Gov. Inslee and members of his Choose Washington NMA (New Mid Market Airplane) Council recently completed a press conference announcing the results of a state-commissioned study evaluating where among the 50 states Boeing should build its highly-anticipated new plane.
The result: Washington ranks No. 1.
In the Seattle Times, Dominic Gates reports,
The conclusion of an aerospace industry study released Wednesday will not come as a shock and will certainly be dismissed as biased by some outside Washington state.
Still, Richard Aboulafia, a respected aerospace-industry analyst and the study’s lead author, asks you to hold your skepticism.
…Aboulafia, a vice president at the Teal Group consulting firm in Fairfax, Va., said his 42-page report is based on independent, rigorous data measuring factors relevant to aerospace production, including costs, tax structure, skilled labor availability and global trade connectivity.
His conclusion: “Strictly by the numbers, Washington state is in a class by itself.” Aboulafia added, “ It has weaknesses, but in the overall ranking, nothing comes close.”
The study is posted at the state Commerce Department. It offers a transparent statement of the factors considered and the weight analysts assigned to each.
The report states,
The assigned weights are based on an assessment of how impactful the category might be to the overall productivity and profitability of an aerospace company. The higher the likely impact to the income statement and profits, the higher the weight assigned. The metrics and categories chosen include elements that are directly or indirectly impactful. Direct impacts score a higher weight than indirect impacts. Additional discussion of the methodology is presented at the end of this document.
The Costs category carries the greatest individual weight (twenty percent). The metrics included in this category (labor, material, energy and construction costs) are more directly related to a company’s actual cost of operations than are metrics in other categories (i.e. education levels or spending on R&D). The Costs category is not intended to fully represent the actual cost of operations, but only aggregate measures that relate to operational costs, thereby impacting the overall competitive environment. A company’s actual costs of operations are heavily dependent on its structure, requirements, supplier relationships and agreements, and numerous other factors.
Here’s the report’s summary assessment of Washington’s position:
Washington scored extremely well across all categories and was a top ten finisher in all but one. It ranked first in two categories: Economy and Industry, while finishing second in Labor & Education and Costs. It was ranked number five in Risk to Operations, Research & Innovation and Taxes & Incentives. Infrastructure was the only category where Washington fell outside the top ten.
Ranked behind Washington in the top 5 are Ohio, North Carolina, Kansas, and Colorado.
In the one-page discussion of Washington (page 15 of the report), The Teal Group writes,
The State of Washington is a strong first place finisher as the most competitive place for aerospace manufacturing operations. It scores high in nearly all the evaluation categories and many of the individual metrics…
What makes it especially competitive is its advantages beyond aerospace experience, namely low Energy Costs (#1), which are increasingly important due to the growing use of energy-intensive composite structures manufacturing in aircraft, high Port Volume (#4), low Insurance Losses (#2), high Patents per Capita (#3), high Private R&D (#5), and lower Individual Income Tax (#1) and Manufacturing Taxes (#4).
The study, of course, is neither predictive nor determinative. Boeing will makes its own decision, using its own set of criteria. But The Teal Group report should not be viewed as a “homer” study. We agree that it’s an independent, data-driven analysis. And one that, we can’t help mentioning, recognizes that costs are a significant factor in location and expansion decisions. No income tax and low manufacturing taxes on aerospace clearly worked in the state’s favor in the ranking.