Maryland's tailor-made deal for Marriott

Marriott can count contractors and telecommuters toward state jobs commitment.

The $62 million incentive package Gov. Larry Hogan and Montgomery County Executive Ike Leggett promised Marriott for building a new headquarters in Bethesda was tailor-made for the firm, down to the definition of who counts as an employee.

The mix of forgivable loans, tax credits and grants from the city and state was announced in October, more than a year after the global hotel giant jolted state officials when CEO Arne Sorenson told The Washington Post in 2015 the company wanted to relocate.

The deal came together in about a month last year, when Marriott leaders approached the Hogan administration around Labor Day to say that after widespread exploring, a Maryland location was at the top of its list, Sorenson said in an interview with The Baltimore Sun last week.

Hogan made keeping corporate giants like Marriott, one of four Maryland firms on the 2016 Fortune 500 list, central to his campaign for governor, and officials moved quickly to accommodate the firm when Marriott said it was interested.

"It was not a hard-fought sort of negotiation," Sorenson said.

To receive the $62 million package, Marriott or a developer must invest $500 million by 2023 in the new headquarters, expected to span 700,000 square feet and include a new hotel, according to the letter of intent signed Oct. 20, shortly after the deal was announced.

Marriott also must continue to employ about 3,500 people, most of them full time, for 10 years, according to the letter, which sets parameters for a final agreement that still must be hammered out.

The letter gets interesting in defining the nature of the jobs that count toward that total. For example, contractors and people working remotely can be counted if they report to the corporate headquarters; if Marriott sells a business unit, it can count those jobs toward the requirement if the jobs remain in Montgomery County.

The state's definition for who qualifies as a full-time employee differs depending on the company and its business model, said Gregory Cole, senior director of finance programs for the Maryland Department of Commerce.

For example, in the case of Northrop Grumman — which recently negotiated an incentive package worth more than $57 million — contractors do not count, but the calculations are based on averages to account for fluctuation.

"You try to match the needs of the company," Cole said. "Northrop Grumman didn't need these liberal definitions for employees because they don't employ anybody this way.

"One of the things that government is rightfully criticized for is being inflexible and impractical," he added. "We're trying to take a 21st-century approach and say, 'All right, wait a minute. Help me understand how your business operates and then what we can do to fairly incentivize you, but the state gets a fair return.'"

Marriott officials said they were looking for a site that was accessible to the Washington Metro with more activity going on around it — perks appealing to younger employees that form about a quarter of its workforce.

If Maryland had taken a harder line on incentives, Sorenson said it would have been "much tougher" not to go to Virginia or Washington, or both, to seek a proposal. He said the firm fielded calls from economic development officials all over the country and expected to elicit a generous package from a state like Virginia.

Marriott didn't want to touch off a bidding war between different jurisdictions, knowing it would end up disappointing some, Sorenson said. But the firm was looking for incentives.

"You can't ignore the world that we live in," Sorenson said in a meeting with The Sun editorial board. "You have to be economically rational."

The "vast, vast majority of [headquarters] employees sit and work in our [headquarters] offices," Marriott spokeswoman Tricia Primrose wrote in an email. "Bottom line is we are building a new [headquarters] in Montgomery County."

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