Maryland's $5 Billion Incentive Deal To Lure Amazon HQ2

ANNAPOLIS, MD — Luring Amazon's second headquarters to Maryland — which would bring an estimated 50,000 well-paying jobs to the region — is important enough that Gov. Larry Hogan has proposed a $5 billion incentive package to boost the state's chances of snagging HQ2. Last week the online retailer released a "short list" of 20 metropolitan areas that will move on in the next phase of the bidding process for Amazon's second headquarters, and Montgomery County is on it. The D.C. area owns three of the 20 spots on the list, with neighboring D.C. and Northern Virginia also on the list.

On Monday Hogan announced the proposed Promoting ext-Raordinary Innovation in Maryland’s Economy (PRIME) Act of 2018, which outlines a package of state income, property, and sales tax credits and exemptions to give Maryland the most competitive bid possible for Amazon’s second headquarters, HQ2.

“Amazon sent a clear signal that Maryland truly is open for business by selecting Montgomery County as one of an elite group of contenders for this transformative project,” said Hogan said in a news release. “HQ2 is the single greatest economic development opportunity in a generation, and we’re committing all of the resources we have to bring it home to Maryland.”

Maryland officials want Amazon to build a 100-acre campus in White Flint or another site in North Bethesda.
Hogan's incentive plan is the second most lucrative among the 20 sites still in the race for the project, says The Washington Post, only New Jersey has offered more perks, at $7 billion.

The legislation is one component of a major incentive package that includes a budget allocation of $10 million per year to the state’s Sunny Day Fund over 15 years and billions of dollars in road, transit, and infrastructure upgrades. The state’s package for Montgomery County totals over $5 billion in incentives and transportation improvements; it must be approved by the state legislature to take effect.

The PRIME Act provides these tax incentives for a period of 10 years:

• A state income tax credit equivalent to 5.75 percent of wages for each new qualifying headquarters job. To qualify, a job must be established within the first 17 years of the project and pay between $60,000 and $500,000.
• A state and local property tax credit, including a requirement for the state to reimburse the local jurisdiction for half of the property tax that would have been collected.
• A state sales and use tax exemption for construction material or warehousing equipment used in the project.

To receive the incentives Amazon must commit to spending a minimum of $5 billion in capital expenditures over 17 years, including $500 million in initial project costs, and employ at least 40,000 people over that period. Amazon’s HQ2 is projected to fulfill these requirements, according to the company’s bid specifications. The incentives being provided through this legislation based on the bid, in combination with support from the Sunny Day Fund, will total over $3 billion.

The bill contains claw back provisions, enabling the state to recoup any or all tax credits if the company does not meet the requirements, and stipulates that the company will cease to receive tax credits if the number of jobs declines.

“I want to thank the governor for his strong support for our compelling case to Amazon for locating their second world headquarters in Montgomery County,” said Montgomery County Executive Leggett.

The list of HQ2 contenders was winnowed down from 238 communities who submitted proposals.

"Amazon evaluated each of the proposals based on the criteria outlined in the RFP [request for proposals] to create the list of 20 HQ2 candidates that will continue in the selection process," reads a company statement. "In the coming months, Amazon will work with each of the candidate locations to dive deeper into their proposals, request additional information, and evaluate the feasibility of a future partnership that can accommodate the company's hiring plans as well as benefit its employees and the local community. Amazon expects to make a decision in 2018."

Amazon HQ2 won't simply be a satellite office to their main corporate headquarters in Seattle. It will be a complete headquarters that the company will invest $5 billion in, and it will employ as many as 50,000 people, the company says.

"In addition to Amazon's direct hiring and investment, construction and ongoing operation of Amazon HQ2 is expected to create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community," the statement adds.

Amazon employs more than 540,000 people worldwide.

The New York Times reported last year that Amazon would accept proposals for Amazon HQ2 from state and local leaders until Oct. 19. The company wants a city in North America with at least 1 million people that has a strong reputation in the tech world.

"Going forward, we will continue working with our partners in Montgomery County, including County Executive Ike Leggett and his team, to ensure that we do everything possible to bring this project home. This news is certainly welcome, but the real challenge lies ahead – and Maryland is ready to meet it," Hogan said last week.

Washington, D.C., and northern Virginia are also in the mix for the headquarters. The Washington Business Journal argues that the Capitol Riverfront near Nationals Park could be a good candidate, although it would require developers there to change up their plans a good bit.

Arlington Economic Development spokeswoman Cara O'Donnell told ARLnow.com that the county would be pursuing the opportunity, although she added that it was "too early to say which specific locations would be under consideration."

Prince George's County and Baltimore also submitted bids, but they were eliminated from consideration.

Although there is going to be a lot of competition, one thing working in the region's favor is its sterling tech reputation: according to a CBRE report, the D.C. area is second only to Silicon Valley in terms of its ability to attract and grow tech talent.
Image via Gov. Hogan's office