By Adam Pagnucco.
Late last week, travel news site Skift broke the news that Bethesda-based Marriott International had notified its employees of pending layoffs. Later, the story was updated to include Marriott’s notification to the Maryland Department of Labor that it was laying off 833 employees as of 1/3/25. The layoff was characterized as “mass layoff – no recall.”
But wait. Eight years ago, when Marriott began its departure from its western Bethesda campus, the state and county governments announced $62 million in taxpayer subsidies to relocate the company to Downtown Bethesda. At the time, the deal was touted as retaining 3,500 jobs. Now that the job count will be substantially less, will Marriott keep the money?
The terms of Marriott’s agreement with the county are contained in budget documents sent by County Executive Ike Leggett to the county council in December 2016 and October 2017. The county gave Marriott a conditional grant of $22 million, disbursed over four years from FY19-22, as part of a capital improvement project for its Downtown Bethesda headquarters. In return, Marriott agreed that it “intends to establish, maintain or assign at least 3,250 full-time permanent employees and 250 part-time direct or contract employees in Montgomery County, Maryland.”
The grant has a conditional conversion clause specifying this: “According to the following performance criteria, the County will permanently forgive all or part of the $22,000,000 grant, or all or part of the grant will convert to a loan bearing an annual interest rate of 3 %.” The performance requirements state:
The Recipient must employ an average minimum of 3,250 Eligible Employees and 250-part time direct or contract employees (the County will accept up to a 125-position variance) at or assigned to the Recipient’s offices in Montgomery County, Maryland at each Measurement Date during the term of the Grant. The number of required employees will be subject to reduction in the event of a force majeure event that materially and adversely affects the lodging industry. Employment will be measured annually as of each Measurement Date, using a simple average of that Measurement Date and all prior Measurement Dates, with employment reports due to the County by March 31st of the following year, with the first Measurement Date being December 31, 2017, but the first annual employment measurement number being the average of the two calendar years 2017 and 2018.
The grant then has an early forgiveness clause allowing Marriott to keep the subsidy if it meets its performance requirements.
If the Recipient has maintained the average annual minimum 3,250 Eligible Employees and 250 part-time direct or contractor employees as of each Measurement Date through December 31, 2022, then no later than March 31, 2023 the County will forgive the $5,500,000 annual grant disbursed in 2018. If the Recipient has maintained the average annual minimum 3,250 Eligible Employees and 250 part-time direct or contractor employees as of each Measurement Date through December 31, 2023, then no later than March 31, 2024 the County will forgive the $5,500,000 annual grant disbursed in 2019. If the Recipient has maintained the average annual minimum 3,250 Eligible Employees and 250 part-time direct or contractor employees as ·of each Measurement Date through December 31, 2024, then no later than March 31, 2025 the County will forgive the $5,500,000 annual grant disbursed in 2020. If the Recipient has maintained the average annual minimum 3,250 Eligible Employees and 250 part-time direct or contractor employees as of each Measurement Date through December 31, 2025, then no later than March 31, 2026 the County will forgive the $5,500,000 annual grant disbursed in 2021. If the Recipient was not required to make any repayments during the grant term, then the County will forgive 100% of the remaining grant at the end of the grant term so long as the Recipient satisfies all grant conditions. At the request of the Recipient, the County will provide prompt written confirmation of the forgiveness of any portion of the Grant.
And so this provides for a rolling set of employment targets based on annual averages. If Marriott meets those targets, it keeps the money.
Last year, I reported that Marriott had cleared the hurdle for its first early forgiveness payment. However, its six-year average employment (3,587 employees and 350 contractors) was not much higher than its target (3,250 employees and 250 contractors). That’s because it laid off about a sixth of its headquarters staff early in the pandemic. Depending on the timing of its new layoffs, it’s conceivable that Marriott could fall short of its employment targets and not qualify for one or two of its last tranches of forgiveness for its county subsidy.
Now let’s put that into perspective: Marriott earned $3.1 billion in net income last year. It can afford any liability it owes to the county government. The real consequence applies to the county’s economy. Marriott’s headquarters was once touted to host roughly 5,000 employees and now it may have around half that count. And because this is a Fortune 500 headquarters, the lost jobs likely pay well into six digits. That’s a hit on income tax revenues. It’s also a hit on local businesses.
I have asked the county government about the status of Marriott’s conditional grant. When I get an answer, I will post it in a follow up.