The Impact of the Aerospace Industry in Washington State February 12, 2014

WASHINGTON STATE AEROSPACE IMPACTS: Research Questions and Data Collection Assess the economic impact of each Boeing Commercial production line in Washington State. Determine any returns accrued to Washington State through investments in aerospace. To an impact assessment, need four pieces of information: 1) direct jobs per line; 2) output per line; 3) wages; and 4) direct purchases.

Washington State Department of Revenue WASHINGTON STATE AEROSPACE IMPACTS: Research Questions and Data Collection Washington State Department of Revenue Boeing Commercial financial statements/reports Washington State Employment Security Department SPEEA and IAM Washington State Input-Output Model Needed to determine: Wages per line Employment per line Average price (actual) per aircraft Direct purchases To an impact assessment, need four pieces of information: 1) direct jobs per line; 2) output per line; 3) wages; and 4) direct purchases.

1 WASHINGTON STATE AEROSPACE DIRECT IMPACTS 2 THE BOEING COMPANY IN WASHINGTON 3 WASHINGTON’S INVESTMENT IN AEROSPACE

WASHINGTON STATE AEROSPACE IMPACTS: employment Washington State Aerospace Industry Employment 2007-2012, Annual Employees Related In 2012 the aerospace industry provided 132,500 jobs at 1,350 establishments. Total jobs are up by 15,000 since 2007, showing 12.8% job growth. Aerospace Sources: Washington State Employment Security Department; Governor’s Office of Aerospace; Community Attributes Inc.

WASHINGTON STATE AEROSPACE IMPACTS: revenues Washington State Aerospace Industry Revenues 2007-2012, Annual, in 2012 USD Billions Related Total aerospace and supporting industry revenues grew by $15.9 billion dollars, representing 35% growth between 2010 and 2012. Aerospace Sources: Washington State Department of Revenue; U.S. Bureau of Economic Analysis; Community Attributes Inc.

WASHINGTON STATE AEROSPACE IMPACTS: wages Washington State Aerospace and Related Industry Wages Annual, adjusted to billions 2012 $ Billions Total aerospace and related industry wages grew by $1.5 billion dollars, showing 15% growth between 2010 and 2012. Aerospace and related industries paid wages equaled 11% of all wages earned in Washington. Related Aerospace Sources: Washington State Employment Security Department; Governor’s Office of Aerospace; U.S. Bureau of Labor Statistics; Community Attributes Inc.

WASHINGTON STATE AEROSPACE IMPACTS: exports Washington Aerospace Exports 2007-2012, billions USD, adjusted to 2012 $ Billions Aerospace industry exports totaled $37.1 billion dollars in 2012, representing 49% of all Washington goods exports. Sources: Washington State Department of Commerce; U.S. Bureau of Economic Analysis; Community Attributes Inc.

1 WASHINGTON STATE AEROSPACE IMPACTS 3 WASHINGTON’S INVESTMENT IN AEROSPACE 2 THE BOEING COMPANY IN WASHINGTON

THE BOEING COMPANY IN WASHINGTON: deliveries Boeing Commercial Deliveries, 2007-2012 Airplanes 601 Boeing Commercial deliveries totaled 601 airplanes in 2012, a growth of 139 airplanes since 2010. 481 477 185 Domestic 462 441 375 159 129 169 154 140 416 Foreign 322 348 287 293 235 Sources: Boeing Company; Community Attributes Inc.

THE BOEING COMPANY IN WASHINGTON: deliveries Average Price per Aircraft, 2012 159 129 169 154 140 416 322 348 287 293 235 Sources: Boeing Company; Community Attributes Inc.

THE BOEING COMPANY IN WASHINGTON: employment Boeing Employment in Washington 2007 - 2013 Employees Boeing provided 83,200 jobs in 2012, a 15% growth in jobs since 2010. The Boeing Company remains the largest employer in Washington. Other Manufacturing *Estimate by Community Attributes Inc. **As of August 2013. Source: The Boeing Company. For 2012 and 2013, breakouts by manufacturing and other are estimates. Sources: Washington State Department of Revenue; The Boeing Company; Community Attributes Inc.

THE BOEING COMPANY IN WASHINGTON: employment Employment Allocated by Aircraft Family, 2012 Number of workers; total estimated Boeing Employment in Washington Employees 777 production provided 19,700 jobs in 2012, representing 27% of Boeing Commercial employment. Overhead and Related We developed these estimates by way of triangulating several sources, including DOR facility-based employment headcounts (from aerospace credits). Assigned to Program Source: Industry sources; Community Attributes Inc.

