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Stunning Deal Reached to Prevent Boeing’s Flight – Governor, Lawmakers Return Thursday for Special Session

As Boeing Co. officials watch approvingly from a corner of the conference room, Gov. Jay Inslee announces a deal he says will stop the aircraft maker's flight to South Carolina.

As Boeing Co. officials watch approvingly from a corner of the conference room, Gov. Jay Inslee announces a deal he says will stop the aircraft maker’s flight to South Carolina.

OLYMPIA, Nov. 6.—Jaws dropped at the statehouse Tuesday as Gov. Jay Inslee, surrounded by lawmakers, union leaders and officials of the Boeing Co., announced a deal to stop the aircraft maker’s flight from Washington and send lawmakers scurrying back to their desks for a special session that begins Thursday.

Boeing gets tax breaks worth $8.7 billion through 2040, and a promise that sometime soon lawmakers will pass a $10 billion transportation tax package that includes a gas-tax hike — perhaps within the next few days. The state will put aircraft-factory permits on the fast track. And it vows to develop a “balanced, practical” plan for more stringent water-quality standards contemplated by the Department of Ecology – perhaps quelling a big fear for industry in this state.

And in return? The state lands the new factory for the 777X, the next-generation airliner on which Boeing stakes its hopes, and the more than 50,000 jobs and billions of dollars in economic benefit that come with it. As Boeing CEO Ray Conner watched approvingly from a corner of the conference room, Inslee said that if lawmakers pass the transportation tax and the tax-break package, the state has a deal.

“The Boeing Co., in clear, unequivocal concrete terms, says that if these two things happen, that we’re going to get the largest aerospace economic expansion of my lifetime,” Inslee said. “And it is going to happen when we pass this legislative package and when this deal is finalized by the members. And you can be quite assured I wouldn’t say that if it was not the case.”

It was the best-kept secret in town. Smart money had been on South Carolina as the site for the new Boeing plant. A special session on transportation seemed a longshot. A deal between Boeing and the Machinists Union seemed iffy. Washington business leaders and political figures had been preparing themselves for the worst. But while the gloom was setting in, it seems there was plenty of talking in the backrooms. At midday Tuesday the Machinists announced a new pact that offers Boeing significant concessions on health and retirement benefits, though it still must be approved by members. And the legislative leaders who followed Inslee to the mike a few hours later in Olympia pledged their support for the deal. Although key details on the transportation package have yet to be negotiated, Tuesday’s deal may just change everything.

Everything Falls Into Place

Boeing's new 777X.

Boeing’s new 777X.

For the last year, business leaders and union officials have been trying to entice Boeing to stay, while corporate officials have kept their cards close to their chests. The Inslee Administration appeared to snub Boeing last session when it came to the Legislature with four requests. The jetmaker sought expansion of a limited workers-comp settlement program authorized by the Legislature in 2011 and urged passage of a transportation package to finance new road projects and reconstruction. It also wanted the state to conduct scientific studies that would slow down the Department of Ecology’s rush to adopt new standards for industrial and municipal water discharges. Only one item on Boeing’s agenda made it through, a handful of relatively modest education reforms. Within Olympia’s business community it was widely understood that Boeing was gearing up for a renewed fight on workers-comp reform during the 2014 session, though it was unclear what leverage it would have if the plant announcement was made before the end of the year.

Now it appears Boeing has backed off on workers comp. Inslee said Tuesday it is not part of the deal. It also appears the transportation deal is half-cooked. Lawmakers said they have the framework of a proposal but not a proposal itself. House Speaker Frank Chopp, D-Seattle, and Senate Majority Leader Rodney Tom, D-Medina, said they will support efforts to hammer out an agreement once lawmakers return Thursday. Tom, who stood alongside Inslee at the news conference, promised the votes of the Senate Majority Coalition Caucus. “We are going to work very hard,” he said. “It is in the interest of all parties to move forward.”

Transportation is Tricky

Passing a transportation package won’t be easy. Though a $10 billion plan passed the House this spring, the proposal for a 10-cent-a-gallon gas tax increase enjoyed only tepid support from the majority Democrats. They didn’t get around to it until the 151st day of the 153-day session. In the Senate it was a nonstarter. Part of the reason was that it included funding for the controversial Columbia River Crossing, and while Inslee and legislative leaders say that is off the table now, there are other big issues that remain.

