Critics say Discovery tax break not needed
Feb. 6, 2002
Steven T. Dennis
Staff Writer

ANNAPOLIS -- A proposed $10 million tax break for Discovery Communications has been decried by a few Montgomery County legislators as wasteful corporate welfare, though most county lawmakers support it.

While Discovery has cut its expectations for new jobs at its $200 million Silver Spring headquarters, it is lobbying hard to double its incentive package for its move from Bethesda to $20 million. Company officials argue that they deserve the additional tax break -- which would be spread over 12 years -- because they have paid $12 million in unexpected costs to relocate water, sewer and other utilities buried beneath their new headquarters site.

State Sen. Ida G. Ruben (D-Dist. 20) of Silver Spring sponsored the tax break, which is also favored by the County Council and County Executive Douglas M. Duncan (D). About two-thirds of the cost would be borne by the county, the rest by the state.

Ruben's bill passed the county's Senate delegation by a 7-1 vote and is expected to gain the House delegation's OK on Friday. It then goes to the full General Assembly for approval.

But several Montgomery lawmakers said this week that the legislation smacks of unnecessary corporate welfare at a time when the state is in fiscal straits.

Del. Dana Lee Dembrow (D-Dist. 20) of Silver Spring said it makes sense to offer tax breaks to attract a company, but it makes no sense to give one after the company has already decided to expand in the county.

"Here is a company that is doing what it is doing, regardless of a tax credit," he said. "We're giving them [$10 million] because they're nice people?"

Two of the county's most liberal delegates, Leon G. Billings (D-Dist. 18) and Sharon M. Grosfeld (D-Dist. 18), also criticized Ruben's bill.

"To me it is truly an example of how corporations run the government," Grosfeld said. "This just goes well beyond any legitimate request by a profitable, solvent, multinational corporation."

"It's almost as bad a piece of legislation as I've seen in my 12 years here," Billings said. "The sponsor ought to be spanked."

State Sen. Brian E. Frosh (D-Dist. 16) of Chevy Chase voted against the bill. He said the county and the state should not have to pay for the unexpected costs of moving utilities -- a risk the company assumed when it agreed to the move.

But Duncan said the county had discussions with Discovery several years ago about getting the additional tax break before the company made its final decision to move to Silver Spring. But the company is not eligible for the tax break as the law is currently drawn because its growth expectations have been cut in half.

Discovery, which had planned to expand its work force from the roughly 740 employees at its Bethesda headquarters to 2,000 or more in Silver Spring, now may add only 500 jobs because the economy has stalled.

"The job growth isn't there, so we're trying to find a way not to penalize them because their development is so important to Silver Spring," Duncan said. "It's important that we work with the company that through no fault of their own is suffering due to the national economy."

"Dot-com has come and gone," said Domenick Fioravanti, a senior vice president of Discovery, the multimedia giant that owns cable's Discovery Channel, among others.

But the company is also developing far more square footage than originally envisioned, especially by taking over the former Caldor property.

"We've continued to invest well above the amount that was originally anticipated," Fioravanti said.

Discovery has not threatened to move or scale back its operations if it does not get the tax break, Fioravanti said. The company's footprint will approach 1 million square feet, anchoring the massive downtown redevelopment.

"This company basically believes in community building and agreed to move to Silver Spring," Fioravanti said.

"You don't want a situation where no good deed goes unpunished," added Discovery lobbyist Stephen Z. Kaufman of law firm Linowes and Blocher. The pair spent Monday buttonholing lawmakers in Annapolis.

Taxpayers have invested more than $160 million in Silver Spring redevelopment, according to the county.

Duncan said not passing the tax break bill would hurt the county's image. "I don't want one of the premier companies in the county to be running around saying that Montgomery County can't be trusted," he said. "We've done well with private sector job growth because businesses are telling their peers that this is a good place to do business."

County lobbyist Ben Bialek said giving Discovery the tax breaks would be cheaper than having the county pay for the unexpected $12 million in infrastructure costs up front. The tax breaks are also contingent on the company providing at least 500 new jobs, 700,000 square feet of development and $150 million in capital investment. The breaks also assume that Discovery will have a corporate income tax liability to offset.

Ruben said the company's presence has had a positive ripple effect that far outweighs the tax break.

County Councilman Derick P. Berlage (D-Dist. 5) of Silver Spring said the additional tax breaks are simply a matter of keeping faith with a good corporate citizen.