Time to end secrecy over corporate welfare in Md.

December 01, 2004|By JAY HANCOCK

FIRST the government taxes you. Then it gives your money to somebody else and calls it economic development.

Would it be too much to ask government to reveal what it's doing?

Almost 15 years after the Soviet Union imploded from its own incompetence and secretiveness, central economic planning is alive in Maryland.

There's Baltimore Development Corp., a $13 million public-private agency that orchestrates millions in annual tax incentives, property seizures and contract awards. There's the Maryland Department of Business and Economic Development, a $96 million, 300-employee agency that picks statewide business winners and reallocates capital accordingly.

There are low-tax enterprise zones, empowerment zones, the Sunny Day giveaway fund, the Maryland Small Business Development Financing Authority, the Maryland Industrial Development Financing Authority, county development agencies, training grants, loan guarantees, infrastructure grants and "payments in lieu of tax."

Is this the best use of scarce resources? We have little idea.

Like many economic development outfits around the country, Maryland's corporate-welfare agencies operate under disclosure procedures that seem anachronisms in a 21st-century democracy. They claim that privacy is crucial for protecting development negotiations and shielding business trade secrets, but the shrouds over their activities spread far beyond those purposes.

The latest eclipse comes from Baltimore Development Corp., which claims exemption from public oversight - even though almost all of its operating budget comes from government.

As chronicled by The Sun's Sumathi Reddy, nine businesses about to get shoved aside by downtown redevelopment have sued BDC, arguing that the agency's unannounced private meetings and refusal to release documents violate Maryland's open-government laws. At stake is the fate of the businesses, the awarding of millions in contracts and the future of downtown's west side.

This kind of concealment is a problem in many states where officials have tried to sidestep disclosure rules by shifting economic promotion to private, nonprofit corporations, as Baltimore has done.

BDC has been assailed for years for its lack of total, timely disclosure, and perhaps the lawsuit will shed some light. John C. Murphy, attorney for the plaintiffs, believes precedent can be found in a 1999 Court of Special Appeals case forcing records disclosure from a private corporation operating a city park in Salisbury.

BDC "is purely a creature of the city," he says. "There is no other economic development agency" for Baltimore.

But BDC is hardly Maryland's only problem with economic-development candor. Over at DBED, the state development agency, they're still trying to accurately report job creation, tourism spending and other results they take credit for.

First of all, the premise is wrong. Much or most of this activity would take place even without an economics ministry.

But even if you assume that it can legitimately claim that credit, DBED has had trouble getting the numbers right. A few weeks ago, a state audit found that for fiscal 2003, the agency reported inflated figures for jobs created, jobs retained, investment and exports. The report wasn't just for bragging; the General Assembly used it to help determine DBED's budget.

The department blamed the discrepancies on computer problems and promises to do better. Unfortunately, that isn't enough. Even with perfect disclosure under today's reporting mechanisms, Marylanders would be in the dark over how economic-promotion money is spent.

Grants and loans are only a small part of the state's development budget. What about job-creation tax credits? Research and development credits? What about enterprise zone tax discounts? Payment-in-lieu-of-tax deals granted by Baltimore?

It all comes out of taxpayers' pockets, and nobody knows what it adds up to. Good information is paramount in economics, but for economic development we don't have it.

We can do better. Last year, Illinois approved a "unified economic development budget," requiring the reporting of all corporate incentives in one spot.

Maryland state Sen. Gloria G. Lawlah, a Prince George's County Democrat, introduced a similar bill for this year's General Assembly. It was referred to state analysts for study, and their report is due this month.

"I don't think we've ever asked them to do this before, to put everything in one place," says Lawlah, who sits on the Budget and Taxation Committee. "We started looking a little harder at what do we do. Who do we really give the breaks to? How much are we really giving away?"

Good questions.

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