Tax cut targets research firms Gary would end levy on equipment used to design technology

September 18, 1996|By Scott Wilson | Scott Wilson,SUN STAFF

The Gary administration has proposed legislation that would save Anne Arundel research companies $2.2 million over the next five years by eliminating property taxes on equipment used for designing new technology.

The legislation, introduced Monday to the County Council, is the county's most recent tactic to retain coveted high-tech businesses while attracting companies from outside the county.

If the bill wins support from a Republican-majority council, Anne Arundel will become the third Maryland county to eliminate property taxes on equipment used for research and development, primarily computer hardware and software. Four counties have never levied such a tax.

"Our long-range view is that it's better for us to present a welcoming and supportive place for these companies to expand than to be shortsighted," said Rosemary Duggins, marketing director for the Anne Arundel Economic Development Corp.

The strategy would cost Anne Arundel an average of almost $500,000 in lost tax revenue annually over the next five years, according to administration estimates, an amount equal to roughly a half-cent on the property tax rate.

County finance officials have worried publicly that property tax revenues, which account for most of Anne Arundel's income, rose just 2.4 percent last year, the smallest increase since 1986. County Executive John G. Gary has called that sluggishness one reason county employees have not received raises for three years.

"I think it's ludicrous they would even be considering something like this," said Jim Bestpitch, president of the American Federation of State, County and Municipal Employees, Local 582. "The council needs to look long and hard at this."

Anne Arundel economic development officials say the tax break will more than pay for itself through a better business climate, although no financial projections have been presented.

Duggins said the bill is largely designed to help Northrop Grumman Corp., which received an $11.5 million economic incentive package from the state this month. The company's Linthicum plant, which it took over in January after purchasing a division of Westinghouse, is expected to add 1,500 jobs as a result.

"We are well aware of and support this proposal," said Jack Martin Jr., a Northrop Grumman spokesman.

Three counties, including nearby Montgomery and Howard, have lowered property taxes for businesses. But Anne Arundel would join Prince George's and Worcester as the only other counties to eliminate property taxes on research and development equipment.

"This is not really a deal maker or deal breaker," Duggins said. "It's one of those things that if the location is right and the facility is right, then this could make the difference."

Last year, the General Assembly passed legislation granting companies a tax break on half of the assessed value of research and development equipment. Gary's legislation would extend that tax break to the remaining 50 percent of the property's value.

County businesses spend an estimated $10 million a year on equipment used in designing and building new technology. The bill, which excludes utility companies, sets criteria for what constitutes research.

For example, a computer used to conduct market research in a high-tech company would not be tax-exempt.

"You have a fuzzy line here," Duggins said.

But the savings to business would be tangible. With the state tax break, a company saves $714 in property taxes the first year on $100,000 worth of computer equipment. By extending the exemption, Anne Arundel would save that company an additional $1,190 in taxes the first year.

"Any property tax exemption couldn't hurt," said John C. Smith, general counsel for ARINC, an Annapolis-based company with 1,000 local employees that makes aviation communication equipment.

Pub Date: 9/18/96

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