South Carolina Issues Bonds to Lure Boeing: Muni Deal
South Carolina will sell $85 million in debt this week to help Boeing Co. (BA) expand a plant as the state jockeys to manufacture the company’s largest twin-engine jet.
Proceeds from the general-obligation bonds, part of a $146 million issuance, will help cover land costs for Chicago-based Boeing’s 787 Dreamliner plant in North Charleston. The world’s largest aircraft maker plans to invest $1 billion over the next eight years to increase capacity, purchase 320 acres and add an information-technology center.
South Carolina is among states vying to produce Boeing’s 777X after the company’s largest union in Washington rejected a contract that it said would have gouged workers. Labor organizations have argued that moving work to the South is meant to undermine them and drive wages down. A South Carolina official said the company is capitalizing on the state’s new prowess in the field.
“Boeing’s presence here can serve to spur the growth of the aerospace sector in the state, which already has more than 200 aerospace-related companies,” Bobby Hitt, the South Carolina secretary of commerce, said in an e-mailed statement.
South Carolina has a top rating of Aaa from Moody’s Investors Service. The state last sold 10-year general obligation bonds in April 2012, which traded at a yield of about 2 percent, in line with benchmarks for that date, according to data compiled by Bloomberg.
The sale includes $26.5 million for highway refunding bonds, $16.5 million for the University of South Carolina in Columbia, $15 million for Lander University, which is about 80 miles (129 kilometers) west of there, and $3.4 million for Winthrop University in Rock Hill.
The securities will go on sale tomorrow, and the economic development bonds for Boeing reach final maturity in 2023.
The debt issue is another chapter in a long-running fight involving the company, which has been synonymous with Seattle, where it was founded in 1916.
In 2011, the National Labor Relations Board filed a complaint against Boeing over the opening of the South Carolina plant, its first outside the Puget Sound region. Nonunion workers there receive $17 an hour, about $10 less than the organized workers in Everett, Washington, according to the International Association of Machinists and Aerospace Workers.
The case, which was withdrawn that year, charged the company with illegal retaliation against the union. Republicans said the Obama administration was interfering with the right of businesses to locate where they please.
If Boeing, Washington’s largest private employer, selects another location to manufacture the 777X jetliners, it would hurt the state’s second-level credit grade of Aa1 from Moody’s Investors Service, according to a report by the ratings company.
“After their bitter experience with the rejection of the contract in Washington state, I think that there’s a pretty good chance of them moving,” said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Massachusetts. “To some degree, it almost looks like a race-to-the bottom type situation, where one state is competing against another state to lure an operation.”
The planemaker employs more than 6,000 people in South Carolina, after breaking ground in 2009. South Carolina agreed in 2010 to issue $270 million in bonds to offset Boeing’s infrastructure costs and help pay for air terminals.
“We have a long and successful future in South Carolina, and the partnership we have with the state continues to be a fundamental part of our success here -- and a source of substantial mutual benefit,” said Candy Eslinger, a Boeing spokeswoman in North Charleston, said in an e-mail.
Individuals pulled $770 million from municipal-bond focused mutual funds in the week through Nov. 20, according to Lipper US Fund Flows data.
To contact the reporter on this story: Priya Anand in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Stephen Merelman at email@example.com