Study: So What if Boeing Does Leave the Puget Sound?

The Puget Sound Business Journal posts today about an interesting study just released by the Washington Alliance for a Competitive Economy: What if Boeing Left Washington? (pdf)

The report explores the effects of both an immediate withdrawal of Boeing in 2013 and a 10-year phased withdrawal from 2013 to 2022. In addition to estimating the drops in employment and migration, they also take a guess at how Boeing’s departure would affect home prices.

From the report:

Lower population growth reduces the demand for housing, which in turn reduces home prices. Chart 4 shows the percentage point difference in Central Puget Sound region home prices between the immediate withdrawal and baseline scenarios. The difference starts at three percent in 2013 and widens to 6.5 percent by 2030. For the rest of the state, the average reduction in home prices is smaller, 0.4 percent in 2013 and 1.5 percent in 2030.

With the phased withdrawal, however, the effect builds more slowly. By 2022, prices in the Central Puget Sound region are 4.5 percent below the baseline; by 2030, 5.9 percent below.

Interesting analysis. 5.9% to 6.5% seems to be a little low to me, but at least it’s a starting point for a discussion about the possibility of Boeing packing up and heading out.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

20 comments:

  1. 1
    Kary L. Krismer says:

    DHL did really well when they moved their operations out of the Puget Sound region. ;-)

  2. 2
    singliac says:

    Yeah, I’m a bit baffled by that 6.5% drop too. It seems like Boeing leaving WA would hurt a lot more than that. I guess we are talking about 2030 though, so that is a lot of time without any appreciation. It just seems strange to attempt to predict so far in the future when we don’t even know what next month will bring.

  3. 3
    mukoh says:

    Boeing would hurt plenty.
    Unless the union busting efforts legally can free up the free loaders earning way more then average it will happen sooner or later.

  4. 4
    b says:

    The drop is low because the majority of Boeing employees can no longer afford homes here anymore, only the top management and engineers can shoehorn themselves into a $400k crackerbox dump.

  5. 5
    Gary says:

    I think it would hurt a lot more than that.
    Almost 70,000 + jobs at boeing alone plus, all of the supply chain and any other business that benifits from those and the residual jobs?
    As much as people like to complain about the wages they pay thier employees, they support way more than is even realized.
    Think about the massive amount of commercial real estate they own here including huge amounts of waterfront.
    Microsoft leaving would do far less damage.

  6. 6
    old ballard says:

    Boeing must want a new airfield or another tax break.

    This so-called “report” is typical of the kind of hack job (black mail) you see right before Boeing demands some kind of concession from the state or the unions.

    I wouldn’t bury a dead cat in the PSBJ, just more corporate media.

    RE: Kary L. Krismer @ 1

    Didn’t DHL shut down it’s entire U.S. operations.

  7. 7

    Certainly Boeing leaving would hurt, although the number of Boeing employees as a percentage of the total Seattle area population is far smaller than it was 30 years ago, and the economy is more diversified. Still, places not too far from Boeing manufacturing facilities would be heavily impacted, especially Everett, Mukilteo, and Kent. Renton saw the handwriting on the wall a few years back and built retail and housing where some Boeing facilities used to be.

  8. 8
    singliac says:

    RE: old ballard @ 6
    I believe that was Kary’s point.

  9. 9
    DaveP says:

    By mukoh @ 3:

    Boeing would hurt plenty.
    Unless the union busting efforts legally can free up the free loaders earning way more then average it will happen sooner or later.

    It’d take more than union busting. WA has an A@@ backwards business tax on gross sales rather than net profit. It has way more red tape and regulations than many other states. Basically, WA has a political culture that spews hate toward business.

  10. 10
    Mikal says:

    RE: DaveP @ 9 – It is simple. Just like having no state income tax. Sales tax is now 9.5 percent. Other than vehicles which still have to be licensed here, it is cheaper to rent a truck and go to Oregon for big ticket items. That nearly ten percent add on is HUGE. The B and O tax here is nuts. Seattle in it’s infinite wisdom has made a square foot tax for businesses that are located within city limits but do business in other parts of the state. We need police, fireman,and other things paid for with tax money, but the system here bites.

