act. Now that we have your records request, we will contact you as soon as this records review process is completed.”

After having failed to hear from the Commerce Department as of early February, Carolina Journal enlisted the help of a law firm to gain access to the records. A legal complaint accompanied by a letter was delivered to Fain on Feb. 5. Don Hobart, a Commerce Department lawyer, responded that he hoped the redacted records could be made available Feb. 11 or Feb. 12. But first, Commerce officials, he said, needed to study the records to determine which ones should be kept confidential because they contained Boeing trade secrets or might compromise the state’s economic development efforts.

Finally, Commerce officials allowed Carolina Journal and a reporter from The Free Press of Kinston to review some of the public records on Feb. 13. The second installment of the records was made available to all media on Feb. 16.

Richard Wagner is the editor of Carolina Journal.