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  Marriott Seeks Bigger Tax Break for Staying Put

By Scott Wilson
Washington Post Staff Writer
Wednesday, February 24, 1999; Page B01

Marriott Corp. wants Maryland to revise a multimillion-dollar incentive package it has offered the company to stay in Montgomery County so that the deal no longer would make new investment a condition for receiving lucrative property tax breaks.

Instead, Marriott executives are asking the county to cut taxes they pay on the existing Bethesda headquarters, according to government sources familiar with a Marriott counteroffer delivered Monday. The international hotel and hospitality giant is deciding whether to stay put, move to another county location or leave for Virginia.

In offering Marriott a financial package worth as much as $58 million, Maryland and Montgomery tied all tax breaks to the company's future construction plans, most notably the possibility that it would build a $150 million corporate headquarters in Rockville. But in recent weeks Marriott officials have been leaning toward staying at the company's current location near Interstate 270 and the Capital Beltway, according to government sources familiar with the talks.

Maryland officials had offered to cut property taxes if Marriott followed through on plans to spend $90 million to improve its existing headquarters, justifying the incentive on projections of new tax revenue that a bigger building would bring. Now Marriott officials are trying to sweeten the deal by getting the county to reduce the $1.3 million it already pays in annual property taxes.

In the midst of confidential negotiations, Maryland and Montgomery officials have been reluctant to discuss Marriott's response to the state package offered earlier this month. But privately some concede that Marriott's request for tax breaks on existing property amounts to a significant change of course that, if accepted, could raise the bar for future business recruitment negotiations. Marriott officials declined to comment on the negotiations.

"Marriott wants the largest possible package they could convince the state and the county to approve," said Richard C. Mike Lewin, Maryland's secretary of business and economic development. "It rests with the state and county to say what's fair. If it becomes too expensive, we're not going to go beyond that."

Marriott plans to decide by the end of next month whether to stay in Montgomery, where it has maintained corporate headquarters since 1955, or move to Fairfax County, where a variety of lower taxes could boost company profits. At stake are 3,700 jobs that pay an average of $66,000 a year, millions of dollars in tax revenue and bragging rights for the regional rival that lands the prestigious company.

But Marriott's counteroffer also arrives as state lawmakers are beginning to challenge the logic of spending more than $50 million in taxpayer funds to keep a company already contributing to the local tax base. A small but vocal group of lawmakers are arguing that, during these good economic times, even Marriott is replaceable.

"What we are saying [with this offer] is that for whatever reason, one particular taxpayer is going to receive significant tax breaks to stay in our county, which increases the burden on other taxpayers and rewards economic blackmail," said Del. Leon G. Billings (D-Montgomery). "If they want to leave, that's their business decision, but it should not be tied to the amount of socialism it can get out of the government. We have a county that has full employment. What difference does it make?"

Virginia officials, meanwhile, have offered Marriott $6 million plus a variety of transportation improvements to relocate across the Potomac, where sales, corporate and income taxes are all lower. Maryland lawmakers familiar with the negotiations say an internal Marriott analysis shows that, because of those lower business costs, Maryland starts the bidding about $40 million behind Virginia.

From Maryland, Marriott is choosing between three financial packages that range in value from $35 million to $58 million, according to state and county economic development sources.

The company would receive the greatest financial incentives if it moves to a Rockville industrial site known as Tower Oaks because of tax breaks included in the package that apply to construction of new corporate headquarters. County officials prefer this option because it would add the most to the local tax base and free up Marriott's current offices for new tenants.

But during recent discussions Marriott officials have focused more on how to make staying at the company's existing location more lucrative, according to sources familiar with those talks. According to the county analysis, Montgomery would receive a $2 million gain in tax revenue under that scenario, significantly less than if Marriott moved to a new county location.

"If you asked the people of Montgomery County if they want to use $50 million to bribe a company to stay, the answer would be no," Billings said. "Let's build new schools instead."

Staff writer Peter Behr contributed to this report.

© Copyright 1999 The Washington Post Company

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