MCTL Meeting of October 20, 2011:
Steven Silverman is the Director, Department of Economic Development, Montgomery County.
Gerald Gordon is the President, Fairfax County (Virginia) Economic Development Authority.
Gerald Gordon described his office. Its programs and authorities are authorized by the state and have been heavily supported by both Virginia and Fairfax county for over 30 years as it aggressively pursues business development. Unlike Montgomery, Fairfax has no local income tax, which is a factor when businesses decide where to relocate in the Washington area. Fairfax gets back 19 cents of ever dollar it sends to the state [Montgomery gets about 16 cents]. Tax rates in Fairfax have actually declined recently because so many new businesses have either relocated or been created, thereby broadening the tax base.
Steven Silverman said that Montgomery has been less aggressive in developing business ever since Neal Potter was County Executive 1990-1994. However, there has been a big change in attitude in the last 2-3 years with a greater emphasis on creating jobs. The top 200 employers in the county have 50% of all employees. That fact, coupled with the reality that very few businesses of significant size relocate nationally every year, has led his office to develop a program to increase its relationship with current county employers. The county’s budget has a 20% set-aside for small business.
Each speaker then proceeded to answer questions that were provided to them several days earlier by the League.
1. What is the budget and staffing for each of your organizations? Are your budgets growing or being reduced? Does your staff specialize in the various business sectors? Which ones? Do you have offices in other US states, other countries?
Gordon: He has a staff of 55 with 47 inside the county and the others in several foreign countries. His budget is $7 million; Sixteen of his staff have specific business sector responsibilities.
Silverman: His budget is $5 million and includes not only economic development but also agriculture development and workforce services. The office has 28 positions; five years ago it had 58. His office took a 13% budget cut last year. There are no overseas offices but he does piggyback on state activities. The focus is on biotechnology; there are also 4 staff members dedicated to agriculture development and 3 to workforce services
2. There is a 200,000 job gap between Fairfax and Montgomery counties. Can you give us the reasons why this is so?
Silverman: Montgomery has a local income tax; Fairfax does not. Montgomery has a reputation of being anti-business; Fairfax and Virginia are viewed as pro-business. Montgomery’s anti-business attitude is exemplified by two recent proposals by the County Council: Subjecting “big box” stores to additional restrictions, and a resolution asking Congress to spend less on wars and redirect the funds to social programs. [The latter was not enacted; the former is under consideration.] An attendee added that Virginia’s being a right-to-work state could also be a factor.
Gordon: Because of the support his office receives from his county and the state, he has been very aggressive in trying to attract business. The state has pro-business policies and thus a good reputation regarding business. The presence of The Pentagon is also a major factor; the two creators of DARPANet (forerunner of the internet) still work in Fairfax.
3. In competing for the relocation of businesses, what do you believe should be the average cost of tax credits and other subsidies for each job created? In competing for the relocation of government offices (which don’t pay taxes), should these subsidies be the same for jobs retained?
Gordon: Fairfax County has never given any incentives to attract business although the state has. The state then requires the county to match its contribution but the match can be in “values” such as roads, lighting, etc. The office vacancy rate in Fairfax is 13%. The Base Realignment and Closure (BRAC) process of the Department of Defense will not have any effect.
Silverman: The amount of any subsidy varies by proposal. For instance, Northrup Grumman, which recently moved its headquarters to Fairfax, has 300 employees. In contrast, the U.S. Department of Health and Human Services, already located in Montgomery, has 3000 employees. Choice Hotels with 400 employees is moving from its long-time headquarters in Silver Spring to Rockville. The driving factor in both counties is the availability of 4 million square feet of class A vacant office space. It is preferable to have Federal agencies in private buildings because they indirectly pay property taxes, though they are exempt from property taxes on Federally owned buildings. However, all Federal agencies along with private industry pay an energy tax
Potential areas for job creation are the Life Sciences Center in Gaithersburg, the East County Master Plan and the development of the White Flint area. The paramount factor will be the development of better transportation.
