Maryland legislators on Wednesday approved the biggest incentive package, by far, in the state’s history, part of an effort worth up to $8.5 billion to lure Amazon to Montgomery County to build its second headquarters.
Backers of the plan, proposed by Gov. Larry Hogan (R), said it was too good an opportunity to pass up.
“It’s a no-brainer,” said Del. Robert B. Long (R-Baltimore County).
The 79-to-59 House vote followed a lengthy debate about whether the state should provide such an unprecedented package to one company. The Senate voted 35 to 11 last month to approve the measure. It will now go to Hogan for his signature.
“Amazon is getting the gold mine and we’re getting the shaft,” said Del. Herbert H. McMillan (R-Anne Arundel), describing the package as “corporate welfare.”
Critics of massive public subsidies say bidding wars among jurisdictions amount to a race to the bottom. Of the bids that have become public, Maryland’s $8.5 billion package has now surpassed New Jersey’s $7 billion — although the size of Maryland’s subsidies has become the subject of dispute.
The Hogan administration maintains that the package would cost the state about $5 billion. That includes tax incentives of about $3 billion, plus $2 billion in transportation and infrastructure upgrades to be identified in the future.
But nonpartisan analysts at the General Assembly said the tax incentives alone would cost the state $5.6 billion, or nearly double the estimate by Hogan’s team. With the $2 billion in transportation spending and $924 million in local tax credits, which would reduce revenue for Montgomery County, the total cost would be $8.5 billion.
Whatever the size, Hogan administration officials say the generous package would give the state a clear advantage over others trying to woo the second headquarters and its anticipated 50,000 jobs.
The governor’s office said that Amazon expects to make a decision by year’s end, and that the Maryland legislature’s approval of the incentive package will put the state ahead of others with legislative schedules that don’t allow them to do likewise.
(Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)
Of the final 20 locations on Amazon’s list of potential picks, three are in the Washington region: Montgomery County, Northern Virginia and the District. Many of the finalists — including Virginia and the District will not publicly disclose incentives they have offered Amazon.
Hogan administration officials said the package is modeled after a bill the General Assembly passed last session awarding a 5.75 percent tax credit to companies that create manufacturing jobs.
The state does not have to put up any money in advance. Instead, for 10 years after the hiring of each employee, it would divert back to Amazon a portion of employees’ paychecks that would have gone to state income taxes.
“This is a once-in-in-a-lifetime opportunity,” said Del. Anne R. Kaiser (D-Montgomery). “The worst thing that happens is we don’t lose anything. The best thing that happens is we gain 50,000 jobs.”
The Democratic caucus split on the bill, but the majority of the Republican delegates backed the governor’s proposal.
Most of the lawmakers from Prince George’s County and Baltimore City voted against the incentive package. But the entire House delegation from Montgomery County, except one delegate, voted in favor. Del. David Fraser-Hidalgo (D-Montgomery) was absent.
Lawmakers did not appear fazed by the analysis that suggested the package would cost $3.5 billion more than the Hogan administration estimated.
Analysts for the legislature said the Hogan administration had not taken into account the prospect that Amazon employees would get salary increases. Any pay raise would result in a bigger loss to the state when the tax credit is applied. The analysts also assume the incentives would be in place longer than the Hogan administration believes. Finally, they said local credits for property and business taxes would cost Montgomery $924 million.
The Hogan administration disagreed with that analysis.
“There is information that they don’t have access to,” Commerce Department spokeswoman Allison Skipper Mayer said. “What ultimately matters is that the legislation passed and Maryland is now in an excellent position to capitalize.”
In other action on Wednesday, Hogan vetoed a bill that would remove the authority of the state Board of Public Works to approve school construction projects, calling the measure one of the General Assembly’s “most outrageous and irresponsible actions.”
Hogan called the measure, which would eliminate a decades-old process for prioritizing how and when schools are built and repaired, a “scam.”
The legislation would create a commission composed of appointees by the governor, Senate president and House speaker to approve school construction projects that are currently vetted by the Board of Public Works, which is made up of the governor, the state comptroller and the state treasurer.
Democratic leaders have said the legislation is designed to remove politics from the process.
But Hogan suggested that Democrats were trying to politicize the process.
“When Marylanders are calling for more accountability and more oversight in education spending, this legislation attempts to do away with all oversight,” Hogan said at the start of the bimonthly Board of Public Works meeting.
State Comptroller Peter Franchot (D) has opposed the legislation, attacking it as a product of the Democratic “machine” in Annapolis. But Treasurer Nancy Kopp (D) said the change was necessary because the panel’s work on school construction has become “political theater” over the past three years.
Democratic leaders say they plan to override the governor’s veto before adjourning on Monday.