Spirit AeroSystems won’t have to pay taxes on a 144,000-square-foot manufacturing plant until 2030, thanks to a tax deal approved by the Wichita City Council this week.
The deal continues a 2018 arrangement made between the aerospace company and the city, despite the company’s failure to meet its promises to create and maintain 320 new jobs.
In 2018, city officials signed a deal with Air Capital Flight Lines LLC. The limited liability company owned by Dave Murfin and Steven Johnny purchased much of the former Boeing site in Wichita and was leasing property to Spirit.
Toward the end of that year, Spirit was seeking to expand its production capacity. Spirit officials came to the city, on behalf of Air Capital Flight Lines, to request an $18 million bond, sales tax exemption and tax abatement.
City estimates at the time put the value of one year of tax abatement at $422,254 — a figure that would have included $117,601 in taxes to the city, $105,814 to Sedgwick County, $193,437 to the Derby Public School district and $5,400 to the state.
The company promised that if the city granted its bond and tax deal, it would commit to creating and maintaining 320 new jobs for the Wichita market. Those jobs would have an average base wage of $54,000 and be in addition to 1,000 jobs Spirit committed to creating in a separate expansion deal with the city and Sedgwick County in early 2018.
City officials agreed to the deal and granted Spirit the bonds and 100 percent property tax abatement on the building for five years with the option to extend the tax portion for another five years.
Damon Ward, Spirit’s vice president and corporate controller, told the city council that Wichita’s financial support in that expansion was vital to the company’s success.
The bond dollars were used to construct Building 39K, a major manufacturing space at 3800 S. Oliver that’s primarily used to produce fuselages for Boeing’s 737 and 767 aircraft.
“It’s a critical part of enabling us to meet those expected production volumes,” Ward said. “We could not produce on a sustained basis what we produce today and what we’re expected to produce in the future without this facility.”
Troy Anderson, the assistant city manager for development services, told the council that while wages at the facility during the past five years had consistently exceeded the agreed upon range, Spirit “did not meet the job requirement.
“However, there’s a lot of extenuating circumstances,” Anderson said.
Anderson joined Spirit officials in saying that the pandemic and grounding of the 737 Max had worked against the company.
The Boeing 737 Max passenger plane was grounded from March 2019 to December 2020 after fatal crashes of the plane in Indonesia and Ethiopia. The Federal Aviation Administration grounded the 737 Max-9 in January 2024 after the door plug of an Alaska Airlines flight blew out mid-flight.
When city and Spirit officials signed the tax deal, 12,260 employees was established as the target number to hit. By the time Spirit received the bonds from the deal, the employee head count had climbed to 13,577.
The following year, during the height of the pandemic and fallout from the plane crashes, the number of employees dropped to 8,012. In 2023, employment numbers hit 12,591 before dropping again in 2024.
Ward said the FAA’s decision to cap production of the 737 to 38 planes a month after the Alaska Airlines incident was responsible for the employment decline.
“We had a very significant effort to bring in new employees to help the recovery of that production volume as the air plug incident was resolved,” Ward said. He added that employment numbers hit 12,308 people last month.
When asked about future employment efforts, Spirit officials told the council that the company plans to hire 600 new employees by the end of the year, primarily machinists and touch labor positions.
Ward said Boeing is in the final stages of acquiring Spirit, a deal he expects to be done by the end of the year, and he predicted a wave of hiring was on the horizon to meet Boeing’s production goals. While the 38-plane cap still stands, Bloomberg is reporting that the company plans to seek a production increase to 43 jets per month.
Anderson advised the council that city ordinance allowed the city to relax some stipulations in the agreement if there was an economic downturn. Council member Mike Hoheisel referenced that allowance before voting with the rest of the council to extend the tax break.
"This is a lifeblood profession within our district, within our city,” Hoheisel said. “And I do think it's important to work with them as best as we can."
