CORRECTED-Washington state lawmakers to weigh spurs for 777X production

Thu Nov 7, 2013 12:19pm EST

(Corrects spelling of Conner from Connor in third paragraph)

By Jonathan Kaminsky

OLYMPIA, Wash. Nov 7 (Reuters) - The Washington state Legislature was set to convene on Thursday to consider legislation designed to entice Boeing Co to build key parts of its newest jet, the 777X, in the Seattle area.

Washington state Governor Jay Inslee, a Democrat, called the special legislative session to extend roughly $8 billion in tax breaks and streamline permits for Boeing and to approve a $10 billion transportation tax package.

In a letter to Inslee sent on Wednesday, the head of Boeing's commercial airplanes unit, Ray Conner, wrote that "favorable economic incentives" implemented by the state coupled with Boeing machinists' pending approval of a contract would solidify its commitment to build the wings of the 777X and house its final assembly in the Puget Sound region.

A provisional agreement between Boeing and the machinists' union was announced by Inslee on Tuesday.

Union members are due to conclude voting next week on an eight-year contract that includes $10,000 signing bonuses. It would also halt additions to workers' pensions and set up a different retirement plan funded by the company, the union said.

The agreement is viewed as crucial to the Seattle area, which is increasingly competing with non-unionized workers in southern U.S. states where wages are lower.

Inslee's plan includes extending commercial airplane tax incentives until 2040 and widens other exemptions.

Democrats control the legislature's lower house, and a Republican-dominated majority the Senate, the upper chamber. Sentiment leans to passing Boeing-related tax incentives.

Senate Majority Leader Rodney Tom, a conservative Democrat,

cautioned it could take weeks to pass a transportation revenue package which would likely rely on a gasoline tax increase.

It was not immediately clear whether Boeing views swift passage of a transportation package as a prerequisite to locating 777X production in Washington state and building 1.5 million square feet of new facilities in the Puget Sound area. (Reporting by Jonathan Kaminsky in Olympia, Washington; Editing by Eric M. Johnson and W Simon)