Giving state aid too randomly?

Random House incentive: Grant raises questions since parent firm signaled it was here to stay.

June 04, 1999

MARYLAND'S $2.5 million grant to keep the Random House book distribution center in Carroll County won't rival the incentive package recently worked out with Marriott International to keep the hospitality firm's headquarters in Montgomery County.

But the relatively modest "Sunny Day Fund" grant to the book publisher (through German parent firm Bertelsmann AG) raises questions about the necessity of the public incentive.

Random House, which employs nearly 1,200 people in Westminster with an annual payroll of $34 million, completed an $8 million expansion of its distribution center only last year. Bertelsmann announced seven months ago, with no equivocation, that the Westminster facility would become the sole national distribution center for its titles. Bertelsmann bought Random House more than a year ago. Months ago, the company submitted plans for a new, 300,000-square-foot warehouse, increasing capacity by 30 percent, with no hint of withdrawal from Maryland.

Now the state's economic development chief claims that Maryland "ran a very significant risk of losing" all jobs at the facility, Carroll County's largest private employer. The grant, along with $1 million in state and county worker training funds, was essential to keep Random House here, officials say.

Random House pledges to spend $30 million over three years to expand and renovate the warehouse complex. It commits to retaining at least 900 employees at the distribution center. Taxes to the state will exceed $1 million a year. All are good reasons to keep the company happy.

The question is whether Random House, given its recent and planned investments in the plant, would have pulled up stakes in Westminster without the grant, and whether the state is raising expectations among businesses that they, too, should put a hand out if public money is to be had.

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