One is the project list — House Republicans and the Senate majority coalition complained last session that the proposal didn’t do enough to upgrade existing highways. And they are insisting on reforms to accompany the tax increase – measures that aim to reduce the cost of road-construction projects and prevent public embarrassments like the cracked pontoons on the new Highway 520 bridge across Lake Washington that will cost $80 million to fix. After a statewide 10-city “listening tour” on transportation during September and October, Senate leaders say they are ready to move forward. Indeed, they have been negotiating behind closed doors with House transportation leads and the governor’s office during the last two weeks. But they are still short of a final proposal. So how fast can they get it done?

In a statement released shortly after the news conference, Tom and Senate Republican Leader Mark Schoesler, R-Ritzville, suggested that some or all of the transportation plan might not be wrapped up during the special session. They said Boeing officials and union leaders are fine with giving lawmakers more time to finish their work. “They recognize, as we do, that this needs to be a two-step process. The second step will be the state’s part of the infrastructure, meaning roads and transit,” Tom said in the statement.

Schoesler said, “It’ll take time to agree on transportation reforms, just as it took time for a labor agreement to come together and lead to this special session. The Legislature needs to do what it can now, and take a reasoned approach toward the rest.”

Inslee Would Light Fire

Already one might detect the seeds of disagreement. At the news conference Tuesday, Inslee said he expects lawmakers to put together a transportation deal in short order. “We need a transportation package in order to secure this aerospace future for the state of Washington. We will talk about timing a little bit later. But I do think it is important for us to move quickly.”

Other elements may not be so tough. The tax-break plan is essentially an extension of existing tax breaks that are due to expire in 2024, keeping them in place during the expected production span of the 777X.

The deal on water-quality standards, meanwhile, appears a bit hazy at this point, but more may be revealed at a news conference set for Wednesday by the Department of Ecology. The matter is known around the Capitol as the “fish-consumption” issue because the state is under pressure from Indian tribes and environmental groups to adopt an estimate of human fish consumption that is dramatically higher than the state’s current standard. Water-quality regulations are based on the estimate, and the higher the estimate, the cleaner that industrial and municipal wastewater discharges have to be. The hitch is that if the state adopts an estimate as stringent as the Department of Ecology has suggested, it will force the state to adopt regulations so stringent that no current technology can meet them.

“We are going to have a process to develop the fish-consumption rule that will be consistent with what is important to aerospace and the environment,” Inslee promised. “Which is to have a rule that respects the science in this, that complies with the [federal] Clean Water Act, and that assures we can continue aerospace work in our state. And Boeing is appreciative of that effort and I believe it knows that we are on the right track.”

Exactly what that means is unclear, though some have suggested Washington might adopt standards imposed by the state of Oregon in 2011 – currently the highest in the country – rather than the even higher water-quality standards suggested by the Department of Ecology early in the rulemaking process. Inslee said the state will not embrace a proposal from Boeing last session that would have delayed the imposition of new standards until new scientific studies could be completed. “We have stepped in and stepped up to the plate to design a system that will give us a rule that will work for Boeing and work for aerospace and be defensible in court,” Inslee said. He noted that no legislative action is required on the fish-consumption issue – the rulemaking process is a job for Ecology.

What About a Vote?

One other big question lawmakers will have to resolve is whether to require a public vote on the transportation package. Last session House Republicans and members of the Majority Coalition Caucus suggested that the public ought to be given a chance to ratify any gas-tax hike. If lawmakers pass a tax package before the end of the year, they would be able to refer the matter for a vote in a special election over the winter or spring, rather than waiting for the November 2014 general election. But a legislative referendum faces strong opposition from the business and labor coalition that is pressing the case for a transportation package. The governor and legislative Democrats maintain the Legislature should pass the package without a public vote, thus sewing up the deal quickly.

Tom didn’t address that issue at the news conference. But he said any transportation deal will have to pass muster with the public because any gas-tax increase is likely to encounter resistance in the form of a rollback referendum or initiative. “We need to build a package that the voters can look at and say some of these anomalies in the current system, whether it is pontoons that don’t float, bridges that don’t meet – that we have corrected those errors, we have built the reforms into it that provide value and they can see the same value that we do when they take that vote.”

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