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

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WASHINGTON STATE AEROSPACE IMPACTS: Research Questions and Data Collection 2 Assess the economic impact of each Boeing Commercial production line in Washington State. Determine any returns accrued to Washington State through investments in aerospace.

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WASHINGTON STATE AEROSPACE IMPACTS: Research Questions and Data Collection 3 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

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

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WASHINGTON STATE AEROSPACE IMPACTS: employment Washington State Aerospace Industry Employment 2007-2012, Annual Sources: Washington State Employment Security Department; Governors Office of Aerospace; Community Attributes Inc. 5 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. Related Aerospace Employees

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Washington State Aerospace Industry Revenues 2007-2012, Annual, in 2012 USD Sources: Washington State Department of Revenue; U.S. Bureau of Economic Analysis; Community Attributes Inc. 6 Billions Total aerospace and supporting industry revenues grew by $15.9 billion dollars, representing 35% growth between 2010 and 2012. WASHINGTON STATE AEROSPACE IMPACTS: revenues Related Aerospace

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Washington State Aerospace and Related Industry Wages Annual, adjusted to billions 2012 $ Sources: Washington State Employment Security Department; Governors Office of Aerospace; U.S. Bureau of Labor Statistics; Community Attributes Inc. 7 Related Aerospace 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. WASHINGTON STATE AEROSPACE IMPACTS: wages

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Washington Aerospace Exports 2007-2012, billions USD, adjusted to 2012 $ Sources: Washington State Department of Commerce; U.S. Bureau of Economic Analysis; Community Attributes Inc. 8 Billions Aerospace industry exports totaled $37.1 billion dollars in 2012, representing 49% of all Washington goods exports. WASHINGTON STATE AEROSPACE IMPACTS: exports

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

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THE BOEING COMPANY IN WASHINGTON: deliveries Boeing Commercial Deliveries, 2007-2012 Sources: Boeing Company; Community Attributes Inc. 11 Domestic Foreign Airplanes Boeing Commercial deliveries totaled 601 airplanes in 2012, a growth of 139 airplanes since 2010. 154 140 159 169 129 185 287 235 322 293 348 416 441 375 481 462 477 601

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THE BOEING COMPANY IN WASHINGTON: deliveries Average Price per Aircraft, 2012 Sources: Boeing Company; Community Attributes Inc. 12 154 140 159 169 129 287 235 322 293 348 416

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Boeing Employment in Washington 2007 - 2013 13 *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. Other Manufacturing Employees Boeing provided 83,200 jobs in 2012, a 15% growth in jobs since 2010. The Boeing Company remains the largest employer in Washington. THE BOEING COMPANY IN WASHINGTON: employment

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Employment Allocated by Aircraft Family, 2012 Number of workers; total estimated Boeing Employment in Washington Source: Industry sources; Community Attributes Inc. 14 Employees Overhead and Related Assigned to Program 777 production provided 19,700 jobs in 2012, representing 27% of Boeing Commercial employment. THE BOEING COMPANY IN WASHINGTON: employment

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Wages by Aircraft Family, 2012 Billions $, including benefits Sources: Industry sources; Community Attributes Inc. 15 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. THE BOEING COMPANY IN WASHINGTON: wages

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Direct Impacts by Aircraft Family, 2012 Source: Industry sources; Community Attributes Inc. 16 777 production provided 19,800 jobs in 2012, representing 27% of Boeing Commercial employment. THE BOEING COMPANY IN WASHINGTON: employment

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Direct Impacts by Aircraft Family, 2012 17 777 production provided 19,800 jobs in 2012, representing 27% of Boeing Commercial employment. THE BOEING COMPANY IN WASHINGTON: Impacts Source: Industry sources; Community Attributes Inc.

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

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Type of IncentiveEligibilityRate 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 Aerospace product development businesses B&O tax credit equal to leasehold taxes WASHINGTONS INVESTMENT IN AEROSPACE: tax incentives

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3 WASHINGTONS INVESTMENT IN AEROSPACE: firm locations

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WASHINGTONS INVESTMENT IN AEROSPACE: tax investments Aerospace Industry Tax Investments by Washington State Actuals, estimates (2013), $millions, based on fiscal year Source: Washington State Department of Revenue; Community Attributes Inc. 22 Millions Between fiscal years 2007 and 2013, tax investments in aerospace from the State totaled over $900 million. Preferential B&O Rate for Mfg, Wholesale and Retail of Commercial Aircraft Preferential B&O Rate FAR Certified Repair Station B&O Tax Credit for Aerospace Product Development B&O Tax Credit for Aerospace Manufacturers for Preproduction Development Expenditures B&O Tax Credit for Property Taxes on Land/Buildings Sales & Use Tax Exemption for Computers Used in Development & Design

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

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WASHINGTONS INVESTMENT IN AEROSPACE: fiscal benefits Sources: Washington State Department of Revenue; Washington State Office of Financial Management; Community Attributes Inc. 24 Between 2004 and 2012, Boeings 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. Sales Tax B&O Tax Other Taxes Millions State Fiscal Benefits from Boeing Operations, 2004 - 2012 Adjusted to 2012 $ USD, Millions

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WASHINGTONS INVESTMENT IN AEROSPACE: fiscal benefits, 2012 25

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CONCLUSIONS 26 Boeings 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 Commercials fiscal impact significant, to the tune of nearly $600 million in 2012.

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CONCLUSIONS 27

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WASHINGTONS INVESTMENT IN AEROSPACE: charitable contributions Sources: The Boeing Company; Community Attributes Inc. 28 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.