Foolonomics 101

Last week, the Washington Post reported that Fairfax County beat out Montgomery County to become the new headquarters location of Hilton Hotels. But the Post did not report Montgomery’s miserly contribution to Hilton’s incentive package, a fact that came out in Monday’s County Council Planning, Housing and Economic Development (PHED) Committee meeting.

The Virginia and Maryland state governments offered competing incentive packages to Hilton, which is relocating from Beverly Hills to the Washington area. At stake are more than 325 jobs, many of which will be high-income since they are associated with a headquarters facility. Virginia’s package totaled $4.6 million in grants, including a $1 million grant from Fairfax County. Maryland’s package totaled $2.4 million, of which $1.4 million was a tax credit and $1 million was a loan to be converted into a grant if Hilton created at least 325 jobs. What was Montgomery’s contribution to the state’s incentive package?

Montgomery bureaucrats admitted to the amount on Monday: $150,000. That’s right, about $850,000 less than Fairfax. That’s less than the value of one middle management job at Hilton. How is Maryland’s Department of Business and Economic Development supposed to take Montgomery seriously the next time its county government says it wants jobs?

People can have a good faith debate over whether tax incentive competition between states actually creates jobs or merely enriches corporate bosses. But it makes no sense for Montgomery to try to play this game if it does it so badly, and loses in such humiliating fashion to Virginia.

Perhaps we’re being unfair. The county government does have a job creation proposal on the table: its “stimulus plan.” The plan delays a variety of fees and relaxes approval standards for development. It could cost anywhere from zero to $50 million in deferred revenues (no one knows the real cost) at a time when the county really needs money, but it may not create a single job.

So let’s see: the county won’t spend more than $150,000 to get 300+ high-paying international headquarters jobs. But it will delay up to $50 million in badly-needed revenues to get zero jobs.

Foolonomics, people. One-oh-one.