Wednesday, January 10, 2018

Discovery move is all about why Knoxville beats MoCo in business climate

Discovery Communications is moving from Silver Spring to New York City because it is a content company? Not quite. Unless you believe they film their Shark Week programs in giant water tanks on the seventh floor of their Silver Spring headquarters - as many embarrassed Montgomery County elected officials apparently do. Put aside the spin in Discovery's press release, and carefully study their public statements to media yesterday, and you'll find the real story here is A) why Knoxville has a better business climate than Montgomery County, and B) the big Discovery "move" may actually be a big layoff of extraneous workers, as the company merges with Scripps.

The County's spin, of course, is that there "was nothing Montgomery County could do to retain Discovery." Discovery is a content company! They need to be near other content and advertising companies in New York! Aren't taxes terrible in New York City? Isn't the cost of living even higher in New York City?

Ah - but there's the key point. Discovery's move isn't about New York in the end. Analyze Discovery's public statements, and you find there's no certainty as to how many jobs are going to New York City. Some key high-level positions had already been moved to Discovery's current New York base of operations. Some positions at Scripps in Knoxville will also be moved to New York in 2019.

Scripps already has over 1000 employees in Knoxville doing a lot of the business and administrative jobs that many Discovery employees are doing now in Silver Spring. Again, read Discovery's statements carefully - they don't mention x-number of jobs moving from Silver Spring to Knoxville (or to New York). It could be that Montgomery County not only suffers the shame of losing one of its few Fortune 500 companies, but almost certainly also winds up with hundreds of unemployed Discovery workers as a result. Knoxville will gain all of the jobs Discovery needs from Silver Spring, but not likely all 1300.

Knoxville has everything Montgomery County's elected officials keep telling us we don't need - lower taxes, suburban living, and highway infrastructure. Discovery's press release noted "infrastructure" as a key reason they chose Knoxville. It's very easy to see why:
Discovery's new HQ in
Knoxville is right at an
interchange with I-40
The new Discovery campus in Knoxville is right on Interstate 40, a major cross-country route from California to North Carolina. In fact, they've got an on-ramp right next to them.
Discovery's new Knoxville HQ
is only 18 minutes by car from
the airport
Discovery's future Knoxville campus is also only 18 minutes by car from McGhee-Tyson Airport. Try getting to an airport in 18 minutes from Montgomery County (Hint: You can't).

Tennessee has no income tax. Property taxes are about half of what they are in Montgomery County, even on a million-dollar home. The Volunteer State's sales tax rate is 7%. There is no estate tax, and after a recent change in Tennessee's tax law, the "Hall Tax" on interest and dividend income is being phased out by 2021. The latter change is simply the capstone on why Tennessee's tax structure is so business (and worker) friendly. Robin Ficker was absolutely correct yesterday when he cited taxes as a factor in the Discovery move.

When you consider that neither Discovery, nor New York Gov. Andrew Cuomo, cited any specific number of jobs moving to New York yesterday, the picture becomes more clear. Some key positions may well move to New York, and Cuomo and Mayor Bill Blasio can celebrate winning the "global headquarters."

But Discovery is the real winner here. By moving the real nuts-and-bolts of their company to Knoxville, they and their employees (however many actually get moved) will both save bigly on their annual tax bills. Significant layoffs that would have been bad publicity for the company in Silver Spring now get hidden and deodorized by a "big move" and merger.

Montgomery County, as usual, is the real loser. Not only has no major corporation relocated its headquarters here in twenty years, but now we've lost one of the few Fortune 500 companies we had.  We've lost the taxes Discovery and many of their employees paid.

