POLICY HIGHLIGHTER

Volume 14, Number 3
February 19, 2004

Latest facts from governor's contract with Boeing

After EFF filed a public records lawsuit against the governor and the Department of Community Trade and Economic Development (CTED), agency staff delivered 250 pages of additional documentation related to the governor's contract with Boeing. Here is our summary of the key information found in those documents:

1. If statements made by the state's 7E7 Project Coordinator Martha Choe are correct, the governor and the state are already in violation of several key provisions of the contract:

• The contract required the governor to issue an Executive Order that details the funding, communications, expectations and management accountability related to the workforce training provision at the time the contract took effect on December 19 (Section 7.3). EFF has requested a copy of this Executive Order, but CTED now claims it does not exist.

• The contract required a copy of all authorizing government resolutions to be compiled and attached (as Exhibit F) to the contract by January 18 (Section 10.2). This exhibit is blank.

• The contract required Opinions of Counsel addressing the legality of the agreement to be furnished (as Exhibit G) when the contract was signed on December 19, with any supplemental opinions attached by December 21. To date, no counsel opinions have been provided for Puget Sound Energy and Snohomish County Public Utilities District. There is no opinion that addresses the constitutional issues EFF has identified.

2. The documents confirm that the state is hiring full-time employees to run interference for Boeing in several key policy areas. This contradicts Martha Choe's claims that current state employees will simply add the duties to their current workloads (page 9 of the Legal Questionnaire).

3. The documents provide more information on the Employment Resource Center that taxpayers will build and operate for Boeing—details that are redacted in the contract exhibits to protect "trade secrets." The state-of-the-art center will be 30,000-40,000 square feet and located within ten minutes of Boeing's manufacturing site. It will be entirely funded by state and federal dollars. Boeing will pay no costs. Boeing and its contractors will have exclusive use of the facility for the first five years, and Boeing will have priority use thereafter. We believe this facility violates the state constitution, which prohibits lending of credit and sole benefits for a corporation.

4. The Port of Everett will "purchase approximately nine (9) acres of land at the Boeing Everett Facility from the Boeing Company and lease back to Boeing for a twenty (20) year term." The Port agrees to waive the leasehold tax of 12.84 percent. In addition, the Port will modify a runway and waive landing fees for the 7E7 and 747-400 cargo plane (page 30 of Legal Questionnaire).

5. The documents show suggestions from the state on how the Port of Everett can avoid a public hearing on the property lease agreement (page 30 of Legal Questionnaire).

6. The documents indicate the Port of Everett may have held secret meetings in violation of the Open Meetings Act. Regarding the establishment of a purchase price and lease payments for the Boeing property, the documents state: "Due to the confidentiality requirement, the Port Commission has not taken formal action to authorize the commitment but there is concurrence that will form the basis for official action." Section 5.2.2 in the contract requires that the lease terms and conditions be acceptable to Boeing (Page 30 of Legal Questionnaire).

7. Responding to Boeing's concerns about the cost of modifying a 747 into a cargo plane, the state agreed to provide non-cash support by working with state universities to recruit drafting and engineering students to assist Boeing in the design and modification work. The modified cargo planes will be used to import large component parts for the 7E7. Students will receive academic credit for their work. The governor amended the contract February 2 after Boeing forfeited the state's offer of funding for the project, but we do not know if the amendment removes student involvement. Martha Choe has stated this provision is removed, but we have not seen details to confirm it.

8. The state will form a private, non-profit Aerospace Futures Board, supported by an executive director and staff. The Board will design and implement a plan for 7E7 production and workforce development, and will direct all state resources committed for employee training. Boeing will approve all organization documents, including its bylaws, and will designate all Board members, including public parties.

According to the documents, "the state is committed to partner with Boeing to develop the board structure and fund the board including operations and an Executive Director position." The state will spend $300,000 from the Workforce Investment Act fund through June 30, 2006. Future costs are not identified (page 19 of Legal Questionnaire). EFF questions the legality of the state funding a private, non-profit board of aerospace employers which is controlled by Boeing—especially since the board will direct the state on how much funding to provide.

9. As mentioned, the governor amended his contract February 2 to eliminate state funding for a large cargo freighter coordinator, a requirement that the state assist in obtaining funds for three cargo planes, and a $5 million state appropriation to assist in modifying a 747. However, the amendment includes a new provision to waive all landing fees in Snohomish County (Paine Field) for 747-400 cargo planes. EFF questions the governor's authority to bind future Snohomish County Commissioners.

Further, the governor ordered the state and CTED to ensure that the "747-400 Large Cargo Freighter is eligible for all benefits afforded the 7E7 program and shall facilitate a low cost operating environment for the aircraft through state tax abatements and other avenues available through the appropriate state and local governments." EFF questions the governor's authority to amend HB 2294 (the $3.2 billion aerospace tax incentives passed last year) without legislative approval.

Prepared by Bob Williams | President

Contact: Jason Mercier | Budget Researsh Analyst | 360.956.3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org