THE BOEING COMPANY IN WASHINGTON: wages Wages by Aircraft Family, 2012 Billions $, including benefits Billions 737 production provided an estimated $2.7 billion in wages in 2012. Combined wages from aircraft production totaled $9.5 billion in 2012, including benefits. Sources: Industry sources; Community Attributes Inc.

THE BOEING COMPANY IN WASHINGTON: employment Direct Impacts by Aircraft Family, 2012 777 production provided 19,800 jobs in 2012, representing 27% of Boeing Commercial employment. We developed these estimates by way of triangulating several sources, including DOR facility-based employment headcounts (from aerospace credits Source: Industry sources; Community Attributes Inc.

THE BOEING COMPANY IN WASHINGTON: Impacts Direct Impacts by Aircraft Family, 2012 777 production provided 19,800 jobs in 2012, representing 27% of Boeing Commercial employment. We developed these estimates by way of triangulating several sources, including DOR facility-based employment headcounts (from aerospace credits Source: Industry sources; Community Attributes Inc.

1 WASHINGTON STATE AEROSPACE IMPACTS 2 THE BOEING COMPANY IN WASHINGTON 3 WASHINGTON’S INVESTMENT IN AEROSPACE

WASHINGTON’S INVESTMENT IN AEROSPACE: tax incentives Type of Incentive Eligibility Rate Preferential B&O tax rate Manufacturers & processors for hire Aerospace product development businesses Aerospace products Certificated FAR part 145 repair stations 38-50% reduced rate B&O tax credit for aerospace product development Supplies Cost of FAA certification Computer & processing expenses Amount of qualified expenditures x 1.5% Sales and use tax exemption on computer hardware and peripherals Hardware Software Plotters Switches Hubs Full exemption B&O tax credit for property taxes/leasehold taxes paid Manufacturers Tooling manufacturers Certified FAR part 145 repair stations B&O tax credit equal to leasehold taxes

3 WASHINGTON’S INVESTMENT IN AEROSPACE: firm locations

Aerospace facilities across state, among those that used credit.

WASHINGTON’S INVESTMENT IN AEROSPACE: tax investments Aerospace Industry Tax Investments by Washington State Actuals, estimates (2013), $millions, based on fiscal year Millions Sales & Use Tax Exemption for Computers Used in Development & Design B&O Tax Credit for Property Taxes on Land/Buildings Between fiscal years 2007 and 2013, tax investments in aerospace from the State totaled over $900 million. B&O Tax Credit for Aerospace Manufacturers for Preproduction Development Expenditures B&O Tax Credit for Aerospace Product Development Preferential B&O Rate FAR Certified Repair Station Preferential B&O Rate for Mfg, Wholesale and Retail of Commercial Aircraft Source: Washington State Department of Revenue; Community Attributes Inc.

WASHINGTON’S INVESTMENT IN AEROSPACE: other investments Key Non-Tax Investments, 2003 through 2012   Workforce Training Capital/Land Improvement Other Total PROJECT OLYMPUS $23,500,000 $340,500,000 $2,285,000 $366,285,000 PROJECT PEGASUS $9,550,000 N/A TOTAL $33,050,000 $375,835,000  Source: Community Attributes Inc.

WASHINGTON’S INVESTMENT IN AEROSPACE: fiscal benefits State Fiscal Benefits from Boeing Operations, 2004 - 2012 Adjusted to 2012 $ USD, Millions Millions Between 2004 and 2012, Boeing’s commercial activities supported nearly $4.1 billion in State fiscal revenues. In 2012, Boeing Commercial operations accounted for 7.4% of all B&O tax collected by the State. Other Taxes Sales Tax B&O Tax Sources: Washington State Department of Revenue; Washington State Office of Financial Management; Community Attributes Inc.

WASHINGTON’S INVESTMENT IN AEROSPACE: fiscal benefits, 2012

CONCLUSIONS Boeing’s largest impacts come from induced impacts, i.e., spending of income throughout the economy. Induced effects accounted for 104,200 total jobs, compared with 31,700 through indirect effects. In 2012, Boeing Commercial operations accounted for 7.4% of all B&O tax collected by the State. Boeing Commercial’s fiscal impact significant, to the tune of nearly $600 million in 2012.

CONCLUSIONS

WASHINGTON’S INVESTMENT IN AEROSPACE: charitable contributions In 2012, the Boeing Company, its employees, and retirees made charitable contributions of $51.8 million in Washington State. Since 2000, Boeing has made 84 research grants to WSU worth $5.7 million. Boeing executives sit on the Board of Directors for over 100 local non-profits. Sources: The Boeing Company; Community Attributes Inc.