Averting a serious blow to Maryland's business image, state and Montgomery County officials jubilantly announced yesterday that they had won the bidding war with Virginia to keep Marriott International Inc.'s headquarters and 3,500 employees from moving across the Potomac River.
Marriott Chairman J. W. "Bill" Marriott Jr. joined Gov. Parris N. Glendening and other politicians at a State House news conference to unveil combined state and county pledges of $31.7 million to $44.2 million in grants and tax breaks for the company.
"This is indeed a great day for the three M's: Maryland, Montgomery County and Marriott," said Marriott.
The financial incentives -- the most ever offered by Maryland to a company considering locating in or leaving the state -- are contingent on Marriott expanding its existing Bethesda headquarters or building a new complex elsewhere in the county. The company also is obligated to add 700 headquarters jobs over the next five years.
The announcement ended months of intense negotiations, in which state and county officials scrambled to keep one of a handful of Fortune 500 companies remaining in Maryland from moving its headquarters elsewhere.
The bargaining went public in December, when the company declared that it was considering moving its corporate headquarters when its lease expires in 2004. With Virginia aggressively wooing the company, Marriott executives reportedly asked for $71 million in incentives.
Tensions were heightened by the political differences between the company's outspoken chairman and the governor. Marriott had backed Republican Ellen R. Sauerbrey's bid to deny Glendening re-election last fall, and he had publicly complained about the state's business climate. But Marriott declared himself a cheerleader for Maryland yesterday, noting that the money offered his corporation offset the blandishments of conservative, pro-business Virginia.
"As far as we're concerned, the playing field has been leveled," he said. He pledged to "personally commit my time to endorse Maryland as a great place to work, to live and to put your business."
Virginia's offer
Virginia had offered Marriott $6 million in incentives to move south, but the company's analysts estimated that Virginia's lower taxes and other business-friendly policies were worth another $40 million overall.
Glendening acknowledged that the state and county had offered Marriott a very generous package of financial incentives to stay put. Six delegates -- including two from Montgomery -- issued a letter yesterday criticizing giving such a large subsidy to "one of the nation's richest companies," but the governor argued that Marriott's stature as a "premier hospitality corporation" and its support of civic groups made it a good deal for the public as well.
Marriott employs 8,500 in the state, the governor noted, and its headquarters payroll is $189 million a year. The company pays $20 million a year in state and local taxes, and with the promised expansion would increase its tax payments by $2 million a year.
"Maryland is making an investment that most business people would find extraordinary," Glendening said. "We're getting a very good return on that investment."
The deal offers Marriott state and county grants and tax credits over 19 years, depending on whether the company chooses to expand its headquarters, build a complex on an adjoining site, or move to a site in Rockville.
Most of the aid to Marriott is in grants, from the state's Sunny Day Fund and from a similar county economic development fund. The company also will get state job training money and job creation tax credits, along with county property tax credits.
Sunny Day expenditures require legislative approval, as do the state and county tax credits. Hearings are scheduled next week on the tax bills, which may have affected the timing of yesterday's announcement.
Highway upgrades
In addition to the grants and tax breaks, state officials have pledged to spend $5 million to $30 million upgrading highway interchanges serving whatever of three sites Marriott chooses for its expanded headquarters. Transportation Secretary John Pocari said the projects had been planned for some time and would serve other local traffic needs, as well as Marriott's.
The company had rankled some legislative leaders a few weeks ago by asking for a $1.3 million break on the property tax it pays on its headquarters, regardless of any plans to expand. But that was not part of the deal, officials said. Still, some charged that Maryland was engaging in corporate welfare or blackmail. In their letter, the six delegates wrote: "We believe our constituents would be outraged if the legislature were to succumb to threats and provide millions of dollars to keep the Marriott Corp. in Montgomery County."
The signers were Leon G. Billings and Sharon Grosfield of Montgomery, Elizabeth Bobo and Frank S. Turner of Howard, James W. Hubbard of Prince George's and Nathaniel T. Oaks of Baltimore.
But House Speaker Casper R. Taylor Jr. and other legislators at the news conference yesterday hailed the pact.
Glendening insisted that the state would do the same for any corporation of Marriott's caliber, and he defended the state's business climate, noting its improved job-creation ranking.
Richard C. Mike Lewin, state business and economic development secretary, who worked with Lt. Gov. Kathleen Kennedy Townsend and Montgomery County Executive Douglas M. Duncan to satisfy Marriott, said he did not like having to engage in bidding contests with other states to keep companies.
"But as long as we're going to be in the competitive playing field, we're going to do it right," he said.
Lewin suggested that federal legislation is needed to stop the economic development bidding wars.
Bill Marriott made no apologies: "We weighed every factor to be fair to our shareholders and employees, and the state and county had to do the same."
The company's incentive package would rank among the largest ever awarded to a Maryland employer. The only deals that clearly outrank it are subsidies awarded to the Baltimore Orioles baseball team and the Baltimore Ravens and Washington Redskins football teams. Together, three stadiums for those organizations cost Maryland taxpayers about $570 million.
State and local incentives granted to Northrop Grumman Corp. in 1997 surpassed $14 million, including $11.5 million from the Sunny Day fund over five years. Marriott's Sunny Day award would cover four years and be worth from $14.1 million to $15.3 million, depending on the company's real estate choices.
Marriott's giveaway would surpass Northrop's as the biggest Sunny Day deal yet.
Corporate site consultants -- people who negotiate incentives for a living -- said the total Marriott deal is generous but not outrageous, in the light of economic development standards.
"I think that these numbers are in the high range of appropriateness," said Larry Kosmont, president of Kosmont & Associates Inc., a site consultancy based in the Los Angeles area. "On the pure face of the numbers, this is a competitive deal, and I wouldn't consider it a giveaway deal."
The Marriott blandishment ranges in value from $7,000 to $10,000 per job for 4,200 jobs, depending on the company's final location. That's less than some states have paid for new automobile plants, consultants said, and it's less than what New York City has paid to retain some of its corporate headquarters.
"They're big numbers. They sound big," said L. Clinton Hoch, director of location advisory services for DCG Corplan, a New Jersey consulting firm. "But you have to look at this in terms of the quality of the jobs more than the number of jobs. They're paying well, and that's very important."
The average salary of Marriott's headquarters employees is $67,000 a year.
Pub Date: 3/12/99