4. Have business incubation programs (subsidized office space, counseling, enterprise zones etc.) been more effective in creating jobs, and what is the average cost for each of these jobs that are created?
Gordon: Fairfax does not have business incubation programs per se but relies on the state and George Mason University.
Silverman: Montgomery has incubation centers in Wheaton, Silver Spring and elsewhere. The centers have 170 companies, mostly in the areas of biotechnology and information technology.
5. Do the two counties concede any industry sector to the other, e.g., bio sciences, lodging, defense?
Silverman: Its mostly a self-selection process by the companies themselves. Federal agencies are more focused on localities than is the private sector.
Gordon: Neither county concedes anything to the other, but each realizes the other has certain strengths. For instance, Montgomery is strong in biotechnology
6. Are there ways for Montgomery and Fairfax counties to cooperate to bring new industries to our region?
Gordon: Biological science and technology could be a major force in bringing jobs to the region.
Silverman: He would be in favor of cooperation. The county already works with Johns Hopkins University and is cooperating with Baltimore on future projects.
7. How do your state laws and regulations encourage or impede economic development in your county?
Silverman: Although he has heard people talk in generalities about how regulations impede the growth of business, he would like to hear of specific regulations. The problems are usually with state regulations.
Gordon: Virginia’s regulations are fine although the 19 cents return from the state is inadequate. Land use laws allow for considerable freedom in development.
8. An example : The CEO of Company X has decided to move his large company to our area. The four main reasons for the move are high taxes, poor schools. terrible transportation and the rising rate of serious crime. He has narrowed the move to the Washington, DC Region, specifically either Fairfax or Montgomery county. Both counties have highly educated workforces. Corporate and personal taxes are higher in Montgomery versus Fairfax. Both Fairfax and Montgomery counties have excellent school systems. On transportation, Fairfax county has heavier traffic congestion. Montgomery has a higher rate of serious crime. What would you do to convince the CEO to relocate his company to your county?
Silverman: Fairfax and Montgomery are mirror images of each other. Relocation decisions are based on the personal preferences of a company’s management such as the nearness of an airport, length of employee commute, taxes, etc. To lure Northrop Grumman, Maryland and Montgomery offered $22 million in incentives, which would have been offset by the $2 million the company would generate annually in income taxes. Incentives don’t have much effect. Virginia has a great reputation over the years of being very responsive to business. There have been very few times where Montgomery and Fairfax have competed directly. Very few companies relocate their businesses annually so there are no massive changes. Therefore the county is more interested in retaining businesses already here.
Gordon: Many factors go into the decision of where to relocate. Sometimes they are very personal such as an owner wanting his business to be closer to his home.
9. How do “quality of life” issues affect job creation/economic development in your county? For example, vehicular traffic in the DC metropolitan area is among the worst in the nation with many roads past saturation point. Many community groups believe that development occurs at the expense of quality of life. Is economic development compatible with quality of life? Please give us some examples.
Silverman: Jobs and the quality of life are quite compatible,but transportation is key. The county is two decades behind in developing its transportation infrastructure.
Gordon: The quality of life does not decrease; it just changes.
10. What more can the Fairfax Board of Supervisors and the Montgomery County Council do to help you succeed in your mission?
Gordon: Fairfax County has been very supportive of his programs. He doesn’t need anything more.
Silverman: The Council has been very active recently, supporting virtually every economic development proposal submitted to it. For example it recently approved by unanimous vote an expansion of the DARCARS Automotive Group.
Afterward there was a question from an attendee: What is the impact of Dulles Airport?
Gordon: It’s the most attractive benefit Fairfax County has to offer.
Silverman: The completion of the Intercounty Connector will help create jobs in the east county. Although improved transportation is critical to growth in Montgomery, Baltimore has been put in front of the county for getting Federal transportation funds. It is difficult to get county politicians to work together in support of county interests. Many believe that if Maryland elected a governor from Montgomery, the county would receive significant benefits because the governor of Maryland is one of the most powerful in the nation.