  11. 11
    Kary L. Krismer says:

    RE: old ballard @ 6 – Re DHL, yes. They took over Airborne Express to gain a larger US presence and then moved everyone out of the Seattle area to AZ, TX and FL. Then they failed.

    They thought the wages were too high here, but it doesn’t really do much good to pay others less if the others are incapable of doing the job.

  12. 12
    Bits_of_Real_Panther says:

    “the majority of Boeing employees can no longer afford homes here anymore, only the top management and engineers can shoehorn themselves into a $400k crackerbox dump.”

    Several Boeing employees live on my street, a modest neighborhood with a mix of old and new developments about fifteen minutes north of Paine Field, and $400k will get you a 3000 sf house on a quarter to half acre of recent construction (~ 10 yrs) or an acre or more with an older house. There is plenty of affordable housing on the fringes, and by affordable I mean the mortgage payment is doable on a working class income and the house can be rented for the mortgage payment if desired (or in my case necessary because of a job change), and with a regional mandate to expand transit outward it’s only going to make more sense in the future to pass on inner city life.

    This is a slightly off topic rant but lack of affordable housing has nothing to do with Boeing potentially leaving Washington. They have been battling the state’s economic development people for many years, with good reason IMO. WA is as unfriendly toward business as any state IMO.

  13. 13
    dls says:

    RE: b @ 4 – There are plenty of senior IAM folks who make at/near/above $100K, and plenty of short service engineers who make much less than that, so stating that only top management and engineers can afford to buy in the local area is incorrect.

  14. 14
    commentator says:

    Boeing will leave WA when I see my arse without a mirror.

  15. 15
    what goes up must come down says:

    dls those senior IAM people you talk about bought a long, long, long time ago

  16. 16
    what goes up must come down says:

    question if all these businesses can’t make it in WA because of the tax structure why don’t they just pack up and leave?

  17. 17
    DaveP says:

    By what goes up must come down @ 16:

    question if all these businesses can’t make it in WA because of the tax structure why don’t they just pack up and leave?

    They have.

    Boeing HAS left, most people just don’t think about it. They moved their headquarters to a different state just a years ago. Moving the corporate headquarters had nothing to do with the puget sound traffic fiasco, and everything to do with intrusive and expensive government.
    http://www.boeing.com/news/releases/2001/q2/news_release_010510a.html

    AFAIK Microsoft moved their fullfillment center/division to a different state a long time ago (Navada iirc). I’m sure it’s because they had a good argument that there’d be no nexus in WA, so no need to pay sales tax here for sales… major tax advantages.

    Bear in mind that these large companies get millions in special tax breaks that “regular” companies don’t get. Thus I moved my company out of WA.

  18. 18
    Kary L. Krismer says:

    By DaveP @ 17:

    AFAIK Microsoft moved their fullfillment center/division to a different state a long time ago (Navada iirc). I’m sure it’s because they had a good argument that there’d be no nexus in WA, so no need to pay sales tax here for sales… major tax advantages..

    I don’t think that would get them out of it. Owning a few of the largest structures in the world, which are located in Washington, would create enough of a nexus. It’s not like Amazon can avoid the sale tax by shipping stuff from NJ.

    Also note that the sale tax would only apply to items shipped to Washington in any event.

  19. 19
    lamont says:

    “It’s not like Amazon can avoid the sale tax by shipping stuff from NJ.”

    Yes they can. I believe Amazon is incorporated in VA or some other state on the East Coast, and none of their distribution centers are in WA state and they don’t pay sales tax on the goods going through their distribution centers.

  20. 20
    SteveH says:

    Let’s get a few things clear here. A company does not pay the sales tax, the customer pays it. The business collects it from the customer and forwards it to the state. This is revenue neutral for the business. If a company has a presence in Washington they have to charge the sales tax and forward the revenue to Washington for a purchase made in Washington. Amazon does not get out of collecting and paying the Washington sales tax for Washington customers by shipping from some out of state address. They have a corporate presence here and have to collect the tax. Also, there is a huge movement going on with states agreeing amongst themselves that they will collect other states sales tax on internet purchases. The are several groups of states that already do this.

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