D.C. area jurisdictions vie to become new home of Northrop Grumman headquarters

By V. Dion Haynes
Washington Post Staff Writer
Monday, January 11, 2010; A11

Economic development officials in the District are pitching the city's urban hipness and proximity to Capitol Hill power brokers. Maryland is touting its abundance of federal facilities and highly educated workforce. And Virginia is marketing itself as a place whose relatively low taxes have helped draw such corporate titans as Hilton, Volkswagen and CSC.

The battle for Northrop Grumman is on.

The District, Maryland and Virginia -- as well as numerous counties -- are vying to host the new headquarters of the defense contractor, which last week announced plans to relocate from Los Angeles to the Washington region. Though only 300 employees are expected to take up offices here, such a relocation would bring to the winner some extra payroll tax revenue from high-income executive jobs, another tenant for vacant office space, a boost to local philanthropies and prestige.

The process for most corporations contemplating such relocations is typically veiled in secrecy. Most hire firms that scout sites on behalf of unnamed clients. Real estate agents and economic development officials usually are kept in the dark about the identity of the corporation with which they are working until the selection is announced.

But Northrop Grumman has raised the stakes through its public process, pressing the jurisdictions to make their best offer.

The company -- which already has 30,000 employees in Virginia, 10,000 in Maryland and 600 in the District -- said it is looking not only for the most suitable site with an abundance of amenities, but also the best financial incentive.

"We did reach out and notify the economic development organizations. They are working on incentive packages," said Randy Belote, a spokesman for Northrop Grumman, adding that the company wanted its relocation process to be transparent. Executives plan to reach a decision by March, Belote said, based in part on which jurisdiction can offer "the best deal."

Matt Erskine, executive director of the Greater Washington Initiative, a nonprofit organization that promotes the region as a top-class business destination, said his group and economic development officials in 26 jurisdictions in the region are finalizing guidelines devised about a year ago on how the communities can compete fairly, keeping the process from getting ugly.

Rule No. 1: The officials are encouraged to play up their assets -- but never trash their neighbors.

Economic development officials "need to refrain from disparaging other localities," Erskine said. "Compete on your strengths."

Some business and commercial real estate experts say they think Virginia -- particularly Fairfax County -- has an advantage over its neighbors. The state has a 6 percent corporate tax rate, compared with 8.25 percent in Maryland and 9.97 percent in the District.

Liz Povar, director of business development for the Virginia Economic Development Partnership, said the state's corporate tax rate is among its top selling points. The rate has been "unchanged for nearly 30 years, and that indicates a stable business climate and shows a commitment to business," she said.

Volkswagen Group of America officials two years ago selected Herndon for their headquarters, citing among other reasons the availability of a suitable office building and proximity to Dulles International Airport. Virginia gave Volkswagen nearly $6 million in incentives, and Fairfax County sweetened the deal by offering to spend at least $1.5 million to accelerate road and land projects. Hilton and CSC were offered similar deals.

The incentives were "important to us, and we appreciate the commitment the state and community made to us," said David Geanacopoulos, general counsel for Volkswagen Group of America.

But the District and Maryland also are aggressive in their campaigns.

In recent years, the District has signed agreements with Radio One, which is relocating from Prince George's County, and National Public Radio, which opted to build a new headquarters in the city after being heavily courted by Montgomery County.

D.C. Council member Jack Evans (D-Ward 2), chairman of the Committee on Finance and Revenue, said he is almost certain the city will pitch general property tax abatements and other incentives. "We'll tell them, 'We want you even more than the other jurisdictions want you.' "

Suburban Maryland is home to Marriott, Lockheed and numerous biotech firms, and Northrop already has offices near Fort Meade, between Baltimore and Washington, where the government is consolidating operations as part of the national base relocation effort.

Christian S. Johansson, secretary of the Maryland Department of Business and Economic Development, said the state has a highly qualified workforce, ranking No. 1 or No. 2 in the number of people with doctoral degrees, and has 16 of the top 25 defense firms.

Northrop Grumman has "been successful in Maryland -- that's a track record we're proud of," Johansson said. "We also have a governor who's made aerospace and defense a key priority."

Staff writer Lisa Rein contributed to this report.

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