June 11, 2010

Marylands sales force debates state competitiveness

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By Len Lazarick
Len@MarylandReporter.com

The people who sell Maryland to the country and the world spent part of this week debating whether the Free State’s brand is competitive in today’s marketplace.

On the plus side, Maryland has a “great quality of life” and a highly educated workforce, said economist Anirban Basu. On the downside, it has high taxes and a perceived bad attitude toward business.

The two sides of that coin were flipped in several presentations that heard from site selection professionals and economic development heads from competing jurisdictions. The hundreds of people at the Maryland Economic Development Association’s annual conference heard a comparison of how Maryland fared in national business rankings. The results ranged from the very good to the very bad.

“We’re positioned in a good place,” especially when it comes to investment in human capital, Basu said. Despite “all this talk about a lousy business climate, we’re not a basket case,” said the economist who does consulting for state and local governments, as well as private sector clients. “If Virginia was such a paradise, you’d live there,” Basu told the crowd at the Cambridge Hyatt Regency.

On the other hand, “many of the businesses do not feel loved” in dealing with government agencies, he said, and data indicates that tax levels are “on the high side.”

“Maryland suffers comparative disadvantages” and often gets eliminated from site-selection process just on the basis of taxes and labor costs, said Jay Biggins, managing director of Biggins Lacy Shapiro, a Princeton, N.J., firm that advises businesses on location economics.

Mary Faye LaFaver, a director at Ernst & Young, said Maryland’s biggest problem is taxes and the overall tax burden. “That’s where you get cut out of the process,” LaFaver said.

“Maryland is a lot more aggressive in enforcing tax laws,” she added. Business executives are particularly stung when they find out that they must pay Maryland sales tax to register their out-of-state cars, even though they paid similar taxes in another state.

Baltimore Sun financial columnist Jay Hancock countered that Maryland’s costs support good services.

“It’s not the price tag,” he said. “It’s what you get for what you pay for.”

“Maryland is superior to Virginia in category after category after category,” from education, transportation, sports and culture to homeownership, income and pollution, said Hancock, who came to Maryland 14 years ago from the Norfolk, Va. newspaper.  “We don’t want to be like Virginia.”

Maryland’s economy is underrated and overcriticized,” Hancock said. “You don’t sell a Cadillac on the basis of how cheap it’s going to be.”

Business representatives echoed Basu’s take on how much the state “loves” its businesses.

“We want to feel the love,” said Sean Looney, government relations director for Comcast, speaking before a panel of eight O’Malley administration cabinet secretaries, “The leadership is not only what you do, but how you do it.”

House Secretary Ray Skinner said his agency was “streamlining processes to show Maryland is business friendly.”

Planning Secretary Rich Hall said his department has worked with developers to “make sure that requirements are certain” and answers are given within 30 days.

“Business needs to feel that they have a seat at the table,” said Christian Johansson, the business development secretary. “We need to do a better job at selling ourselves.”

In light of all the criticism surrounding Northrop Grumman’s decision to relocate its national headquarters from California to Northern Virginia, rather than Maryland, Hancock said, “one of Virginia’s biggest trade secrets is all the Maryland politicians that are around promoting it.”

Economic development officials from Philadelphia, Delaware, North Carolina and Virginia did not see Maryland as their competition in most cases.

Gerald Gordon, head of economic development in Fairfax County, Va., said “Maryland is not a competitor” due to its lack of consistency and lack of aggressiveness in economic development. “If collectively, they got their act together, then I would have a competitor,” Gordon said.

Maryland’s business rankings are all over the ballpark, according to Don Fry, president of the Greater Baltimore Committee, ranging from the #3 state by the Kaufman Foundation which supports entrepreneurship, to #45 in business climate by the Tax Foundation, which favors low taxes. Forbes magazine ranked Maryland #12, but its survey of CEOs ranked it #27 or #33; and CNBC ranked it #27. Fry had not even seen the U.S. Chamber of Commerce’s study last month ranking Maryland as the fourth most “enterprise-friendly” state. (Virginia was #2.)

But Fry noted that his survey of surveys showed not just a wide range of outcomes, but a wide range of factors evaluated, with no consistency in the factors and “clearly some bias.”

Several speakers warned about Maryland’s greatest strength – its proximity to the federal government and its dependence on government spending, which must slow down at some point. “We should be working very hard to be competitive in a private-business sense,” Basu said.