Marriott offered incentives to keep main office in Md.
State agrees to provide $22 million in forgivable loans to hotel giant
Marriott International agreed to keep its headquarters in Maryland after the state and Montgomery County offered up tens of millions of dollars of incentives.
The hotelier said Tuesday it plans to commission new offices for its headquarters and build a hotel in downtown Bethesda, spending about $600 million.
The announcement ends more than a year of speculation and jockeying with nearby jurisdictions over whether the global hotel giant, which has been based in Maryland for more than 60 years, would relocate when the lease at its existing Bethesda campus expires in 2022.
Losing Marriott, one of the state’s four Fortune 500 companies, would have been a major blow for Gov. Larry Hogan, who placed the economy and keeping corpo- rate giants like Marriott at the center of his campaign for governor two years ago.
“Marriott is a world-class company with deep roots in our state, and their decision to continue growing their business right here in Maryland is tremendous news,” Hogan said in a statement.
The state agreed to provide $22 million in loans, which can be forgiven if the company follows through on its intended
investment and retains 3,500 workers in the state for 10 years. Montgomery County will match that amount with a conditional grant from its economic development fund.
Marriott, which employed more than 10,000 people statewide at its hotels and corporate headquarters last year, is expected to be eligible for $15 million to $18 million in tax credits related to the new facility. Montgomery County would account for $10 million to $12 million of those credits.
About $20 million of the state funds would come from the so-called Sunny Day program, which requires legislative signoff. The loan’s size is rivaled only by the $20 million loan Hogan proposed for aerospace giant Northrop Grumman earlier this year as part of a broader retention package.
Northrop Grumman promised to retain 10,000 jobs in the state, many of them at its radar manufacturing and research facilities in Anne Arundel County, and invest $100 million in capital projects in exchange for the funding, but the loan is held up by a fiscal fight between Hogan and General Assembly leaders.
They’ve refused to schedule a vote on the funding for the defense contractor until Hogan agrees to spend $100 million that Democrats designated for their priorities, including school construction. Hogan has declined to spend that money, citing a downturn in state tax receipts.
Hogan intends to request funding for the Marriott proposal in his fiscal 2018 budget, said Karen Glenn Hood, a spokeswoman for the Maryland Department of Commerce.
Marriott expects to spend about $600 million on a build-to-suit complex that will include about 700,000 square feet of leased office space for its headquarters, said Carolyn Handlon, an executive vice president and global treasurer for Marriott. A 200-plus room Marriott-branded hotel also will be built on the site.
Handlon said the firm is reviewing proposals from developers and plans to settle on a precise location in the first half of next year.
The new facility is expected to house about 3,500 people, the same number as currently work at the headquarters. A move will allow the firm to downsize from the roughly1million square feet Marriott leases at its campus and other locations.
The incentives played a role in the decision, Handlon said.
In addition to the grant, Montgomery County also committed to providing 1,200 parking spaces for the new Marriott complex, said Patrick Lacefield, a county spokesman. (The firm would pay the county $40 million for the parking over 20 years, he said.) The county council still must approve the county incentives.
The conditions of the loans and grants do not require the firm to add jobs at the headquarters, despite a recently completed merger with Starwood Hotels & Resorts. Not including tax credits, the deal represents more than $12,500 in state and county subsidy per position.
State Del. Herb McMillan, a Republican who represents Anne Arundel County, called the subsidies “bad policy” and characterized the deal as corporate welfare. The state should be paying more attention to the needs of small businesses, he said.
“Their tax dollars are being used to subsidize corporations that make billions in net profit, while they struggle,” he said. “To me this is just a race to the bottom.”
State Sen. Richard S. Madaleno Jr. said the deal for Marriott might be an easier sell than the Northrop deal, depending on how it is structured and the state’s finances when disbursements begin. Madaleno, a Democrat who represents Montgomery County, said he supports the package.
“There are similarities and there are some big differences,” he said. “For the world’s largest hotel company to continue to call Maryland and Montgomery County home I think is a good thing.”
Marriott has been a recipient of state incentives before.
In 1999, state officials announced a $12.5 million forgivable loan for the firm, which employed about 3,500 people at the time and was supposed to add 700 more. Employment topped just 3,600 at the end of 2006, so the state ended up reducing its assistance to $9 million.
Moving to downtown Bethesda looks like something Marriott may have wanted to do, even without the incentive package, said Greg LeRoy, the executive director of Good Jobs First, which tracks corporate subsidies, pointing to the firm’s emphasis on transit and broader trends suggesting corporations are moving to more urban locations.
LeRoy said more details are needed to determine if the deal is a good one for taxpayers, but it is clear that pressure on the governor and Montgomery County Executive Ike Leggett was intense, given Marriott’s stature.
“Who wants to be the governor that lost Marriott or the county executive that lost Marriott? That’s the power of their fame,” he said. “I hope they didn’t overpay.”