Please ensure Javascript is enabled for purposes of website accessibility

In Maryland, 2016 was the year of the tax incentive

Critics may assail these incentives as corporate welfare, but community leaders, business groups and politicians say that tax breaks, public-private partnerships and public financing are essential to keeping Maryland competitive with other states in attracting -- and retaining -- businesses and development projects. (Photo illustration by Maximilian Franz)

Critics may assail these incentives as corporate welfare, but community leaders, business groups and politicians say that tax breaks, public-private partnerships and public financing are essential to keeping Maryland competitive with other states in attracting — and retaining — businesses and development projects. (Photo illustration by Maximilian Franz)

Marriott International  Inc. is the world’s largest hotel company, Northrop Grumman one of the nation’s biggest defense contractors. Maryland Republicans and Democrats might argue over lots of things, but they were united in their determination to make sure those two companies got tax incentives before they started looking to move their state operations to greener pastures.

Under Armour’s meteoric growth is hailed as an American success story. When it came time for the Baltimore-based sports apparel and fitness giant to build out its global headquarters, policymakers made sure CEO Kevin Plank’s real estate development company got hundreds of millions of dollars in tax increment financing to build a massive mixed-use project adjacent to Under Armour’s prospective campus in Port Covington.

These were far from the only companies or projects that made 2016 the year of the tax incentive in Maryland. Critics may assail these incentives as corporate welfare, but community leaders, business groups and politicians say that tax breaks, public-private partnerships and public financing are essential to keeping Maryland competitive with other states in attracting — and retaining — businesses and development projects.

“I think, obviously, the availability of tax credits, or public financing, for significant economic growth projects are an important tool for a jurisdiction in its efforts to attract and grow businesses, and the economy,” said Donald C. Fry, president and CEO of the Greater Baltimore Committee. “It’s one of these situations where many other jurisdictions also have these tools as part of their strategy,” Fry said. “So it’s important that we do have the availability, and they need to be carefully considered when you’re looking at any and all potential projects.”

Prominent examples, such as state incentives awarded to Marriott and Northrop Grumman, as well as public financing for developments in Baltimore, Fry said, show the power of these tools. In the next year, he said, the GBC would like to see the state adopt tax incentives that will help continue the Baltimore area’s transformation into a hub for entrepreneurs.

“We certainly think the state has done a good job with some startup company area benefits, but we need, probably, some sort of additional benefit to help those companies beyond just the startup phase, but also to the point they’re fully developed,” Fry said.

One such priority could be an Angel Investor Tax Credit. State entrepreneurs backed legislation in 2016 that proposed creating a three-year pilot program that would provide a 50 percent credit on qualified investments up to $50,000 for an individual and $100,000 per married couple. That bill was never passed out of committee.

Maryland already provides businesses with an array of tax credits, including Enterprise Zone designations, Biotechnology Investment Incentives and Job Creation tax credits. The state also makes various loans and grants available to employers in the state. The state has used these incentives this year to help keep companies, and the jobs they create, in Maryland.

In October, Marriott, one of the state’s four Fortune 500 companies, was awarded roughly $70 million in state and Montgomery County tax incentives, grants and loans to stay in Maryland.

The company now plans to build a $600 million facility in Bethesda, staying in its Montgomery County home of roughly 60 years. The planned development in downtown Bethesda calls for 700,000 square feet of leased space, offices for 3,500 employees and a 200-room hotel.

“Marriott is a brand recognized and respected around the world, and the fact that they call Maryland home does a lot to advance our economic development efforts,” Commerce Secretary Mike Gill said at the time. “With more than 90 hotel properties across Maryland that had more than $600 million in sales last year, Marriott is also a valued part of our state’s tourism industry, which contributes some $16.4 billion in economic impact within our borders each year.”

In December, a state legislative committee approved a $20 million, four-year tax incentive package to keep defense contractor Northrop Grumman in the state. The package provides $5 million annually to the company if it keeps 10,000 employees at its plant in Linthicum. If the company falls below $9,000 employees it faces the state seeking repayment to the tune of $2,000 with interest per employee.

Some Democrats in the state legislature objected to how that process was handled, saying Gov. Larry Hogan’s administration left them out of negotiations. Legislative Democrats who control the joint Legislative Policy Committee initially refused to approve the Northrop Grumman package before relenting.

“We had to do what we had to do,” said Senate President Thomas V. Mike Miller Jr. said at the time the joint committee approved the legislation. “This was the right thing to do. It wasn’t handled the right way by the executive or your office but it’s a deal that needs to happen. We made it happen but it can’t ever happen like this again,”

Some liberal and conservative state politicians call these incentives corporate welfare. Conservative groups in the state continue to argue that what Maryland really needs is tax reform that would eliminate the need for the state to provide tax breaks or incentives.

However, the state has been recognized as a leader in the oversight of the performance of its tax incentives. The Pew Charitable Trusts, in an article published in September, praised the state for its tax incentive evaluations, and called it a model for how “tax incentive evaluation can help policymakers ensure that incentives are working well for businesses, workers, and taxpayers.”

Baltimore, the state’s largest city, has also divvied out its fair share of incentives to projects, particularly to real estate developers.

Mayor Catherine Pugh voiced support for the city’s continued use of tax credits as a tool to stimulate the local economy. In an emailed statement Tuesday, she said using a variety of incentives will help obtain her goal of attracting retail, restaurants, grocery stores and affordable housing to all of Baltimore’s neighborhoods.

“No one community is more important than another in the city of Baltimore,” Pugh said in a statement.

The city’s biggest and most controversial incentive in 2016 involved the public financing of infrastructure for the proposed overhaul of 260 acres of underutilized industrial land on the Port Covington peninsula in south Baltimore.

Under Armour and CEO Kevin Plank’s private real estate development firm, Sagamore Development Co., intend to turn the property into a global headquarters and a massive mixed-use development. Baltimore this fall approved $660 million in public financing for infrastructure construction on Sagamore Development’s portion of the project — not on Under Armour’s.

But activists pilloried the incentive as a handout to a wealthy developer while many of the city’s neighborhoods struggle with disinvestment. Sagamore offered a $100 million community benefits package, which mollified enough opponents to get the deal through the City Council.

Former Mayor Stephanie Rawlings-Blake, when public financing of the $5.5 billion project was approved in September, hailed it as an important investment for the city, one that will lure an expected $4.4 billion in private investments. Construction on the Under Armour portion of the development is expected to begin early next year.

“The next phase of the Port Covington project … begins today, and its impact will last for generations to come,” Rawlings-Blake said during a news conference in October when she approved the public financing legislation.

In 2016 Baltimore also continued to see an apartment building boom in Baltimore spurred on by tax credits for developers.

Developers for a variety of apartment projects in the city praised the tax credits for making their projects possible. Both Garver Development Group’s Peter Z. Garver, who is building the Highland Haus apartments in east Baltimore, and Steve Gorn, CEO of Questar Properties, which is building the 44-story 414 Light St. property praised the tax credits during groundbreakings for their respective projects.

“It was a game-changing factor, and I would say order of magnitude over $2 million a year,” Gorn said at the time.

But these tax credits also faced critics in the city, such as former Councilman Carl Stokes, who portrayed the incentives as a stopgap measure falling short of addressing the real issue the city’s property taxes which are the highest in the state.

“We have carved out niches for the richest, or the most politically connected developers, generally, in this town, and the smaller developers, or those who do not have the strong connections have been left out,” Stokes said in 2014 while the City Council was debating the proposal to create a 10-year citywide tax credit for developing apartments.

Reporters Bryan P. Sears and Anamika Roy contributed to this story.