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.
Thursday, February 12, 2009
Foolonomics 101
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5 comments:
So, when was the last time you (or the other critics) negotiated an economic development deal? You honestly appear to have no idea what you are talking about. If you had listened to the Council discussion the next day, you would have heard that after the first round of negotiations, there was no communication from Hilton. To most people familiar with this type of negotiation, this generally suggests that the party with whom you are negotiating isn’t particularly serious about the negotiations. Most in the business would assume that maybe, just maybe, Hilton was using Montgomery County as a foil to get a better deal out of Fairfax. Hmmm… do you think the fact that the CEO of Hilton is building a new home in Arlington might also have something to do with his decision? You should stick with what you know about, rather then venture into subjects that you have no clue about. The economic stimulus program that you referred to was never intended to be a job creation program. It was never billed as such. It WAS clearly misnamed as an economic stimulus program, but I think that's been changed to more accurately call it an economic assistance program. It was always billed as a way to assist struggling businesses during these difficult economic times. The cost that you cite is from an article in the Washington Post. (In fact most of your posting seems to be pulled from the Post). The reporter deliberately misrepresented the facts and you bought her misrepresentations. The cost is not up to $50 million – any fees, etc are only deferred, not forgiven. Therefore, it's not a cost -- it's a deferral. In addition, it's unlikely to be anywhere close to a $50 million deferral, given the state of the economy. AND it's a deferral from a separate fund that has no effect whatsoever on the $4 billion budget. Also, if you had looked beyond the Post story you would have seen the many elements of the proposal that will help the small businesses in Montgomery County. Once again, if you’re going to be responsible your postings, you should think about looking beyond the Post. Believe it or not, at least some of the reporters appear to have a bias. The bottom line -- Foolonomics? Cute, but not particularly accurate.
We have enough development here in MoCo and we definitely don't have the money to entice development we don't need.
What, you got something against good ol' homegrown Marriott?
I like Marriott. They're "square dealing" and they contribute a lot back to the community. I remember that for the last few years they've come out in a big crowd to Aspen Hill and totally cleaned up North Gate Park so that it's an enjoyable greenspace for families instead of a trash-strewn jungle crawling with predators.
Do you think that Hilton would have done the same?
This post shows the abject failure of the Montgomery County Government. There are plenty of places where Hilton could have located in District 4, along the Route 29 corridor with easy access to BWI airport. The county can spend $3.2 million to buy an apartment building in Takoma Park assessed at $1.4 million and spend $4.5 million to renovate it, but can't get serious about landing 350 high-paying jobs. Mediocrity knows nothing higher than itself. District 4 should have a councilman who would have flown out to see Mr. Hilton to land this jewel. Better to use homeowners as ATMs than use the power of the county government to land homeowners good jobs.
I don't normally reply to anonymous commenters, but I'll make an exception for "Acadia," who probably works for the Leggett administration - possibly for its tragically misnamed "Department of Economic Development."
1. Acadia may have a point about Hilton leveraging Maryland to get a better deal out of Virginia. But if that's true, one has to ask why Hilton would not seriously consider Maryland. Could it be because of the state's disastrous deterioration in business climate ranking?
2. I've consistently referred to "deferred" or "delayed" revenues, including in this post.
3. In a prior post, I examined every element of the stimulus proposal. I liked the parts that steered more money to small business but found that 9 of the 11 elements had no impact on job creation.
We've gone WAY beyond the Post's reporting on this issue. As for "sticking to what we know," I'll let the readers decide for themselves on the quality of our economics coverage. I will say that I've worked over 14 years in the building trades and I've never heard of a contractor creating a job because he received an extension on a building permit.
Adam. how is it that you can possibly care about the State's disastrous deterioration in business climate ranking?
You're not a closet Republican, are you?
While you're defining "progressive", why not write about the sort of people who think that "progressive" includes people who want Maryland to have policies that support both the consumer and the producer?
But before you write that, you might want to study Confucius's "the Great Learning" (I have removed the ideogram characters in the quote):
The Way of the great learning involves manifesting virtue,
renovating the people, and abiding by the highest good. (...)
The ancients who wished to illustrate illustrious virtue throughout the
world, first ordered well their own States.
Wishing to order well their States, they first regulated their families.
Wishing to regulate their families, they first cultivated their persons.
Wishing to cultivate their persons, they first rectified their hearts.
Wishing to rectify their hearts, they first sought to be sincere in their thoughts.
Wishing to be sincere in their thoughts, they first extended to the utmost of their knowledge.
Such extension of knowledge lay in the investigation of things.
Things being investigated, knowledge became complete.
Their knowledge being complete, their thoughts were sincere.
Their thoughts being sincere, their hearts were then rectified.
Their hearts being rectified, their persons were cultivated.
Their persons being cultivated, their families were regulated.
Their families being regulated, their States were rightly governed.
Their States being rightly governed, the entire world was at peace.
From the Son of Heaven down to the mass of the people, all must
consider the cultivation of the person the root of everything besides. (...)
======
Maryland has become a nanny-state and one given to usurious taxation. The Collective is considered paramount to the individual, and the State superior to the businesses.
Maryland increasingly denies the cultivation of the individual, and thus it declines in relevance to anything that is actually productive.
When Maryland -- and the ruling faction of Democrats -- reverses this course, so shall it reverse its slide into exceptionally bad rankings which dissuade investors from attempting to do business here, when business is almost certainly doomed to failure, at least comparably to the chances of success in almost any other place.
Counteracting all of that would be the True Progressive.
BTW I am just here to make people yark every time they hear that word out of the mouth of "foolio". Simply stated, sometimes it's not enough to point out that Bozo has a big red nose, sometimes it's necessary to be sure that no one can fail to notice that his shoes are way to big, and flop when he walks, and knocks everything over, besides.
"Their hearts being rectified, their persons were cultivated."
--Confucius
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