Kansas City possible candidate for aircraft plant

Tuesday, March 25, 2008

KANSAS CITY, Mo. (AP) -- Bombardier Aerospace is considering Kansas City as a site for a $375 million passenger jet assembly plant, city and state officials said.

While the project is only in its initial stages, discussions have gone far enough that state officials outlined legislation Tuesday to provide state tax credits as a prerequisite for landing the plant.

The Montreal-based Bombardier Aerospace is looking for a site to assemble the C Series of 110- and 130-seat passenger jets. The plant would eventually employ up to 2,100 people, with up to 5,200 related jobs created by employers attracted by the plant. The estimated overall economic impact over 22 years would be $5.9 billion.

"This is exponentially larger than any deal we've ever done," Missouri Department of Economic Development Director Greg Steinhoff told The Associated Press in an interview Tuesday.

Kansas City officials also are enthused.

"This would be a game-changer for Kansas City," Bob Marcusse, president of the Kansas City Economic Development Council, told The Kansas City Star. "We would suddenly be major players in the aviation industry."

However, the deal faces several obstacles. Bombardier made a preliminary deal two years ago to build the plant in Canada and is under political pressure to honor that deal.

Also, the company has just begun marketing the C Series and must generate enough orders to justify building the assembly plant. A decision on whether to go ahead with the project is expected this year.

If the project is launched, Bombardier and Kansas City development officials say several factors, such as the declining value of the U.S. dollar, could make building the plant in the U.S. more feasible.

Sylvie Gauthier, a Bombardier spokeswoman, confirmed to The Star that the company has talked to Missouri officials, but declined to comment further. She did not immediately return a call to the AP on Tuesday.

Kansas City and state officials say Bombardier has looked at a site on city-owned property at Kansas City International Airport for the 1.3-million-square-foot assembly plant. The firm hopes to begin production in 2013 and reach full production in 2015 or 2016.

Steinhoff acknowledged some initial concern that Bombardier was looking at Missouri to leverage a better deal from Canada. But he now believes the company is serious about Kansas City.

"I believe Bombardier has a compelling business reason to look to the United States," he said. "It's real, and their interest in us is genuine."

State economic development officials want to give Bombardier tax credits through a "mega-project" amendment to the Enhanced Enterprise Zone Program, which would be for projects that hire a minimum of 1,000 employees and invest at least $300 million.

With Bombardier, the state would cap the amount of tax credits at $40 million annually over the 22-year life of the deal or allocate the incentives based on the percentage of payroll: 80 percent the first three years; 60 percent, years four and five; and declining steadily to 25 percent for years 10 through 22.

Steinhoff said Bombardier would gradually repay the state for the tax credits, with interest, by giving the state a certain amount of money for each plane it produces. The details of those repayments are still being negotiated, he said.

Senate Majority Leader Charlie Shields, R-St. Joseph, and Rep. Ron Richard, R-Joplin, are sponsoring the tax credit legislation. Committee hearings on it are scheduled Wednesday in both the House and Senate.

Along with state assistance, Kansas City would be required to issue a bond under which the city owns the property and leases it back to the tenant. The bond would not be backed by the city, and the lease payments would repay the bond.

Mayor Mark Funkhouser supports the proposal.

"These are high-end manufacturing jobs, not retail. This is real economic development," the mayor said.

The mayor said Kansas City would receive all the earnings taxes, about $1.15 million annually based on 2,100 jobs at $55,000 per year. The city also would receive sales and utility taxes and 50 percent of the property taxes.

Bombardier acquired Wichita-based Learjet in 1990 and employs 2,300 people manufacturing its small business jets. The company employs 5,000 people in the United States, with major operations in Dallas, Tucson, Ariz., and West Virginia.

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