By Rudolph A. Pyatt Jr.
Washington Post Staff Writer
Monday, March 15, 1999; Page F04
Marriott International Inc. has decided to keep its corporate headquarters in Maryland, in exchange for a ransom, which could be worth as much as $74 million, to be paid by the state.
State and local officials, in celebrating Marriott's announcement of its decision last week, called the package of incentives -- unprecedented in Maryland -- a small price to pay to keep a company of Marriott's stature.
The value of the deal will depend on whether Marriott expands at its existing headquarters location in Bethesda or spends $150 million to build a new headquarters in Rockville.
Either way, it's the biggest corporate heist of tax dollars in the state's history.
Marriott figuratively put a gun to the heads of Maryland officials while threatening to move to Virginia. The politicians blinked and, straining to keep a straight face last week, described the huge incentives package as a worthwhile investment.
Montgomery County Council President Isiah Leggett equated the state's subsidy to the Chicago Bulls paying Michael Jordan the highest salary in the National Basketball Association because he filled the arena.
There's a big difference, of course: Basketball fans voluntarily paid to see Jordan play. Maryland taxpayers had no say in the decision to extend corporate welfare to one of the richest companies in America.
And considering the payoff for Maryland, based on Marriott's plan to increase its headquarters staff by 700, the incentive package is a huge price to pay for the mere prestige of keeping Marriott in the state.
If Marriott expands its Bethesda headquarters, it would receive $32 million in grants and tax credits over 19 years. But if it builds a new headquarters at that same location, it would receive $43 million, including a $13.1 million grant from Maryland's Sunny Day Fund. In either case, the state would also pay roughly $31 million for road improvements.
Under a third option, Marriott could build a new headquarters in Rockville and collect $44 million in incentives, and be assured of road improvements totaling $5 million.
In short, Maryland and Montgomery County taxpayers would pay about $90,000 for each new job Marriott promises to add under the first option, $105,000 under the second and $70,000 under the third.
South Carolina gave BMW an incentives package roughly equivalent to $68,000 for each of the 1,500 jobs the German automobile manufacturer promised to create in 1992. Similarly, a year later Daimler Benz pledged to employ about 1,500 workers at a $300 million plant in this country. Alabama responded with an incentives package that cost the state an estimated $153,000 to $200,000 for each of those jobs.
The costs per job in both examples were ridiculously high, even when taking into account the fierce competition for the company.
But in Marriott's case, the much-anticipated incentives war between Maryland and Virginia never materialized. Ultimately, Maryland's response to Marriott was driven by an internal war of nerves over how much money it would take to retain Marriott and save face.
Marriott had every reason to remain in Maryland. Not only is it a fixture after being there more than 40 years, but most of its headquarters employees live in Montgomery County. As much as Chairman J.W. Marriott Jr. complains about traffic, does anyone really believe he would subject nearly 3,000 employees to a more difficult commute to Virginia and hurt productivity in the process?
Besides, it became obvious early on that Marriott was using Virginia as leverage to force Maryland into subsidizing its expansion. The tip-off came when Virginia refused to go above its offer of $6 million in incentives.
Marriott officials explained Virginia's prudent offer by insisting that the costs of doing business in that state are considerably lower than in Maryland. Thus Maryland was told it would have to "level the playing field" if it hoped to keep Marriott.
Despite Virginia's refusal to raise the ante in an effort to land Marriott's headquarters, Virginia officials recently agreed to join Prince William County in giving America Online more than $7 million annually in tax incentives plus $19 million up front in tax breaks to build a new $520 million computer center in the county.
AOL's headquarters, lest we forget, is already in Virginia, where the costs of doing business are supposed to be so much lower than in neighboring states.
Cost comparisons aside, the issue for Maryland officials now is what to do when another major home-grown company comes calling for help while threatening to leave.
What if Geico, for example, decides that it's better off moving its corporate headquarters from Chevy Chase to Stafford County, where it already employs a staff of 3,000 at a regional headquarters? Or, what if Black & Decker Corp. or McCormick & Co. decides to look outside Maryland for a headquarters location?
The situation may be different next time but, in Marriott's case, Maryland clearly caved in to what amounts to extortion.
© Copyright 1999 The Washington Post Company