This is a major financial blow to Silver Spring, as well. Residential buildings continue to replace workplaces in downtown Silver Spring at a rapid pace. There are now fewer workers eating lunch at restaurants as a result. Residents of new apartment buildings in Silver Spring are dining out for lunch in downtown Washington, Tysons, and other growing job centers in Northern Virginia. Turning the Discovery HQ into an apartment building won't help matters.
Discovery's new low-rise,
suburban office park campus
in Knoxville (Google Maps)
If you look at the new Discovery national headquarters campus in Knoxville, it's just that - a suburban office park campus. Nearby are roads and commercial strips that look like Rockville or Gaithersburg. Much like Apple, Google and other successful corporations, Discovery has traded urban for suburban.
It looks more like Rock Spring
than downtown Bethesda -
adjacent water bodies included
Just beyond either side of the suburban commercial area where Discovery will be are single-family home neighborhoods along tree-lined streets. Sure, certain companies are willing to take a financial hit to be "downtown" on a transit station. Discovery obviously isn't one of them, and neither is Apple or Google. Montgomery County's office parks aren't the problem - it's our anti-business County Council, taxes and gridlocked transportation system that are the problems.
Single-family homes on
tree-lined streets near the
new Discovery HQ in
Knoxville (Google Maps)

Montgomery County can lower its taxes. After throwing record amounts of money at Montgomery County Public Schools in recent years, and the results only getting worse by the year, we know spending money is not the solution to the decline in our public schools. Wasteful spending was epitomized last year by the Council spending over $20000 on a security camera system I was able to find for less than $1000 online - including installation. Imagine how many other un-itemized expenditures like this one there are in the operating and capital budgets, and the potential for cuts becomes crystal clear.

Attempts to blame Gov. Larry Hogan for the Discovery debacle only open the door to blaming our County Council for the loss. "The first County Council to lose a Fortune 500" certainly has a nice ring to it. When apologists say, "We were going to lose Discovery no matter what the incentive package was," they are actually correct. Without a business-friendly tax system, without a new Potomac River crossing to provide an 18-minute trip to the airport, without a functioning and complete master plan highway system, and without elected officials who understand international business in the 21st century, Montgomery County is always going to be the loser.


  1. ...yes, TN employees are cheaper than MD employees. You didn't need 3000 words to point that out. Makes sense from Discovery's point of view - the industry is struggling and this merger buys them some time w/cost-cutting measures.

    Not every company can afford the DC/MoCo employee premium; we all know and accept that. Sucks, but it's better than the alternative: if I woke up tomorrow with a TN salary then THAT would be worth a 3000 word rant!

    1. Have you noticed we have a structural budget deficit, and could use more commercial tax revenue from all of the companies who "can't afford the DC/MoCo employee premium (aka high cost of living thanks to the MoCo Council tax policies)"?

  2. "The Volunteer State's sales tax rate is 7%."

    That doesn't include the local sales tax. Knox County (Scripps location) has a 2.25% local rate on top of the 7% state rate, for a combined 9.25% - over 50% higher than MoCo. Way to do your research, Robert. You're so uneducated on these topics you don't even realize when you're undercutting your own argument.

    1. 5:41: You're the uneducated one, who doesn't realize that even with 9.25% sales tax, you would still end up paying far less taxes than in Montgomery County.

    2. "you would still end up paying far less taxes than in Montgomery County."

      Yeah, because your Knoxville salary is a third of what the DTSS HQ paid. What a deal!

  3. Try to keep valuable employees as you consolidate operations to a single location by:

    1. moving them to MoCo, where 500K buys you

    5 Photos
    Map & Location
    Street View

    Own a penthouse! 2 level unit 2BR/2BA plus garden terrace with hose hook up. Historic exterior with updated interiors that retain many historical treatments. Top floor with windows on 3 sides. Garage parking included. Brand new hardwood floors and many upgrades. Feels like another world yet convenient to 2 Metros. DC's most unique condos. Pets OK ! Active for showing, 1/7 Open house. 1/14, 2-4.


    2. Moving them to Knox Co., where 500K buys

    Best Buy in Neighborhood. Overlooking entire play of par 3 #16. This home offers one level living at its best plus Lower Level featuring Rec Rm, full kitchen, bedroom, full bath and office. Main Level offers 10ft ceilings, Master Bedroom plus 2 additional BR's. Island Kitchen opens to Breakfast Area & into the Keeping Rm with Fireplace. Formal Dining Rm flows to Great RM area. Screened Porch adjoins canopy covered deck overlooking the golf course. LL features abundance of storage plus separate wkshp area. Ready for your Move-In.

    Gee, that hose hookup would be so much more appealing if the county would just lower the tax rate a bit.