Economic gloom and doom in Maryland’s largest jurisdiction

From The Washington Post:

In 1991, defense contractor General Dynamics was looking for a place to move its headquarters and the 200 jobs that went with it. Then-Montgomery County Executive Neal Potter had a ready answer: Not here.

Potter said the county needed “to ease off” creating new jobs — and the problems, like traffic, he said they would bring. The company ended up building in Northern Virginia.

It’s hard to imagine that happening in today’s Montgomery County, where officials are scrambling to court Amazon’s second headquarters and its 50,000 jobs. But the county’s complex relationship to business could pose a challenge for the next elected leader of Maryland’s most populous jurisdiction. A report released Friday says sluggish job and business growth — and rising debt and office vacancy rates — could spell economic disaster for the mostly wealthy county in the not-too-distant future.

“We as a business community have been thinking Montgomery County has been underperforming its economic potential for a long time,” said Charles K. Nulsen III, president of Washington Property Company in Bethesda and a founder of Empower Montgomery, a nonprofit advocacy group formed by business leaders that commissioned the report. “By not paying attention to business creation, we are disproportionately burdening the citizens of Montgomery County with higher taxes to pay for increased population, increased services.”

A group of chambers of commerce, real estate associations and others are trying to push the economy as an issue in this year’s local elections, which will usher in a new county executive and at least four new council members. Because county voters are overwhelmingly Democratic, those leaders are likely to be determined in the June 26 primary, just over eight weeks away.

At a Friday morning forum at the Universities at Shady Grove in Rockville, all six Democratic county executive candidates — three sitting council members, a former mayor, a businessman and a state delegate — will be asked about the findings of the report, which is ominously titled “The Coming Storm” and was researched by the Baltimore-based Sage Policy Group.

It offers gloomy statistics about the county economy, and warns of potentially dire consequences, including higher property taxes and shrinking government services, for the county’s just over 1 million residents. Among the findings:

Despite bursts of development along Rockville Pike, in downtown Bethesda and select other locations, the county overall had only six more businesses in 2016 than it had in 2011 — compared to growth of nearly 6,300 jobs in the state in that period.

The office vacancy rate was 14 percent at the end of 2017 — and no new office space was being built outside of Bethesda/Chevy Chase and Silver Spring. As much as 28 percent of office space was vacant in Kensington and Wheaton.

Private sector jobs fell by 12,511 positions between 2006 and 2016, while public sector jobs rose by 11,603, a net loss overall.

The report also highlighted the “immense local economic dependence on declining federal activity,” pointing out the county’s historic relationship with — and fiscally troubling reliance on — the federal government.

Meanwhile, the report found that Montgomery is “the largest borrower among all Maryland counties,” with $5.9 billion in debt in fiscal year 2016 and with debt service taking up more and more of the county’s budget.

But the report also deviated from the dire predictions to point out some of Montgomery’s greatest strengths — good schools, a highly educated and talented workforce, growing transportation options — which the authors said make it the “finest possible location” for a certain headquarters-hunting tech giant (the landing of which, incidentally, would also help to solve pretty much every economic problem).

(Amazon.com founder and chief executive Jeffrey P. Bezos also owns The Washington Post.)

Absent Amazon, the report recommended several salves, including a move to embrace business, not “merely” tolerate it; reduce energy taxes and impact fees on new development; and increase economic development resources.

“Government regulations seem to be more onerous in Montgomery County than other places in the region,” said Stephen Fuller, a regional economist at George Mason University. “If you want to build a new building, it takes longer to get it approved. Or if you want to get a liquor license or if you want to get an occupancy permit for a new restaurant. The government is bigger in Maryland than it is in Virginia. It’s a philosophical difference.”

But, Fuller added, “Sometimes the differences aren’t enormous, but it becomes the perception.”

As a result, he said, “as the economy grows, more of it ends up in Northern Virginia. Land-use regulations are simpler, the perception is you can go and talk to elected officials and they’ll work with you to make it happen.”

That’s not to say Montgomery hasn’t made strides. Bob Buchanan, chairman of the Montgomery County Economic Development Corporation, cited County Executive Isiah Leggett’s (D) decision to create his organization as an independent entity, rather than a county department, as a smarter way to engage the private sector.

Buchanan also pointed to an increasing sense of regional cooperation, a healthy biotech industry in the county, and, of course, the fact that Montgomery was the only Maryland jurisdiction to land on Amazon’s short­list (several locations in the District of Columbia and Virginia made it too).

“I think Montgomery County is getting some belated recognition that it’s not so hostile,” Buchanan said. “I think it’s too easy to stick with that perception of the past.”

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