To learn how a trickle of taxpayer subsidies for demanding corporations has turned into a torrent, look no farther than Maryland.
After neighbor states began poaching in it for employers in the early 1990s, Maryland quadrupled its "Sunny Day" fund of grants and cheap business loans. The fund grew from $5 million in 1995 annually to more than $20 million, and its giveaways soared from $500,000 or $1 million per deal to more than $10 million in the case of Northrop Grumman Corp.
In 1997, Maryland began rebating taxes for companies adding jobs or moving them from elsewhere. This year, lawmakers layered on new benefits, adding extra subsidies for employers locating in Baltimore or other distressed localities.
All this was added to an already generous menu of low-cost loans, site-development assistance, training funds, high-tech investment capital and other incentives.
And those are just the state giveaways, which exceed $50 million a year, documents show.
Cities and counties have quietly joined the jobs battle. Thanks to state laws passed in 1996, last year and this year that offer wide leeway for local handouts, Maryland municipalities are stocking their own incentives chests, eroding their own revenue bases, altering their own tax codes and fighting with their own neighbors -- one company at a time.
Baltimore, which is projected to book a $153 million budget deficit over the next four years, has been perhaps the most adventurous.
Borrowing a concept that has sapped municipal finances in South Carolina and other states, the city is eliminating property taxes for certain businesses and allowing them to pay a negotiated "payment in lieu of tax."
Three of these PILOTs, which will deprive Baltimore of more than $85 million, have been approved. The PILOT for H&S Properties' downtown hotel, recently upheld by Maryland's Supreme Court, is valued at $75 million alone. At least two other Baltimore businesses have applied for PILOTs.
The city and at least two other municipalities -- Baltimore and Montgomery counties -- award cash bounties or conditional grants to employers that jump boundaries or threaten to. Many others supply different inducements -- low-interest loans, subsidized rent, exclusive tax cuts, low-tax Enterprise Zones.
"We're not so interested in stealing from our neighbors," said Richard Story, economic development chief for Howard County. "When an inbound company is looking to locate into the region [from out of state], then you get some competitive dynamics."
Actually, in a process that mirrors what's going on nationally, Maryland localities have been using incentives to steal each other's jobs for several years.
Howard County is giving MICROS Systems Inc. and its landlord an exclusive, $400,000 property tax break for moving its headquarters from Prince George's County this year.
Howard County bought Allied Signal's vacated building for $7.5 million to keep the company from jumping to the county next door.
Montgomery and Frederick counties fought angrily three years ago over MedImmune Inc.'s manufacturing plant, which ended up in Frederick with more than $1 million in incentives from the county.
Both Howard and Prince George's counties tried to get Cellmark Diagnostics Inc. to desert Montgomery County. Cellmark stayed put, but only after Montgomery wrote it a $45,000 check.
Sylvan Learning Systems moved from Howard County to Baltimore in 1997 after its rent was subsidized with more than $1.85 million in tax breaks for its landlord. Prince George's County enacted new, targeted tax breaks for high-tech businesses after next-door Montgomery County lured away Digene Corp. and Prince George's officials had reported that seven other firms had threatened to leave.
Pub Date: 10/10/99