Proposal to exempt Lockheed Martin from hotel tax sparks grumbling
Montgomery County would lose $450K annually from Bethesda military contractor
When would a giant military contractor need to apply for an exemption from a hotel tax?
The answer: When that contractor is a company that has boarding facilities on its campus for visiting employees.
So a Montgomery County Council proposal that mirrors a state law has some wondering why the county is willing to forgo $450,000 annually in taxes without any apparent return.
County Executive Isiah Leggett (D) introduced a bill July 27 that would exclude such buildings from the county's room rental and transient tax, levied against any structure that temporarily houses people.
The county has a 7 percent transient tax rate on income generated from room rental.
The bill, said Michael Faden, the council's senior legislative attorney, applies to one building in Montgomery County: Lockheed Martin's Center for Leadership Excellence, next to the company's headquarters on Rockledge Drive in Bethesda, which paid roughly $450,000 in such taxes to Montgomery County during its first year of operation.
Critics say the county can't afford to give up revenue following the passage of a budget in which service cuts and tax increases were needed to reduce a roughly $1 billion budget hole.
"I can think of no way that this legislation benefits the citizens of Maryland or Montgomery County and no way that it can be justified," said Jean Athey, coordinator for Peace Action Montgomery, a local political action group. "It makes absolutely no sense and is an insult to the working people of our state, all of whom pay their taxes."
The county bill mimics a new state law that exempts such structures from the state's 6 percent sales and use tax. The bill's fiscal note, signed by Michael Sanelli, a fiscal analyst for the Department of Legislative Services, states the Center for Leadership Excellence is the only structure excused from the tax.
Rob Fuller, a spokesman for Lockheed, said his company requested the county council consider the legislation because company officials thought the center was not being properly assessed. He said because the company internally charges for the rooms, it has been subject to the tax, which applies to income generated from room rental.
"This would not be a tax incentive for Lockheed Martin, since our employees are not paying for the lodging, we are simply allocating costs internally," he said. Lockheed employs 112 county residents at the center.
Del. William Frick (D-Dist. 16) of Bethesda said he sponsored the bill at Leggett's behest.
"They told me about it and I supported to bill to stop an unfair tax," Frick said. "Because if you look at it, they shouldn't be paying this tax."
Lockheed paid $340,000 in sales and use taxes to the state in 2009, the first year the 300,000-square-foot conference center and lodging facility opened, the note states. The center has 183 lodging rooms to house visiting employees.
Defenders of the bill say it is another way to encourage mix-use development in the county's urban centers and promote development of larger businesses in Montgomery County.
"We want to create a dynamic that allows people to live and work in the same area," said County Councilman Michael J. Knapp (D-Dist. 2) of Germantown. "We want to encourage an environment where businesspeople do not have to travel out of the county for work."
Tina Benjamin, director of special projects for the county's Department of Economic Development, said the measure is an incentive for large corporations to house their headquarters and training facilities in the county. She said such businesses represent more than 60 percent of employers in Montgomery County.
"You can't just say we're going to lose $450,000, that's not right. ... It's about generating the kind of jobs these kinds of operations bring with them," she said.
A public hearing on the bill is scheduled for 1:30 p.m. Sept. 21 at the County Council, 100 Maryland Ave., Rockville.