Mar­riott of­fered in­cen­tives to keep main of­fice in Md.

State agrees to pro­vide $22 mil­lion in for­giv­able loans to ho­tel gi­ant

Baltimore Sun - - FRONT PAGE - By Natalie Sher­man

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.”

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