Maryland governor to pitch $5 billion incentive package to lure Amazon headquarters to Montgomery

Maryland Gov. Larry Hogan’s administration will submit legislation Monday to build a $5 billion incentive package to lure Amazon HQ2 to Montgomery County.

The proposal — a combination of state and local tax incentives and big infrastructure improvements — will require approval from state lawmakers and would be the biggest economic development deal offered in state history.

Even before Amazon announced that Montgomery County was among the 20 finalists for the coveted campus and its 50,000 jobs, Hogan had proposed setting aside $10 million in cash to lure Amazon’s second headquarters to the state.

Hogan spokesman Doug Mayer said the incentive package offered to Amazon for the Port Covington site in Baltimore was also about $5 billion and included transit.

But Montgomery County was the only Maryland site selected as a finalist. Hogan said he would detail on Monday how much he would propose spending in tax credits and infrastructure improvements.

Thursday’s announcement that one of Maryland’s wealthiest jurisdictions was a finalist sets the stage for a heated debate in Annapolis about how much the state wants to spend to bring the company to Montgomery County, and not leaders’ preferred location in economically depressed Baltimore.

“It’s a tough pill to swallow,” House Speaker Michael E. Busch said of the proposed $5 billion deal. “The question is whether we get the return on the dollar for the investment the governor is talking about.”

Hogan called Amazon’s announcement “tremendous news” and said winning the company’s second headquarters would have an impact “almost impossible to fathom” on the region’s economy, even though he had hoped that Amazon would pick Baltimore.

“Baltimore needed the help more than anyone else did,” Hogan said during an Annapolis news conference Thursday afternoon, but added: “We’re happy to have the jobs here in Maryland rather than anywhere else.”

He noted that being a finalist was just the beginning of a long process to persuade the company to establish its second headquarters here instead of 19 other places across the country and Canada. “The real challenge lies ahead,” Hogan said.

One challenge lies in persuading state lawmakers to endorse an enormous incentive package for which the state will be paying for decades.

Democratic leaders who dominate the General Assembly immediately agreed to work with Hogan, a Republican, to help pass some incentive package for the internet retailer.

But division was also apparent immediately, with Democratic Senate President Thomas V. Mike Miller saying he backed a deal for Amazon but in the next breath criticizing Hogan’s new budget proposal for leaving out money for Baltimore recovery projects and a new hospital in Prince George’s County.

“First, we have to take care of the needs of the state, then we can focus on attracting a world-class company like Amazon,” Miller told reporters.

Busch said that creating an incentive package for Montgomery — one of Maryland’s most successful economic engines — is “a different debate” than improving Baltimore.

“I don’t want to be in a bidding war, competing with bigger states like California and Illinois,” Busch said. “It’s hard to talk about $5 billion when you’re behind on school construction, behind on health care.”

Karyl Leggio, a finance professor at Loyola University Maryland, said policymakers should consider that Amazon’s campus in Seattle has provided billions of dollars in economic benefit. The company’s request for proposals in September said Amazon’s headquarters had contributed about $38 billion in economic activity to Seattle over six years.

“You see those numbers — $5 billion — and it just seems so huge,” Leggio said of the proposed incentive package. “But look at Seattle, and look at what's happened since Amazon is there and the amount of money that has been generated. … Most of the analysis I have seen is that the inflow from Amazon is so tremendous that $5 billion starts to look reasonable.”

Leggio said the state could offer tax breaks on future revenue if Amazon created a certain number of high-paying jobs, and it could offer to expand schools and upgrade roads and transit in the area.

The governor had said he would personally lobby to bring Amazon to Baltimore’s Port Covington and, like other Maryland leaders, had described that site as the state’s best bet.

Maryland offered up multiple locations for the coveted “HQ2,” which comes with the promise of a $5 billion investment by the company. Prince George’s and Howard counties also pitched the Seattle-based giant. Amazon said it received 238 bids from across North America.

House Majority Leader Bill Frick, a Democrat from Montgomery County, called for a “moment of regional cooperation” with the District of Columbia and Northern Virginia, which are also among the top 20 finalists.

Frick, who is running for Montgomery County executive, urged regional leaders to see each other as allies in luring the company to the area, not opponents, since the massive economic development project would have a regional benefit.

“Montgomery County losing out to Washington, D.C., is still a win,” Frick said. “Montgomery County losing to Atlanta is a loss.”

At the same time, Frick urged the state to present the best deal it could.

“This is a once-in-a-lifetime opportunity, and I don’t think we should nickel-and-dime it,” he said.

Not all Montgomery County politicians agree. Democratic Sen. Richard S. Madaleno, who is running for governor, criticized the governor’s $10 million cash proposal to Amazon as “corporate welfare.”

Madaleno, vice chair of the Budget and Taxation Committee, said he would only support an incentive package that was a good deal for all Maryland taxpayers, not just a good deal for Amazon’s shareholders. He suggested Maryland offer a $1 billion investment in its higher-education system that would tailor programs to help provide Amazon “the best workforce on the planet.”

Hogan said he spoke Thursday with Montgomery County Executive Ike Leggett about developing details for the pitch to Amazon.

"We’re going to make sure that we work together, the county and the state, to make sure that we compete and that we do everything we can to get these jobs," Hogan said.

Leggett said the county is evaluating whether to cooperate at some level in its bid with the region’s two other finalists, Washington and Northern Virginia, because “ultimately it benefits the entire region if it is located here. All area jurisdictions would benefit.”

Senate Minority Leader J.B. Jennings, a Republican from Baltimore County, said the state needs to be “judicious” in how it uses state resources to sweeten a deal for Amazon.

“It’s tricky,” Jennings said. “You want to do everything you can to attract the business, but then again, you don’t want to give away everything to get them here.”

“Whatever we do give,” he said, “it needs to be fair to the taxpayers and fair to the other businesses that we’re trying to recruit.”

The governor and his staff declined to provide any details Thursday on infrastructure, transit or other incentives the state would be willing to offer Amazon.

Baltimore Sun reporter Lorraine Mirabella contributed to this article.

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