Mo. lawmakers back tax breaks for airplane maker

JEFFERSON CITY, Mo. -- A $240 million plan to entice a Canadian airplane maker to Kansas City flew through the legislature Wednesday as politicians praised it as Missouri's best-ever chance to land a supersized development deal.

Political optimism aside, there is no guarantee that Bombardier Aerospace will choose to take Missouri's incentives instead of those offered by its home country.

Bombardier, the world's third-largest civilian plane manufacturer, is looking for a place to make its new series of 110- or 130-seat passenger jets. Missouri is offering a large swath of grassland near Kansas City International Airport as an alternative to Bombardier's previously expressed preference of Mirabel, Canada, just north of its Montreal headquarters.

Missouri's deal would provide up to $240 million in tax credits over eight years, beginning in 2013, based on the number of employees hired at the assembly plant. Bombardier would repay the tax credits, plus a 5.1 percent rate of return, by giving Missouri a fixed amount of money for each plane it sells from the plant.

Along with the state aid, Kansas City would issue bonds under which the city owns the property and leases it back to Bombardier.

Sponsoring Rep. Ron Richard predicted Missouri has about a 75 percent chance of landing the assembly plant.

"This is a large-scale project -- something Missouri's never had the ability to attract in a global economy," said Richard, R-Joplin, chairman of the House Job Creation and Economic Development Committee.

The House gave final approval to the legislation authorizing the tax incentives by a 138-14 vote Wednesday, sending it to Gov. Matt Blunt, who's expected to sign it.

Senators passed the bill 24-8 last week, but only after state economic development officials scaled back the incentives, delayed the startup of the tax credits and added greater taxpayer protections.

Bombardier wants to build a projected $400 million assembly plant and flight testing site that eventually could employ 2,100 people with an average wage of $63,000. Economic development officials project the assembly plant could lead to the creation of an additional 5,000 jobs connected to its operations.

Bombardier announced in May 2005 that it had signed letters of intent with the Canadian and Quebec governments to assemble its new C-Series planes in the Montreal area in exchange for about $350 million in government incentives. That came after the company had winnowed down more than a dozen proposals to sites in Quebec, Ontario, New Mexico and Northern Ireland.

But the declining value of the U.S. dollar led Bombardier to reconsider locating in the United States. Top Bombardier executives toured the Kansas City site last week and dined at the Governor's Mansion with Blunt and other Missouri officials. They helped negotiate the Missouri incentive package while also continuing talks with Canadian officials.

"We expect the Missouri offer to be a very serious one, specifically because it eliminates the hedging problem we currently have in Canada," Bombardier spokesman Marc Duchesne said in a telephone interview from Belfast, Northern Ireland, where company officials were visiting one of their production plants.

Because Bombardier sells its planes in U.S. dollars, it could prove more profitable to also pay for their assembly with U.S. currency instead of Canadian money.

Now that the Missouri legislation has passed, state officials plan to make a formal pitch to Bombardier's board of directors, which would make the final decision on the plant's location.

If Bombardier receives 50 to 100 advance orders for the new C-Series planes from "quality airlines," the company could commit to launch its plane production and announce its assembly plant location this July at the Farnborough International Airshow in England, Duchesne said.

Whether or not Missouri attracts the Bombardier facility, state economic development officials say it has taken a major step by demonstrating its willingness to compete for big businesses.

"I think it's a very strong package," said Department of Economic Development Director Greg Steinhoff. "The state has done everything it possibly can to try to attract a mega-project, and that message has already been sent around the country and around the world."

Not all Missouri lawmakers support the deal, however,

Some senators expressed concerns about Bombardier's financial health, noting it lost its investment grade status for debt in 2004, has undergone management turnover and is likely to face stiff competition in the worldwide market for regional jets.

Other lawmakers suggested Missouri would be better off directing tax breaks to small and mid-sized businesses.

"We're focusing on the wrong part of our economy, and we're just giving away the store to do it," Rep. Rachel Bringer, D-Palmyra, said during Wednesday's debate.

The legislation includes several provisions intended to make sure the state doesn't pour money into Bombardier without any return. For example, the tax credits would be suspended if the state is out more than $155 million to Bombardier at any point. The tax credits would have to be repaid immediately if the company filed to construct a facility of at least 1 million square feet within five years.