Josh Kurtz: Marriott and Maryland’s Sleepless Nights

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By: Josh Kurtz

Sen. Barbara Mikulski (D) made her retirement announcement three weeks ago, and Maryland’s political community has been in a self-absorbed state of high anticipation ever since.

But a potentially bigger political bombshell was delivered on the very same day: when Marriott International’s CEO Arne Sorenson told The Washington Post that the hotel giant is seeking to move its corporate headquarters from Bethesda sometime before its lease expires in 2022.

Marriott’s desire to move will inevitably set off an incentive shakedown, with Maryland, Virginia and the District of Columbia competing for the prize of housing one of the world’s premiere hospitality companies. It will mark an early test of new Gov. Larry Hogan’s (R) declaration that Maryland is “open for business.” And it will be yet another challenge for Montgomery County officials in their constant battle to prove they aren’t hostile to economic development.

The goal, Sorenson indicated, is to relocate the company somewhere that will be attractive to a new generation of workers who aren’t wedded to a life spent traveling by car – in other words, near a Metro station. The current 900,000-square-foot Marriott headquarters, in a corporate park near Montgomery Mall and Interstate 270, is about three miles from the nearest Metro stop.

In the aftermath of Sorenson’s Post interview, the industry newsletter Real Estate Bisnow offered 16 possible sites in the D.C. area where Marriott could set up shop within a mile of Metro. Tellingly, only one was in Maryland – at the White Flint Mall in North Bethesda, which is ticketed for major renovations.

In 1999, amid great fanfare, the state of Maryland provided Marriott with about $40 million in tax credits and job training grants to stay at its Bethesda location, where it had, at that point, been headquartered for 21 years (the company has been in Montgomery County since 1955). The state and county also kicked in tens of millions of dollars more for road and infrastructure improvements.

This agreement was no small feat for then-Gov. Parris Glendening (D), as Marriott family members had been highly critical of Maryland’s business climate and were openly flirting with Virginia. Bill Marriott, then the CEO and son of the company founder, supported Ellen Sauerbrey, Glendening’s Republican challenger, in 1998. Bill Marriott played host to former President George H.W. Bush for one Sauerbrey fundraiser – at a Marriott hotel in Northern Virginia, no less, because the CEO didn’t feel like the company had a suitable venue here.

“Maryland is making an investment most business people would find extraordinary,” Glendening said when the deal was announced. “And we are very pleased with the return on our investment.”

Casper Taylor (D), then the speaker of the Maryland House, sounded more like a high school cheerleader: “Our team is red hot, Virginia’s team is all shot.”

State officials at the time estimated that the state would see a return on its investments in less than 18 months.

Back in 1999, Marriott had about 3,500 workers at its Bethesda offices, and pledged to add 700 more. Today, according to the Post, the workforce at the corporate headquarters is a little more than 2,000 – so the promise to add bodies was apparently never fulfilled.

In 2013, Marriott shed several hundred IT jobs in Bethesda. Overall, the company has just under 10,000 employees in Maryland.

So what, besides access to Metro, is Marriott looking for? What inducements are Maryland, Virginia and D.C. going to offer? According to multiple sources, top officials in Virginia and D.C. are aggressively courting the company and are meeting with key Marriott executives.

What is the company willing to promise? Are government officials going to ensure that any corporate pledges are iron-clad? Will Hogan, who has offered his own pungent criticisms of Maryland’s business climate, be culpable in any way if Marriott decides to relocate elsewhere? Did his predecessors pay enough attention to the company?

And what about Kathleen Matthews, the Marriott corporate communications executive who, according to Politico’s Mike Allen, the scrivener to the powerful, wants to represent Montgomery County in Congress? Surely it is not in her interest to see Marriott skip.

More to the point, is there a better way to attract and retain large corporations than giving in to demands that often amount to financial blackmail?

Just last week, in a letter to Hogan, Sorenson introduced himself to the new governor, congratulated him on his victory, and said he looked forward to meeting him soon. The letter, which I obtained, did not mention Marriott’s search for a new headquarters, but instead urged Hogan to support legislation that would apply additional state sales taxes to hotel reservations made through online travel companies like Expedia and Priceline on top of the taxes that already are collected.

So Sorenson, in his first apparent communication with Hogan, was urging the anti-tax new governor to embrace what many critics of the legislation are characterizing as a tax increase.

The legislation itself has its appeal – and many experts and officeholders of all political stripes agree that the state is missing out on revenue it ought to be collecting by not applying the sales tax to the online companies. But the bill, which was on the floor of the state Senate last night, is essentially an admission that the state doesn’t have the right to the tax revenue now – complicating a court case that the state comptroller’s office is pursuing to collect several years’ worth of back taxes from the reservation companies.

The Marriott development has myriad implications and could take multiple twists and turns in the months ahead – much like the still-developing race to replace Mikulski and the numerous potential down-ballot consequences.

As for Mikulski, one of the last things she’d no doubt like to accomplish as senator is luring the FBI headquarters to Greenbelt. The entire Maryland political establishment – including Hogan – has lined up behind the proposal to bring the FBI there.

Greenbelt is competing with a proposal from Springfield, Va., and with an 11th hour pitch from the Lerner family, the powerful developers who built the White Flint Mall and own the Washington Nationals, to bring the FBI to Landover Mall. Prince George’s County officials have gone out of their way to say nice things publicly about the Landover site. But it’s clear they are dismayed by a second proposal in the county, which could complicate their efforts to bring the FBI to Greenbelt.

Siting a huge federal government facility is different than finding a home for a corporate headquarters. Politics plays a role, but so do multiple environmental reviews and complicated federal real estate, transportation and procurement rules.

When Mikulski was chairwoman of the Senate Appropriations Committee, it seemed likely that Greenbelt had the upper hand. But now Senate Democrats are in the minority, and a Republican is living in Government House in Annapolis. It may be that the Obama administration would rather reward Virginia, with a Democratic governor, Terry McAuliffe, who is a potent party fundraiser as well, by moving the FBI to Springfield instead of Greenbelt.

But it may not be a total loss if that happens: The Washington Business Journal recently suggested that the Greenbelt site could be a possible new corporate home for Marriott, if the FBI doesn’t wind up there.

Josh Kurtz is editor of Environment & Energy Daily, a Capitol Hill publication. Follow him on Twitter -- @joshkurtznews

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Josh Kurtz has been writing about Maryland politics since late 1995. Louie Goldstein, William Donald Schaefer and Pete Rawlings were alive, but the Intercounty Connector, as far as anyone could tell, was dead.

But some things never change: Mike Miller is still in charge of the Senate. Gerry Evans and Bruce Bereano are among the top-earning lobbyists in Annapolis. Steny Hoyer is still waiting for Nancy Pelosi to disappear. And Maryland Republicans are still struggling to be relevant.

The media landscape in Maryland has changed a lot, and Kurtz is happy to write weekly for Center Maryland. He's been writing a column for the website since it launched in January 2010.

In his "real" job, Kurtz is editor of Environment & Energy Daily down on Capitol Hill. But he'll always find Maryland politics more fascinating.

Kurtz grew up in New York City and attended public schools there. He has a BA in History from the University of Wisconsin and an MS in Journalism from Columbia University. He's married with two daughters and lives in Takoma Park, Md. He hopes you'll drop him a line, or maybe go out for a meal with him, because he's always hungry -- for political gossip.