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Bechtel gets $9.5M to keep 1,250 employees in Maryland

ANNAPOLIS — Maryland will pay Bechtel Corp. $9.5 million to keep most of the company’s Frederick County operations and employees from moving to Northern Virginia.

“We find ourselves in pretty extraordinary times,” said Christian Johansson, secretary of the Department of Business and Economic Development. “There’s another state that’s certainly offering very significant incentives as well.”

The deal was approved Thursday by legislative leaders. Bechtel will receive annual payments for seven years starting in March if it maintains a payroll of at least 1,250 in Frederick.

Some 625 other jobs will move to a site south of the Potomac.

Bechtel is Frederick County’s largest private employer, and its third-largest overall. Sen. David R. Brinkley, a Republican who represents a piece of the county, called the company “a great corporate citizen.”

“My concern is that we have to pay them to stay in the state,” Brinkley said. “But at this time, we can’t afford not to.”

The company’s power plant design and construction division, Bechtel Power Corp., will remain in Frederick. Bechtel National and Bechtel Telecommunications will uproot for Virginia.

“We are pleased to retain our power business in Frederick,” Bill Dudley, Bechtel president and COO said in a statement. “We first moved to Frederick in 1999 and have found it to be a welcome community to locate our power business’ headquarters.” The company’s subsidy will come in two pieces from the Sunny Day Fund totaling $7,600 per employee. It will receive $2 million in March, and then another $7.5 million spread over the next six years. If Bechtel misses the 1,250-employee benchmark, its subsidy would be reduced.

The fund has a balance of just $3.6 million, meaning the governor and lawmakers will have to allocate money over the life of the subsidy.

The Legislative Policy Committee, headed by House Speaker Michael E. Busch, D-Anne Arundel, and Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George’s, approved the deal 19-4.

House Minority Leader Anthony J. O’Donnell, R-Calvert and St. Mary’s, called the deal “annoying,” pointing out the state is waiving its normal requirement that the recipient of Sunny Day funds make a capital investment of at least five times the subsidy they receive.

“We’re not fixing anything. We’re papering it over with taxpayer money and giving it away to a corporation,” O’Donnell said. “We’re losing 625 jobs in this deal and we’re giving this company $9.5 million.”

Sen. Brian E. Frosh, a Montgomery County Democrat and another dissenting vote, said the state “can’t afford an economic development policy that pays people to keep jobs in the state.”

Johansson said Virginia offered Bechtel incentives to land not only the 625 employees likely headed south of the Potomac, but the 1,250 that will remain in Maryland as well.

Bechtel spokeswoman Michelle Michael said the company has not made a decision on where it will move the other divisions. According to the Sunny Day proposal, the company is looking for 300,000 square feet of office space in Loudoun or Fairfax counties.

A Fairfax County economic development official declined to comment on negotiations with Bechtel, and the Loudon County Department of Economic Development did not respond to a request seeking comment.

Johansson said DBED heard about a large company hunting for real estate in the Washington suburbs in the summer, but did not immediately realize that company was Bechtel. He said Bechtel considered Montgomery County, but ultimately chose Northern Virginia for the focus of its search because of the availability of empty office space, the proximity to the capital and access to Dulles International Airport.

Maryland will recoup its Bechtel subsidy in 16 months through tax revenues that would have been lost if the company left Maryland, Johansson said. The state expects those employees — 1,162 are state residents — to pay $7 million in state income and sales tax every year.

According to the company, the average salary in the power division is $125,000.

Bechtel received a $2 million Sunny Day subsidy to consolidate its Maryland operations in Frederick County in 1998. The conditional loan was forgiven in 2003.

The fund has contributed $170 million to 123 deals, and has been identified by Gov. Martin O’Malley as a potential piece of a job creation effort in the 2012 legislative session.