BUSINESS WATCH-It may be a longshot – but it’s worth the shot.
The venerable Boeing aircraft assembly plant in Long Beach apparently is in the running to build the new generation 777X jetliner. Just the prospect of this development is astonishing, given that the plant had recently rolled off the line the final C-17 built for the US Air Force. The company had said the assembly line would be shuttered for good in 2015.
That could all change with the recent announcement that the Machinists Union in Washington had rejected a tentative labor agreement that would have brought the work to the Seattle area.
Other states reported in contention include Alabama, South Carolina, and Utah.
California faces daunting obstacles to land a major new manufacturing project, one that the machinists union had estimated would bring 10,000 direct and 10,000 indirect industry jobs to the Puget Sound.
California holds a major advantage with our highly skilled and experienced workforce, especially our deep bench of engineers. Long Beach is also centrally located in a web of transportation infrastructure, including the largest port complex in the country.
On the other hand, the cost of doing business in California is notoriously high, contributing to a steady exodus of manufacturing jobs, even as national manufacturing employment has recovered. These costs affect every part of business operations: energy, employment benefits and mandates, and environmental regulation including air emissions and waste and water disposal.
California should build on some tentative progress it has made in the past year to improve the investment climate:
● The Legislature enacted an exemption from state sales and use taxes for a company’s investment in manufacturing equipment. This would be worth about $8.4 million annually to Boeing – small compared with the hundreds of millions in new investments required at the plant, but not insignificant.
● The Governor also achieved a new “California Competes” tax credit, which provides an income tax credit for new economic development in the state. While the credit supposedly took effect last summer, the Governor’s economic development office has not yet released regulations that would describe the criteria and process to qualify for the credit. Depending on how healthy revenues grow over the next five years, this credit could theoretically be worth up to $150 million for a single company. Now that’s real money. The GO-Biz should roll out the rules for this tax credit as soon as possible.
The availability of these tax credits should not eclipse other efforts the state should take to reduce costs of doing business – for Boeing and for thousands of other businesses, big and small. Key cost drivers that should be addressed include:
● Workers’ compensation. Even after reforms enacted over the past decade, California still has the third most expensive system in the country. Continuous reform and cost control of workers’ comp should be a top priority of policy makers.
● CEQA. New investment inevitably brings the threat of litigation when it triggers the California Environmental Quality Act. Retooling a plant should not entail a years-long litigation free-for-all, where the process is used to leverage issues that have no bearing on the environment.
● Energy. Do no more harm. New rules governing greenhouse gas emissions, renewable generation mandates, water quality requirements, among others, have contributed to making our industrial energy costs among the highest in the nation. We are pricing ourselves out of the market for highly skilled industrial jobs.
California – and the very plant in Long Beach – was a birthplace of the aerospace industry. With top-level leadership and a bipartisan commitment to stemming the costs of doing business, we have within reach a remarkable achievement.
(Loren Kaye is President of the California Foundation for Commerce and Education. This column was posted first at FoxandHoundsDaily.com)
Vol 11 Issue 93
Pub: Nov 19, 2013