$3B tax break for Amazon HQ2 in Montgomery County pushed as economic boom for all of Maryland

The $3 billion in tax breaks that Gov. Larry Hogan is offering to entice Amazon to build its second headquarters in Montgomery County would benefit all of Maryland, not just the affluent Washington suburb, representatives of the Republican governor told lawmakers Wednesday.

“If Montgomery County wins, every corner of the state of Maryland wins, and wins significantly,” Commerce Secretary Michael Gill said.

The deal being offered to the massive online retailer would be the largest economic incentive package in Maryland history.

Montgomery’s bid for what the Seattle-based tech giant is calling “HQ2” beat out a Hogan-backed proposal for Baltimore, which was seen as a long shot but one with the potential for major impact in a region that has greater economic challenges. The governor shifted his focus to Montgomery County after Amazon announced in January that it was one of 20 finalists for the project.

Montgomery County is the state’s most populous jurisdiction. The Amazon development is expected to bring as many as 50,000 jobs and $5 billion in corporate investment.

Lawmakers did not dwell on what could have been for Baltimore, but focused on ensuring Maryland as a whole would benefit from a deal for Montgomery County.

With investments in transportation, the incentive package would come to $5 billion. With that much outlay, Del. Nick Mosby said, it would be important to make sure Amazon fulfilled its commitments to the state.

“This is $5 billion,” he said. “We have to look at it differently.”

Legislation that Hogan is calling the PRIME Act — named for Amazon’s membership program — would provide incentives to any Fortune 100 company that agreed to create at least 40,000 jobs that pay an average of $100,000 a year. The proposal would provide $10 million a year out of the state’s Sunny Day business incentive fund, a state sales tax exemption for construction materials and a 10-year annual tax credit equal to 5.75 percent of each new job’s wages.

Legislative analysts have said the package could cost state and local governments $6.5 billion over the next 35 years in lost tax revenue and increased costs.

But the Hogan administration, higher education officials and business advocates stressed that economic gains would more than offset those losses. The project is expected to lead to the eventual creation of more than 100,000 new jobs and $17 billion in economic activity, the Sage Policy Group reported to state and Montgomery County officials.

“I know those numbers are large,” Montgomery County Executive Isiah Leggett said. “But you have to look at the return, and those numbers are larger.”

Economist Anirban Basu, the CEO of Sage, told lawmakers that Amazon’s growth could spur a housing boom that stretches to Baltimore, if there is adequate investment in transit. And he said it could help boost the relatively small international presence at Baltimore-Washington International Thurgood Marshall Airport.

Lawmakers expressed mixed feelings about the potential impact of Amazon investment.

Sen. Nancy J. King, the Democrat who chairs the Senate’s Montgomery County delegation, said she was confident the package would not amount to a handout.

“This bill has been drafted in a way that the economic gains fall heavily on our state,” she said.

But Sen. Roger Manno, a fellow Montgomery County Democrat, said that if the jobs Amazon could bring aren’t high-quality, unionized positions, "I’m not sure the juice is worth the squeeze.”

Del. Eric G. Luedtke, another Montgomery Democrat, asked administration officials if the experience wooing Amazon would change Hogan’s stance on transit investment. Hogan has been criticized in Baltimore for canceling the planned Red Line transit rail system while moving forward with plans for the Purple Line in Montgomery and Prince George’s counties.

Baltimore pitched the Port Covington area of South Baltimore for HQ2. Asked earlier this year by The Baltimore Sun whether his Red Line decision might have hurt the city’s bid, Hogan said he didn’t think it made a difference because the east-west line would not have passed through that South Baltimore area.

Luedtke suggested that more investment in Baltimore transit could have nonetheless helped the city appear better prepared to handle Amazon, which is including transit infrastructure as a criteria in making its final choice.

State officials expect Amazon to announce its choice by the end of the year. Other finalists include smaller cities such as Indianapolis; Nashville, Tenn.; and Raleigh, N.C.; big cities such as New York, Chicago, Philadelphia and Los Angeles; and the neighboring District of Columbia and Northern Virginia.

Of incentive packages that have been made public, Montgomery County’s is second-largest, behind New Jersey’s $7 billion deal. Columbus, Ohio, is offering the next biggest package at $2.3 billion.

Gill said the state did not consider what other cities and states might offer Amazon when formulating its offer. But he urged lawmakers to consider the competition as they review the incentive proposal. Only the General Assembly has the power to create such economic development programs and to spend money from the Sunny Day fund.

At a news conference on unrelated proposals Wednesday, Hogan said that even if Amazon chooses one of the other nearby locations, the company represents “the greatest economic development opportunity of our lifetime.”

“It’d be fantastic to the region wherever it is,” he said. “We’re going to fight like heck to get them here in Maryland.”

Baltimore Sun reporter Erin Cox contributed to this article.

sdance@baltsun.com

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