Before Amazon Makes HQ2 Decision, Maryland Ups Its Offer to Biggest in Nation

by | April 6, 2018

By Erin Cox

Maryland lawmakers approved $6.5 billion in tax incentives for Amazon on Wednesday, pushing through the largest economic development package in state history on the hope the internet retail giant will build a new headquarters here.

The massive tax incentive package comes on top of an additional $2 billion in promised infrastructure and transportation improvements for the White Flint Mall area of Montgomery County, one of the 20 spots across the country Amazon picked as finalists for its so-called HQ2 project.

Maryland's $8.5 billion package, which is $3.5 billion bigger than originally advertised by Republican Gov. Larry Hogan, would be the largest publicly known incentive offered to Amazon in exchange for building its second headquarters. The next largest offer came from New Jersey, which offered $7 billion for the project to be built in Newark.

Hogan's administration contends the package will cost less -- $5.27 billion with the tax incentives costing $3.27 billion. The governor has called it "the single greatest economic development opportunity in a generation."

Amazon set off a nationwide bidding contest last fall when it announced it was looking for a site for a second headquarters. The HQ2 project is expected to create 50,000 high-paying jobs and a $5 billion investment.

Were the headquarters to be built in Maryland, the state would get a $17 billion annual infusion to its economy eventually, according to a state-funded study. The site in Rockville is one of three Amazon picked in the Washington area.

Hogan originally championed building HQ2 at the Port Covington site in Baltimore, but when the city lost out, he threw his weight behind the location in the Washington suburbs. Hogan pushed for lawmakers to approve the deal, which passed with bipartisan but not unanimous support.

The incentive package -- a mix of credits, incentives and grants that will be doled out over more than a decade -- dwarfs any other economic development deal in Maryland by several orders of magnitude: The most costly existing deals are measured in the hundreds of millions of dollars.

House Majority Leader C. William  Frick, a Democrat from Montgomery County, called the deal "the single most important economic project" that has ever come before the state.

"This is the single most important company in the future economy," Frick said.

Lawmakers who explained why they backed the deal said the ripple effects from Amazon could drive employment and improve economic fortunes across the state.

Republican Del. Robert B.  Long represents the Dundalk area of Baltimore County, where shuttered steel mills and the decline of manufacturing ushered in tough economic times. Long said he voted for the the deal because he expects prosperity propelled by Amazon to "spill over" into his district.

"This is a vote for the future of Maryland's economy," Long said. "This is not corporate welfare. They have to give us jobs before they get anything. It's a no-brainer."

In the House of Delegates, many Democrats from Prince George's County and Baltimore City voted against the proposal.

The economic development deal, which Hogan called the PRIME Act -- named for Amazon's membership program -- would provide Amazon incentives if it creates at least 40,000 jobs that pay an average of $100,000 a year. The proposal would provide a $10 million-a-year grant out of the state's Sunny Day fund, it would give a state sales tax exemption for construction materials used to build the project, and it would create a new, annual tax credit equal to 5.75 percent of each new job's wages. The company could apply for that tax credit every year.

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

That huge tab prompted several state lawmakers to disparage the proposal as unnecessary "corporate welfare."

"Maryland's going to give one of the biggest corporations in America a $6.5 billion corporate welfare check," said Del. Herbert H. McMillan, a Republican from Anne Arundel County. "A $6.5 billion corporate welfare check paid out over a generation with the sweat and labor of Maryland's small businesses. ... There's no free lunch. Someone's tax dollars are going to pay for this."

Republican Del. Susan K. McComas of Harford County said she voted against the bill because she doubted it would deliver all the benefits proponents promised, in part because state officials said they were not at liberty to reveal some of Amazon's plans because they are private and proprietary.

"If it sounds too good to be true, it probably is too good," McComas said. "It's a hard decision, because I'm going against my party and my governor. But I fear we're buying a pig in a poke."

Anne R. Kaiser, a Montgomery County Democrat who leads the Ways and Means Committee that worked on the package, said the deal only takes effect when Amazon delivers on its promised jobs and incentives. If they don't, the state is not on the hook for the tax deals, she said.

"We're not writing a blank check. We're staggering incentives," she said. "The worst that happens is that we don't lose anything. The best that happens is we get 50,000 jobs."

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