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Maryland Gov. Larry Hogan details Amazon pitch with $3 billion in tax credits, $2 billion in transportation projects

Erin Cox
Contact ReporterThe Baltimore Sun

Maryland Gov. Larry Hogan released some details on Monday of his $5 billion pitch to lure Amazon to Montgomery County, proposing a "PRIME" Act that would give Fortune 100 companies that invest $5 billion in the state a series of tax breaks worth $3 billion.

Combined with $2 billion in proposed road and infrastructure projects, the incentives offered Amazon would represent the largest economic development package in state history.

Maryland’s plan is the second biggest public bid in the country to attract the internet retailer’s new headquarters and its promised 50,000 jobs and $5 billion investment. New Jersey has offered a $7 billion package to entice Amazon to open the so-called HQ2 project in Newark.

“HQ2 is the single greatest economic development opportunity in a generation, and we’re committing all of the resources we have to bring it home to Maryland,” Hogan said in a statement. “I look forward to continuing to work closely with Montgomery County Executive Ike Leggett and all county leadership as we do everything possible to secure this incredible opportunity.”

The Republican governor used inventive grammar in giving his proposed legislation a name that evokes Amazon’s brand: the “Promoting ext-Raordinary Innovation in Maryland’s Economy Act of 2018,” or PRIME Act.

It promises $10 million a year for 15 years out of the state's Sunny Day fund to a Fortune 100 company that creates at least 40,000 jobs that pay an average of $100,000 a year. It also promises state and local property tax credits, a state sales tax exemption for construction materials, and a 10-year, annual tax credit equivalent 5.75 percent of the salaries of each job created.

Together, the administration said, the cash and tax credits amount to more than $3 billion.

The benefits could technically apply to any company that qualified, though the package is tailored to what Amazon said it would provide for HQ2.

Companies could qualify if they created a new headquarters in the state, invested $5 billion within 17 years — including $500 million up front in construction costs — and employed 40,000 people during that time. The workers would have to make an average of $100,000 a year.

The incentive package dwarfs any economic development deal Maryland has offered before.

The state was willing to pay a record $220 million — plus up to $97 million more from Prince George’s County — to land the proposed new FBI headquarters. The Trump administration put that project on hold.

The $150 million cash offer out of the Sunny Day fund would be more than seven times bigger than any previous distribution of cash from that account. So far, the largest Sunny Day deal was $20 million approved in 2016 for Northrop Grumman to keep 10,000 jobs in the state — roughly $2,000 per job kept. Amazon would be paid $3,750 per job created.

Like Amazon, Northrop was granted a specially designed tax credit to benefit it. The aerospace company can get up to $37.5 million over five years for retaining 10,000 jobs that have an average salary of $85,000. The proposed Amazon tax credit is structured differently, but the company would get a $5,750 tax break each year for every job with a $100,000 salary, and the benefits would last for a decade.

The Amazon proposal also offers breaks on state and local property taxes, and promises to use state tax dollars to cover half of the company’s local property tax tab.

The Amazon package requires General Assembly approval, which is not guaranteed.

The Democrats who lead the legislature told The Baltimore Sun last week they were cool to offering huge incentive packages unless the governor made sure the state could afford all its current needs.

House Speaker Michael E. Busch, an Anne Arundel County Democrat, said it was a “tough pill to swallow” and noted the state was behind on school construction.

Senate President Thomas V. Mike Miller said the governor must restore funding for a struggling hospital in Prince George’s County before he would consider the incentive package.

Both men said they were less inclined to support the deal now that Amazon picked wealthy Montgomery County, not economically depressed Baltimore, as its preferred site in Maryland.

Greg LeRoy of Good Jobs First, an organization that tracks economic incentive deals, questioned the need for Maryland and other states and cities to offer lucrative incentives to Amazon.

LeRoy said items that Maryland is offering to cut, such as property taxes and sales taxes, comprise just a small fraction of the costs Amazon would pay to open and operate its new headquarters campus.

“Incentives will always be between irrelevant and marginal to Amazon’s decision,” said LeRoy, who has been critical of generous incentive packages.

And with Amazon paying less for property taxes, it will fall to other Montgomery County property owners to pay for expanded services that the company’s headquarters would require, such as more seats in schools for employees’ children and traffic improvements, he said. “None of those things are free, and if Amazon isn’t paying any taxes, guess who pays the bills?” LeRoy said.

Other business analysts have said the $5 billion investment appears small in comparison to the huge economic impact Amazon can have on an area. Amazon, in its request for proposals for HQ2, said its current headquarters has contributed roughly $38 billion in economic activity to Seattle.

Amazon set off a nationwide bidding war among cities last fall when it invited jurisdictions to apply to be the location of its next headquarters. The internet retailing giant last week announced 20 top contenders from the 298 bids it received. Washington, D.C., and Northern Virginia were also on the list of finalists.

Baltimore Sun reporter Pamela Wood contributed to this article.

ecox@baltsun.com

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