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Regulations, taxes called harmful to Maryland business climate

PATUXENT RIVER — A coalition of county and local officials and economic development directors said the state’s business climate suffers at the hands of regulatory agencies and a non-competitive tax structure.

The comments were part of a day-long meeting of the Maryland Commission on Economic Development and Business Climate held on the grounds of the Naval Air Station Patuxent River in St. Mary’s County. Many of those who testified said over-regulation and lack of flexibility have made it difficult and in some cases too expensive to base their operations in the state.

“Most agencies in the state aren’t advocates, they’re enforcers,” said Bill Scarafia, president and chief executive officer of the St. Mary’s Chamber of Commerce.

Business leaders from the area around the naval installation pointed the finger at the State Highway Administration and Maryland Department of the Environment and said both have developed a culture that is not conducive to working with businesses.

Brian Norris, president and chief executive officer of Cherry Cove development company, read the commission a letter he said showed the difficulty of working with state highway officials on one project. In the email, Norris said he sought a meeting to discuss plans for his project and related traffic issues identified by the agency.

In the email response from the agency, an unnamed official wrote Norris asking him to submit plans in writing saying, “We don’t meet to review or debate” such proposals.

“That’s driven by a culture of not wanting to work to an end,” said Norris who added that the “my-way-or-the-highway attitude” could ultimately result in businesses seeking to leave the state.

Laurie Boyer, the director of economic development in Rockville, called on the commission to include in its recommendations a call to action for those agencies.

“It’s important that there is cross-communication between these agencies so that they understand they don’t work in a silo,” Boyer said.

Boyer was joined by Mary Burkholder, executive vice president of the Anne Arundel County Economic Development Corporation, in calling on the commission to also recommend that the next governor and General Assembly increase funding to grants provided by the Department of Business Economic Development and give the agency more flexibility in how it administers money to smaller companies and communities.

“They should be restored,” Burkholder said.

The Department Business of Economic Development, which is charged with providing financial incentives to attract new businesses to the state and retain and expand existing businesses and is not a regulatory body, has been a major focus of the commission. While many business leaders from around the state have complained about taxes and regulations, some on the commission focus on revamping the agency and possibly making recommendations to privatize some or all of its functions.

The meeting is the sixth since House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller established the commission earlier this year.

Some area business leaders told the commission that they and others are in a position of having to find ways to control costs as they do business with the federal government. As much as 85 percent of the county’s economy is related to activities at the naval installation that employs 22,000 government and civilian workers.

Adelle Pierce, president of AM Pierce & Associates, said the state’s tax structure and health care mandates can force companies to consider options that include moving to other states.

“It’s all about going to where the money is easier — looking for the lowest barriers for success,” Pierce said.

A.M. Pierce & Associates also employs workers at a separate location in Huntsville, Alabama. Pierce said Alabama’s corporate income tax rate of under 4.25 percent, which is seventh-lowest in the country, is tempting when compared to Maryland’s rate of rate of 8.25 percent, which is 36th in the country.

“By golly, Huntsville, Alabama, has their stuff together,” Pierce said. “I hope I don’t get to the point where I look at ‘is it cheaper to do business from another state?’ Ideally, I would hope to see us not ever have to make that decision.”

But some legislators on the commission seemed unconvinced that companies would seek to move to places such as Huntsville.

Del. Dereck E. Davis, D-Prince George’s County and chairman of the House Economic Matters Committee, said chasing lower tax rates in an effort to attract businesses is “a race to the bottom.”

Del. John L. Bohanan Jr., D-St. Mary’s County, agreed.

“The grass is always greener on the other side,” Bohanan said, acknowledging that many leaders in the county were “fixated locally with Huntsville, Alabama.”

“There’s some big differences from our perspective,” Bohanan said. “We’re a more mature market than Huntsville. They’re hungry.”

Bohanan said state leaders should focus on the relationship between its universities and business and finding ways to accelerate the development of ideas into marketable products.

“We’ve got to facilitate the transition from research into jobs,” Bohanan said.

“We’re on our way to doing that,” he said. “Our ticket out of it is solving that part of the equation.”