The office of Maryland Gov. Larry Hogan (R) on Wednesday backed away from comments made by his transportation chief that the state has promised Amazon.com a “blank check” for transportation improvements to lure the company’s second headquarters to Montgomery County.
“Obviously Secretary [Pete K.] Rahn misspoke,” said Doug Mayer, Hogan’s communications director. “The transportation portion of the Amazon incentive package will include targeted investments in both transit and roads that will be financed over at least 10 years. It will be funded fully and appropriately.”
Hogan, who is seeking reelection, took the unusual step of contradicting a member of his senior leadership team apparently out of concern that offering a “blank check” did not fit with his oft-
stated positions favoring fiscal responsibility and opposing tax increases.
Rahn, who declined to discuss his comments further Wednesday, raised eyebrows Tuesday when he told state senators during his agency’s budget hearing that Maryland will “provide whatever is necessary to Amazon when they need it. . . . For all practical purposes, it’s a blank check.”
Rahn told lawmakers that he didn’t know how the state would pay for the $2 billion it had already pledged to Amazon for transportation upgrades.
Del. Tawanna P. Gaines (D-Prince George’s), who chairs the transportation panel for the House Appropriations Committee, called the comments “irresponsible.”
“We don’t have the money,” Gaines said. “I know we usually come up with the money, but that’s a conversation to have with everyone.”
Independent experts also questioned the wisdom of offering unlimited support, even to attract a once-in-a-lifetime investment that Amazon says will create up to 50,000 jobs paying an average of $100,000 a year.
Nathan M. Jensen, a government professor at the University of Texas at Austin who studies public economic development strategies, said the offer probably would “fail a basic cost-benefit analysis” and set a bad precedent by encouraging other companies to expect lavish subsidies in the future.
“A blank check is basically a guarantee to overpay,” Jensen said. “It is madness.”
Hogan has already promised Amazon an unprecedented $5 billion package. Of the offers whose details have become public, either through government or local media accounts, only New Jersey’s is larger, at $7 billion.
Montgomery is one of 20 regions on the shortlist for the huge investment by the Seattle-based online retail behemoth. The District and Northern Virginia are also on the list. (Amazon founder Jeffrey P. Bezos owns The Washington Post.)
The District and Virginia declined to say whether they would match Hogan’s offer.
“We’re going to be competitive, obviously, but we’re going to be mindful ultimately of the impact that it will have on D.C. residents,” said Brian Kenner, the D.C. deputy mayor for planning and economic development.
“For competitive reasons and to protect confidential company information, we cannot provide details at this time,” said Suzanne W. Clark, spokeswoman for the Virginia Economic Development Partnership.
The Montgomery site would be in the White Flint area of North Bethesda, according to officials familiar with the proposal who spoke on the condition of anonymity because the information has not officially been made public. The area has a Metro station but is also heavily congested with traffic from the Capital Beltway, Interstate 270 and Rockville Pike, a heavily developed north-south corridor in the D.C. suburbs.
Hogan’s offer to Amazon, announced last month, includes $2 billion in unspecified transportation upgrades to deal with the clogged roadways around the proposed site. It also includes $3 billion in tax credits, grants and other financial incentives. Hogan’s office sought to cast the softening of Rahn’s comments as a simple clarification of a routine error.
“Pete Rahn is one of the finest transportation experts in the nation, but he also happens to be human,” Mayer said. “He was simply reiterating the well-reported fact that Maryland is going to aggressively compete for this incredible economic development opportunity.”
But Rahn had a chance to correct the record Tuesday, when asked to respond to a statement by state Sen. Bill Ferguson (D-Baltimore City) that the “blank check” comment was “jarring.”
Rahn spokeswoman Erin Henson said then that Rahn was “simply reiterating” that the state would “do what it takes” to close the Amazon deal. She added, “The real news here is that Senator Ferguson is so easily jarred.”
Hogan’s willingness to offer billions in incentives to Amazon could become an issue in the governor’s race.
State Sen. Richard Madaleno Jr. (D-Montgomery), who is running in the Democratic primary for the opportunity to challenge Hogan in a general election, called talk of a blank check “outrageous.” Madaleno, who attended the budget hearing where Rahn spoke of the bid, said landing an Amazon corporate headquarters would be “transformative” for the Washington region by attracting entrepreneurs and diversifying the region’s government-centric job base.
But he said he’s concerned the state will offer so much that it will end up shortchanging the public schools and other amenities that attract potential employers in the first place.
“No one gets a blank check. You’ve got kids in Baltimore who don’t have heat in their classrooms because of broken pipes and leaky roofs, and the governor offered them $2.5 million,” Madaleno said. “But when it comes to a business, there’s no price too big. You should be willing to tell the children of our state that they’ve got a blank check.”
Another Democratic candidate, Baltimore County Executive Kevin Kamenetz, said, “Hogan admits his economic development strategy is literally to write a blank check to the world’s richest man. He can’t tell us where the money comes from, or where it goes. Hardly a way to run a government.”
Gaines, the Prince George’s legislator, said she’s most concerned about the transportation projects that would have to be delayed or cut statewide to find $2 billion, particularly better bus service for residents to reach jobs in more rural parts of the state.
“How are you going to do this?” Gaines said. “Do other jurisdictions lose? Prince George’s? Western Maryland?”
She noted that Hogan cited the need to save money when he canceled a proposal to build a light-rail Red Line in Baltimore and scaled back the Washington region’s light-rail Purple Line.
House Minority Whip Kathy Szeliga (R-Baltimore-Harford) defended Hogan, saying she sees the governor’s commitment to fixing Montgomery’s traffic problems to attract thousands of new jobs — as a potentially “huge boon” to residents statewide.
“If I were looking at the project from Amazon’s standpoint, a concern I’d have would be transportation because traffic in Montgomery County is very challenging,” Szeliga said. “Having the full backing from the governor of the state of Maryland saying ‘We know our transportation infrastructure could be a deterrent, but we’re here to solve the problem’ is a great asset to get Amazon to come to Maryland.”
Montgomery County Council President Hans Riemer (D-At Large) said it’s no secret Montgomery’s traffic congestion would need to be alleviated before it could absorb so many jobs. Riemer said he assumes that would include improved transit, cycling and walking options, as well as moving more cars.
“It’s not cash,” Riemer said of the state’s proposed $2 billion in transportation upgrades. “It’s infrastructure. It’s functionality that [Amazon] wants. I think the secretary was saying that the transportation will work, and we’ll take care of it. . . . I really appreciate the state expressing very clearly that they’re determined to make it work. I think that’s what counts.”