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The 1999 Deal to Keep Marriott's Bethesda, Maryland Corporate
 Headquarters from Moving to Virginia Draws Criticism

By Jay Hancock, The Baltimore SunMcClatchy-Tribune Business News

Jan. 28, 2007 - Extortion." "Blackmail." "Welfare queen." "They're trying to gouge us."

In the annals of anti-business abuse, that kind of venom is usually directed at strip miners and sugar companies, not innkeepers. But when it threatened to move its headquarters to Virginia unless Maryland taxpayers forked over millions in ransom, Marriott International summoned outrage so bipartisan that The Washington Times found itself agreeing with Ralph Nader.

Now that Maryland and Marriott are closing the books on the 1999 deal -- one of the biggest business handouts in Maryland history -- we can subtract the final costs, add the dubious benefits and draw lessons for the new people in Annapolis.

Conclusion: The criticisms of eight years ago were well justified. Gov. Martin O'Malley, think twice before reviving Maryland's corporate-welfare tradition.

Marriott employed 3,500 at its Bethesda headquarters in 1998. It was supposed to add another 700 jobs. But this never happened. At the end of last year, the hotelier employed 3,617 people at its headquarters, according to the state Department of Business and Economic Development.

That's 117 more, for you finger-painting majors.

DBED and Marriott blame the shortfall on structural changes at Marriott and the 2001 terrorist attacks, which hurt the travel industry.

"Seven years later, the world is a very different place for Marriott," says Jim Henry, managing director for DBED's finance programs. "We've now been able to see the reasonably long-term effects that 9/11 had."

Even so, Marriott just pocketed $9 million of Maryland's cash in return for what DBED calls the "extraordinary economic development opportunity" it has given the state.

The $9 million was part of a potential $12.5 million package Marriott got from the Maryland's "Sunny Day" fund that was tied to job growth and investment. (Marriott benefited from millions more in highway improvements, which would have eventually happened anyway, and tax credits, which are unobjectionable because they're available to all companies.)

Marriott hit its investment target of $99 million for renovating its Bethesda headquarters. But it hasn't come close to the goal of 4,200 jobs it needed to get the full $12.5 million. It hasn't hit the 3,900 mark needed to keep $9 million, which was advanced as a loan in 2000 but was supposed to be repayable if job goals were missed.

It hasn't even hit the 3,700-job level required to keep $4.5 million.

Yet, at DBED's recommendation, the General Assembly's Legislative Policy Committee just agreed to give Marriott the $9 million.

"We certainly believe that we met the spirit of the agreement through a powerful job-creation engine that has generated important, skilled positions in Maryland," says Marriott spokesman Tom Marder.

The way Marder and Henry explain it, Marriott has created Maryland jobs in affiliates and spinoffs whose paychecks don't bear a Marriott logo.

For example, says Marder, Marriott helped capitalize DiamondRock Hospitality, which buys Marriott hotels; it spun off Avendra, which buys hotel furnishings, and it influenced the headquarters move of another affiliate, the Ritz-Carlton Hotel Co., from Georgia to Maryland.

"If you kind of look at those together, you're coming up with more than 300 jobs" needed to get from 3,617 to 3,900, says Marder.

OK, but there are three things to be said.

1. A deal is a deal, and I highly doubt Marriott's other business partners would be quite so understanding if it failed to fulfill the letter of a contract. (It should be added, however, that Marriott had until 2012 to reach its targets under the original agreement and is forgoing the chance to get an additional $3.5 million if it reached 4,200 jobs.)

2. Marriott has been spinning off affiliates for years to pare debt from its balance sheet, so it had to know this sort of issue might come up.

3. Sunny Day deals are the stupidest way of spending public money I can think of, even if recipients achieve their goals. After a welcome dormancy for Sunny Day blandishments under Gov. Robert L. Ehrlich Jr., Gov. Martin O'Malley wants to put $2 million in the fund, which means the nonsense will start again.

Marriott was never going to Virginia in the first place. It got $9 million for doing what other companies do every day for free: Conduct business and try to earn a living.

That's almost $4 from every household in Maryland. I would never suggest taking a Marriott towel on your next vacation to pay yourself back. But I wouldn't blame you for thinking of it.

jay.hancock@baltsun.com

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Copyright (c) 2007, The Baltimore Sun

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