Mayor Catherine Pugh and other city leaders finalize the proposal to make Baltimore the home of Amazon's next HQ. (Kim Hairston / Baltimore Sun)
To lure Amazon's proposed second headquarters and its promised 50,000 jobs to the state, Maryland has prepared an incentive package measured in the billions of dollars.
The massive collection of tax breaks and transportation projects for the online retail giant would be spread over at least 10 years, according to three people familiar with the state's plans.
The state's contribution to the incentive package would be enhanced by additional breaks offered by the handful of local jurisdictions competing for the project, the sources said.
"I can tell you that the state has never put together an incentive package like this before," Gov. Larry Hogan said Wednesday in Annapolis. "It's going to be mind-boggling for the folks at Amazon."
Hogan's spokesman, Doug Mayer, declined to confirm any details about the state's offer, saying Maryland did not want to tip off the nationwide competition ahead of Thursday's deadline to submit bids. He said Maryland's offer to Amazon will be "the largest in state history by a long shot."
On Wednesday, municipalities around the country were putting the finishing touches on their bids for the coveted project. Baltimore City as well as Charles, Howard, Montgomery and Prince George's counties are submitting bids for the headquarters, which Seattle-based Amazon announced in September.
Hogan publicly promised to lobby Amazon CEO Jeff Bezos to bring the company to the Port Covington development in Baltimore. He said he would support any other area of the state that wants to apply, too.
"We're going to throw everything we have at them," said Warren Deschenaux, executive director of the Maryland Department of Legislative Services, which advises state lawmakers. "We have a variety of magnificent incentives to offer."
The proposal for Amazon consists primarily of tax breaks for the company and relies on some of the state's existing business incentives. Some of the incentives Amazon would qualify for include a manufacturing tax credit, Enterprise Zone tax credits and a job creation tax credit, which awards businesses that create jobs up to $1,500 per employee.
In fiscal 2016, the state gave just under $100 million in such tax incentives, grants, loans and loan guarantees to 584 businesses.
The package also requires the General Assembly to pass new laws in order for Amazon to qualify for other tax breaks.
In addition, the state is proposing to pay for transportation improvements at all of the Maryland sites offered for the new 100-acre campus Amazon wants to build. The cost of those transportation projects varies by location.
The scope of the deal for Amazon is significantlylarger than major incentive packages previously offered by the state. In the last two years, state and local officials offered Marriott a record $62 million in tax breaks, forgivable loans and other benefits in exchange for keeping its headquarters and 10,000 jobs in Maryland. Northrop Grumman received a package worth $57 million for retaining 10,000 jobs here.
Amazon has promised to invest $5 billion in its new home, providing an instant economic boon to wherever the company lands.
Baltimore has proposed Port Covington, the 235-acre South Baltimore site where Sagamore Development, Under Armour CEO Kevin Plank's private development firm, plans a large mixed-use project anchored by a new campus for the Baltimore-based athletic apparel firm.
The site is home The Baltimore Sun's printing plant, for which the company has a long-term lease.
While other states and cities have openly discussed how much they will offer Amazon — New Jersey said this week it would offer a $7 billion package — Maryland leaders have declined to disclose their plans.
During an event Wednesday at which officials signed Baltimore's bid, Pugh reiterated Port Covington's selling points, namely that it is a shovel-ready site that has already been approved for $660 million in taxpayer-backed incentives to support Sagamore's $5.5 billion project.
"We know when Amazon sees this site there won't be any place else they want to choose," Pugh said Wednesday at Sagamore's City Garage.
After signing a cover letter for the city's bid, she held up a box sealed with a red label that contained the proposal, but declined to make any details about its contents public. Pugh said doing so would compromise Baltimore's competitive edge against other cities vying for the project.
The city is one of dozens, if not hundreds, making a play for Amazon.
The e-commerce giant on Sept. 7 released a public call for proposals detailing its needs and wants in a second headquarters site, setting off a nationwide bidding war among jurisdictions to offer up the most lucrative incentives.
Many states could easily offer Amazon $100 million a year or more just by adding up all their standard business incentives, said Tim Bartik, a senior economist with the Upjohn Institute for Employment Research in Michigan.
States must weigh carefully the incentives they offer against the benefits Amazon would bring, he said. Billions of dollars in tax breaks and incentives could put unnecessary pressure on a state's tax base.
"The problem with these large tax deals is you're giving away your successor's tax base," Bartik said.
Amazon would likely be lured more by a region's other assets — available real estate, a sizable educated workforce and reliable transportation, he said.
Greg LeRoy, executive director of Good Jobs First, an organization that promotes accountability in economic development, agreed that a highly skilled workforce and proximity to elite schools to continue feeding the pipeline could be more valuable than incentives.
LeRoy said taxes account for about 2 percent of the average company's cost structure, while business basics, such as labor, occupancy, materials, and energy, account for the remaining 98 percent. Most companies base relocation and expansion decision on incentives that will reduce those basic business costs, he said.
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