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August 11, 2015

Just How Business Friendly Will Frederick Be?

Farrell Keough

It’s a new day in Frederick County (and now the City of Frederick) as our new government seems to be moving toward a ‘business friendly’ environment! This move is so replete with ironies that it is difficult to take it seriously.

County Executive Jan Gardner has put forward an additional County code [Article XIII: Commercial and Industrial Tax Credit, Sections 1-8-441 through 1-8-445].Very simplistically, this gives a “commercial or industrial manufacturing, fabricating or assembling facility” a 60% tax break for 10 years. The facility must spend at least $5 million and hire 25 employees.

One will quickly remember the bitterness the Gardner Administration had against the “open for business” signage the Blaine Young Board of County Commissioners forwarded and Gov. Larry Hogan embraced state-wide. Yet this meager attempt at enticing outside businesses seems intent upon promoting just the viewpoint the Gardner Administration rejected.

Another (and quite amazing) irony is how vehemently opposed the Gardner campaign was to TIF (Tax Incremental Financing), which continued to bring in taxes on such a location and paid for needed infrastructure, yet this plan has the ability to virtually reduce all taxes for 10 years (anything beyond a 60% tax break would require a vote by the County Council). The proposed TIF by the previous Board of County Commissioners would still have brought in the entire tax assessment (prior to a build out) while this proposal will immediately lower a chosen businesses taxes by 60% or more!

In a recent Daily Record article, Maryland Comptroller Peter Franchot noted: “I’m not a big fan of cutting taxes right now… Let’s stay where we are and let’s manage our way forward.” Mr. Franchot also noted: “I’d love to cut taxes, I’m a politician.” How very ironic that one of the state’s leading Democrat leaders – someone completely immersed in government debt and revenue sources – is so adamantly against proposals like this.

We’ve seen various incentives like this fail to keep needed business in Frederick County and Maryland in general – one will quickly remember Bechtel and their exit from our vicinity. If a business decides in year 9 and 7 months to leave the area, there is little-to-no recourse – and certainly no incentive – to retain them. Yet, the impact from this proposal may harm long existing businesses in our area.

After reaching out to various business leaders, a few major points regarding these types of governmental schemes to attract new employers were presented.

This credit only applies to those areas zoned commercial or industrial. A significant portion of the building in Frederick County is mixed use – an area of both residential and commercial usually involved in the many service professions. While this additional code is narrowly focused, it neglects a large employment area growing in this area.

Consider an existing employer in Frederick – someone who makes widgets. Suppose they currently employ more than 25 workers. They are totally neglected with this proposal!

More importantly, consider a competitor financed by an investment group from outside this area who would benefit greatly by this proposal – potentially putting a longtime Frederick employer out of business. And with an outside investment group, this new business has no real roots here and may well move its facility after this decade-long benefit which ‘skews’ the playing field and harms longtime employers.

Finally, one of the most important costs to a business is training – it generally takes a business from six months to a full year to bring an employee to a point where she/he is competent enough to bring benefit to a company. This is the real expense in business – not simply an expansion or employment of more employees.

Our numerous local businesses value their employees greatly and desire to keep them. Consider how many local (and long-term) businesses have gone under in Frederick County! These businesses have done everything within their power to keep their employees – people who pay these local taxes and keep our county revenues paying for necessary government services. Yet, we are seeing NOTHING from the Gardner Administration reaching out to help them continue.

To make matters worse, we are seeing increases in fees and regulations upon our local businesses by government. These increased costs affect how many employees one can hire and keep employed, yet these increases are not accounted when considering government effects on local business.

Rather than move toward these business schemes that Jan Gardner opposed when running for county executive, this new administration (and the County Council having the legislative authority they have yet to embrace) should find mechanisms to help our existing local businesses survive and grow while employing Frederick County residents! Glitzy proposals like this have a history of failure and nothing in this proposal would limit that historic precedent. In short, ‘County Executive Gardner, tear down this wall of government harming our existing businesses!’


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