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Working & the Economy

Business Group Issues Another Warning About Sluggish Montgomery Co. Economy

Anirban Basu, chairman and CEO of the Sage Policy Group.

A pro-business group is again sounding alarm bells about Montgomery County’s economy, warning that sluggish growth and high taxes are making Maryland’s largest and wealthiest subdivision a less attractive place for private-sector investment.

“Slow economic growth is among the reasons that many Montgomery County stakeholders fret about the community’s future,” said Charles Nulsen III, a prominent developer and the founder of Empower Montgomery.

“They also wonder when fiscal strains will become so burdensome that quality of life will be sacrificed. This report stands for the proposition that the period of constrained quality of life has already begun.”

Empower Montgomery, a non-profit organization made up of business community activists, released a report last April by economist Anirban Basu, head of the Baltimore-based Sage Policy Group, that it attempted to use as leverage in the Democratic primaries for county executive and County Council seats. The Washington Post, which often aligns with Montgomery County development interests, used the study to guide its editorial endorsements in county races.

An updated version of the report, out Tuesday morning, concludes that little has changed from a year ago. It urges the county’s new leadership — including County Executive Marc B. Elrich (D) and a largely new County Council — to heed the warnings about the dangers the county is facing if it continues on its current course.

The new document includes three scenarios in which hypothetical companies — a software-development company, a “large regional corporate headquarters” and an “independent clothing store/retailer” — consider whether to move to Montgomery County or to Fairfax County, in Northern Virginia.

In each case, the authors conclude, the hypothetical firms would pay similar corporate taxes. But the firms’ workers would pay far more in individual taxes in Montgomery.

“[O]nce one considers personal income tax liabilities, a Fairfax County location emerges as far more economical,” the report found.

Data in the report show that economic activity in the rest of Maryland is more robust that what’s occurring in Montgomery, and that Montgomery is being out-performed by Washington, D.C., and other communities in the capital region.

“Many years of being outperformed by proximate jurisdictions inside and outside of Maryland along the dimension of economic development has left Montgomery County with a weakened fiscal position and a growing inability to support quality of life through spending on education, transportation, public safety, and health and human services,” the report concludes.

Basu makes several recommendations for jump-starting Montgomery County’s economy:

— Grow the White Oak and White Flint areas by improving infrastructure, offering “substantial” tax breaks and creating “permit-expediting zones”;

— Ending the county’s liquor control monopoly;

— Building “a marquee STEM high school” in the White Oak area to attract employers and families to the eastern portion of the county;

— Reduce county reserve funds equal to AAA-rated Arlington County, Va. (5 percent reserve versus 10 percent) to free up $269 million to build schools in communities that have or are facing development moratoria; and

— Lower the tax burden businesses face in Montgomery, to make the county more competitive with Fairfax.

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Business Group Issues Another Warning About Sluggish Montgomery Co. Economy