2018 | Bethesda Beat

Opinion: Is MoCo Becoming a Second-Class County?

Leaders need to take steps to compete

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Editor’s Note: The views expressed in MoCo Politics are the writer’s and do not reflect those of Bethesda Beat staff. 

It’s official: Amazon is not coming to MoCo. And that news has prompted a discussion once again about the county’s economic competitiveness.

For those who are beating up county elected officials over the loss of Amazon, let’s stipulate a few things. First, the two sites Amazon selected—Crystal City in Arlington, Virginia, and Long Island City in Queens, New York—are great picks for the company. Both have lots of transit access, are near major airports, are adjacent to two of America’s great downtowns and are capable of attracting and satisfying Amazon’s workforce. White Flint is a good site, but it is not near an airport and is farther from downtown D.C. than Crystal City. Second, Maryland tried hard to land Amazon. The state’s $8.5 billion offer far surpassed the combined $2.4 billion offered by Virginia, New York and Tennessee (which landed an operations center). Any additional amount offered by MoCo is at this moment unknown. And finally, Amazon was the catalyst for Maryland, Virginia and D.C. to jointly agree on new dedicated funding for the Washington Metropolitan Area Transit Authority. That’s a big win for MoCo regardless of Amazon’s location decision.

Still, seeing MoCo officials characterize this as “an absolute win for the region” rankles. We seem content to feed off the crumbs left by Virginia and D.C. Are we turning into a second-class county?  Let’s set aside Amazon and go to 30,000 feet.

For years, county leaders have viewed the county’s budgetary, legislative and regulatory policies as separate from economic development. Let’s look at some of what our county has done. We have had nine major tax hikes in 16 fiscal years. We have led the region in passing costly new employment laws while we have been increasing those taxes, the only jurisdiction in the area to do both at the same time. Despite the tax hikes, we have suffered big budget shortfalls and are looking at more. We squeezed county per pupil spending for the public schools for seven straight years in part because our leaders did not like state law on education funding. While the state is building the light-rail Purple Line and that’s a good thing, Virginia is building a Metrorail line to an international airport and has five separate HOT lane projects on the Beltway and I-66 either built or in the planning stages. We have been increasing spending on education and transportation, two of the biggest assets in attracting and retaining employers, at half the rate of everything else in the budget. We have been diverting tens of millions of dollars from benefit funds to sustain spending. We have been adding millions of dollars to the county executive’s budget every year and have left it to the county executive to figure out how to pay for that over the long term. We have increased county debt by five times the rate of inflation over the last eight years. And we have imposed a dysfunctional liquor monopoly on restaurateurs and retailers that no other jurisdiction in the region has. How are existing and potential employers in the county going to view all of this?

As far as economic development goes, the county’s strategy has been three-fold. First, pay for marketing. Second, reorganize the county’s economic development organizations repeatedly. There have been three such entities over the last decade with the acronyms DED, MBDC and MCEDC. Third, hand out escalating heaps of corporate welfare. The county approved $88 million in business incentives from 2012 through February 2017 alone. There are limits to all of this. All large jurisdictions market themselves, the alphabet soup can only be stirred so many times and snowballing corporate welfare will eventually deplete the county’s assessable base, which is what happened to Baltimore. Given the budget, tax and statutory policies outlined above, no combination of marketing, reorganizing and handouts can make up for it.

The results of all of this have been long-term stagnant employment, stalled income growth, minimal business formation, taxpayer income flight and growth in lower-paying self-employment instead of higher-paying wage and salary jobs. Let’s look at one metric in particular: private sector employment.  According to the U.S. Bureau of Labor Statistics, MoCo’s private sector employment in 2017 was 378,224. That’s below the prerecession peak of 386,626 in 2006, a loss of 8,402 jobs or about 2 percent of the private workforce.

Now let’s look at private sector employment in the Washington-Arlington-Alexandria metro area. In 2017, the area had 2,429,250 private sector jobs. That’s an increase of 188,367 jobs from 2006’s level of 2,240,883, a gain of about 8 percent. That’s right, the region has added more than 180,000 private sector jobs since 2006 while we lost more than 8,000 jobs.

The incoming County Council members have said that improving the county’s economic competitiveness is important and even the new county executive, long-time development opponent Marc Elrich, has conceded that the county needs to grow. That’s encouraging. But actually moving the needle is going to be very hard. To do so, we will have to save tax hikes for emergencies and not pass them simply because we want to spend more. It means we will have to invest more in education and transportation—the things employers (and residents) want—and hold the line on the rest of the budget to pay for them. It means we will have to give employers time to adjust to the recent spate of new county employment laws rather than quickly pass a lot more of them. It means promoting economic development near transit even if it’s unpopular. It means taking on labor costs before they lead to another tax hike. It means revoking the Department of Liquor Control’s monopoly status so our restaurants and retailers can compete fairly with their rivals across the region. And it means doing all of this proactively rather than waiting for a fiscal crisis and reacting with a meat ax.

By doing all of the above, we can be a first-class jurisdiction and compete with anyone on the planet. Employers like Amazon will be beating down the doors to move here. But if we just keep doing what we’re doing, we will be lucky to get the leftovers from the Washington region’s growth as our competitors surge ahead of us. If that happens, our residents will pay the price.

Adam Pagnucco is a writer, researcher and consultant who is a former chief of staff at the County Council. He has worked in the labor movement and has had clients in labor, business and politics.