ANNAPOLIS – Montgomery County’s House delegation Friday voted to double a planned tax break for Discovery Communications’ new Silver Spring headquarters, despite the fact that the company won’t be bringing a promised 1,000 new jobs to the area.
The delegation approved tax breaks worth $15.6 million for the development, instead of the $7.8 million that the company would qualify for automatically.
The vote means the legislation will now move into the House of Delegates committee system. If passed by the General Assembly, the bill would change the requirements in Montgomery County to receive an enhanced tax credit, allowing the media giant to qualify. Using the enhanced credit had been part of the original deal county planners made with Discovery to secure its moving to the area. The county would foot two-thirds of the $15.6 million in tax credits and the state would pay the rest.
Since the original deal was struck, the economy soured and the company was forced to shed its Internet arm. Thus it could only promise to bring 500 new jobs, lower than the number required for the enhancement.
Without the enhanced credit, Discovery was only eligible for the typical credits given to companies moving into designated enterprise zones — about $7.8 million, split evenly by the state and county, total over 10 years.
Because Discovery’s new headquarters building is considered the key to a revitalized Silver Spring, county and state lawmakers said the company should still get the tax credits arranged in their previous commitment.
Without them, said Delegate Peter Franchot, D-Montgomery, there would have been no movement by other businesses into the area.
Montgomery County Executive Doug Duncan said he supported the move because he wanted to keep the original commitment and recognized Discovery incurred increased costs to build in the area.
Discovery of unexpected underground pipes and cables added $12 million to the company’s moving costs, said Discovery spokeswoman Pat Lute, bringing the total to nearly $200 million. Local governments, she said, typically pick up the cost of moving utilities.
“(The tax credits) allowed the city and state to minimize up-front costs” of building the project, said county lobbyist Ben Bialek.
But some lawmakers objected to increasing tax credits in tight fiscal times for a company that was already doing well.
There is an expectation that government should subsidize corporations and it is an “inappropriate mindset,” said Delegate Sharon Grosfeld, D-Montgomery, discounting talk of the company’s increased risk by locating in the area. “I’m sure that their corporate executives did cost/benefit analysis of locating there and found that the benefit far outweighed the risk,” she said. While Grosfeld said she’s “grateful” the company is coming to Silver Spring, she said her thanks, rather than tax credits, should be sufficient. Other needs – education and health care among them – are more pressing than Discovery’s relocation, said Delegate Dana Lee Dembrow, D-Montgomery, who opposed the bill. The company already qualified for generous tax breaks, he said. Discovery initially received $2.4 million in state Sunny Day grants and $600,000 from the county, and the company would be eligible for $7.8 million in tax credits under state enterprise zone benefits. “It is the most outrageous giveaway at a time when we’re in a financial crisis,” said Delegate Leon Billings, D-Montgomery. However, Sen. Ida Ruben, D-Montgomery, pointed out there would be no revenue loss if there was no revenue to collect. Ruben, the bill sponsor, said Discovery’s commitment was critical in the success of the revitalization effort. She noted that the land chosen by Discovery had been vacant for years. The Senate delegation approved the legislation earlier, 5-1, with Sen. Brian Frosh, D-Montgomery, on the losing end. “It’s corporate welfare,” Frosh said. There is no need to bribe companies to stay within the state or county. Sen. Chris Van Hollen, D-Montgomery, abstained from voting due to his law firm’s connections with Discovery. The only other company to have used the law was Marriott three years ago. The company obtained about $40 million in tax credits when it appeared to be ready to relocate outside the state. It came out later that the company had already planned to stay in Maryland when the tax cuts were approved. Although state lawmakers tend to defer to local delegations on local issues, Sen. Robert Neall, D-Anne Arundel, said legislators will take a closer look at this bill since it involved state funding.
Although some lawmakers have received campaign contributions from the media giant or the law firm that represents it, those contacted denied that the contributions had any impact on their decisions.
Ruben, who took $1,800 since 1999, said she became interested in the bill when working with Discovery to obtain the arts and entertainment designation for the area.
Duncan, who accepted $2,000, said he ran for office on revitalizing Silver Spring.
And Franchot, who took $3,000, said there was no connection between the two issues.