Donald C. Fry: Climate change needed for competitive edge

The announcement last April that Northrop Grumman was selecting Virginia over Maryland and Washington, D.C., as the new location for the defense industry giant’s headquarters struck a nerve among Maryland’s media, elected officials and the business and economic development communities.

Maryland put forth a very competitive bid for Northrop Grumman and was not likely to prevail for reasons apart from the competition itself. But it was a good effort. Nevertheless, media commentators questioned the nature of Maryland’s business climate.

Elected leaders in Annapolis pointed out that a new headquarters amounts to a gain of only 300 jobs for Virginia, compared to the thousands of Northrop Grumman employees who already work at the company’s Maryland facilities.

They also noted that Northrop Grumman’s decision notwithstanding, Maryland’s many strengths — including a highly educated work force, a major concentration of technology resources and research activities, and a high quality of life — make our state highly attractive as a business location.

The state’s association of economic developers dedicated a portion of its summer meeting to examining Maryland’s business climate from a variety of angles.

Outside the state, a myriad of admittedly subjective national rankings published during the past year assigned Maryland’s business climate a wide assortment of ranks ranging from third by the Kaufmann Foundation for its technology and “new economy” resources to 45th on the Tax Foundation’s business tax climate index.

Inside the state, the Greater Baltimore Committee conducted a months-long series of roundtable discussions and focus groups with more than 50 CEOs and business owners, seven former cabinet secretaries of the state’s Department of Business and Economic Development and its current secretary, and local economic development directors in the region and state.

We asked them all a straightforward question: what specific core elements would constitute a business climate that would give Maryland, or any state, a competitive edge as a location for job creation and business growth?

Elected leaders are right when they say that Maryland has many strengths, including top-ranked universities, a high concentration of technology and research resources, and a superior location and quality of life, agreed private-sector CEOs and economic development experts.

But Maryland’s environment for job creation could be significantly strengthened by, among other things, top-down support for business growth from elected officials, a streamlined and predictable regulatory system, a more competitive tax structure and improved support for transportation, private-sector experts said.

Eight core pillars

Comments by participants in the GBC study distill down into eight consensus prerequisites — or core pillars — of a competitive business climate:

– Government leadership that unites with business as a partner. A competitive business climate is characterized by elected leaders who project, from the highest levels, that business is welcome and viewed as a partner, not an adversary. Local economic development directors say they are discouraged by reports from business owners who encounter state agencies that are bureaucratic and have little sense of urgency or customer service.

-A work force that is highly educated and meets Maryland’s business needs. Participants agreed that Maryland has quality secondary and higher-education institutions but suggested that they concentrate on a common strategic approach to developing our state’s future work force and strengthening combined efforts to produce graduates in specific fields needed to support Maryland’s business growth.

-Regulatory policies that are streamlined, stable and predictable. Such policies that are “reasonable, relevant and free of surprises and redundancy” are hallmarks of a good business climate, said participants. Businesses thrive on consistency but are hampered by an unpredictable policy environment. As one economic development director put it, “Time is money, and money is jobs.”

-Tax structure that is fair and competitive.  This does not mean that Maryland has to be the lowest tax state — just somewhere in the competitive ballpark and devoid of elements that unreasonably target specific businesses or business sectors. “We need to be competitive, especially with the states within our geographical region,” said focus group participants.

-Competitive costs of doing business. Cost of doing business is a major consideration when a company chooses to locate or expand in a state. The state could benefit if elected officials develop a keener eye for how legislation and policies affect business costs.  “For every dollar put on business, that is one less dollar that business can give back to create jobs, invest in infrastructure and expand,” said one business leader.

-Superior transportation infrastructure with reliable funding mechanisms. Businesses depend on a safe, efficient, reliable and updated transportation system. The state must fund a way to address its depleted Transportation Trust Fund, CEOs and economic developers agreed.

-Strategic and effective state investments in business growth. Maryland’s government tends to be lukewarm to the idea of tax credits and incentives as investments that yield returns in the form of jobs and economic growth. But Maryland needs to strengthen its incentives for businesses to expand or to locate new facilities here.

-Business marketing strategy that is aggressive, coordinated, long-term, and well-funded. Success breeds success, said participants in the GBC study. They agreed that Maryland needs a stronger investment in marketing the state’s business successes and its strengths as a place to live and work.

The GBC report “Gaining a Competitive Edge,” is available online at www.gbc.org. It’s respectfully offered to state policymakers as a blueprint for progress — a way to begin a discussion toward developing a statewide, long-term strategic plan for job creation and economic growth — something that belongs at the top of the state’s priority list in the foreseeable future.

Donald C. Fry, president & CEO of the Greater Baltimore Committee, writes a monthly column for The Daily Record. His e-mail address is [email protected]