Debate Continues Over Frederick Hotel & Conference Center

State funding for a hotel and conference center in downtown Frederick sparked a controversial floor debate in the Maryland Senate this past session.  The state approved granting $4 million for the Downtown Frederick Hotel and Conference Center, leading to Frederick County’s own Senator Michael Hough voting “nay,” alone, on the entire capital budget.

Michael Dresser reports in today’s Baltimore Sun that the public funding for the project – $31 million in total, including state, county and city sources – still requires a number of state and local approvals, including sign-off by the State Board of Public Works. It appears the debate over the project is far from over. From the article:

State Sen. Ronald N. Young, a Frederick County Democrat, said the project is a priority for the city’s growing high-tech and biotech business sector.

“They think they can do international conferences here. They need a first-class hotel,” he said. “It’ll definitely spark other businesses in the area.”

But to others, the project is a colossal boondoggle. These opponents say it’s a textbook example of crony capitalism — a subsidy for wealthy developers. They say it would be out of scale in the historic downtown and would require the demolition of at least one historic building.

State Sen. Michael J. Hough, Frederick County’s other senator, compares the project to the Rocky Gap resort in Western Maryland and the Hyatt Regency in Cambridge — two money-losing ventures in which the state invested two decades ago.

“I’m not exactly sure why the state is still investing in hotels, given our track record,” the Republican lawmaker said. Rocky Gap lost money for years before casino gambling was permitted there under new ownership. The Cambridge resort continues to lose money, according to the Department of Legislative Services, but the state was repaid in 2006 and local officials insist it has stimulated growth in that Eastern Shore city.

A majority of the Frederick County delegation to the General Assembly opposed spending state money on the hotel project, but Young persuaded his fellow Senate Democrats to insert the expenditure in the capital budget. The Senate prevailed in negotiations with the House, and Gov. Larry Hogan did not contest the decision.

Even without most of the delegation, the project has powerful local support. The city government, led by Republican Mayor Randy McClement, is on board. The county executive, Democrat Jan Gardner, backs it. The Frederick County Chamber of Commerce and other local business groups have it on their wish lists.

“We believe it’s the next real game-changer for our community — not a boondoggle,” said John Fieseler, executive director of the Tourism Council of Frederick County. He said accommodations downtown are limited; the few bed and breakfasts are always full.

The Maryland Public Policy Institute, a nonpartisan public policy research and education organization whose mission is “to formulate and promote public policies at all levels of government based on principles of free enterprise, limited government, and civil society,” penned a not-too-positive report on the potential deal last September.

The Institute reports that the deal would distort the hospitality market in the Frederick area; raise hotel taxes on other hotels; “rewards political skill, not business acumen”; may violate the state law giving the county the authority to impose the hotel tax; provides full-service hotel benefits that jeopardize business opportunities for neighboring eating, drinking and other service establishments; and gives too much administrative authority to the county tourism council, which it reports is “a trade group comprising some 300 members engaged in visitor businesses.”

Additionally, it cites:

Heywood Sanders, a professor of public administration at the University of Texas, San Antonio who specializes in hotels and convention centers, says upscale, full-service conference center hotels almost never make financial sense in the downtown of small cities like Frederick. The extra costs involved, both in capital expenditure and operations, just aren’t justified by any extra revenue they generate. The many activities involved in a full-service hotel are also very difficult to manage, he says. However, the bigger problem for Frederick is that the hotel’s anticipated top customer, the federal government, limits “per diem” lodging rates to about $100 and mandates that they will only be paid if the lodging is at least 50 miles from employees’ workplaces. The proposed upscale hotel is aiming at $160 per night rooms, and Frederick is a scant 43 miles from the White House.

The Baltimore Sun refers to the City of Frederick’s economic development director:

Richard Griffin, economic development director for the city, said the opposition to the hotel, “although very expressive,” is small. He said the project is expected to bring 280 jobs and have $26 million in annual economic impact.

Griffin said public-private partnerships are typical for such projects. He pointed to a Marriott hotel-conference center built in North Bethesda with state help and regarded as a success.

“Everyone’s waiting for this project to get going so they can jump in and begin the process of the full realization of the east side of downtown,” he said.

Valued Purchasing Officers, Better Purchasing Value

Procurement is an area requiring greater attention from government leaders, reports Route Fiftyin summarizing a survey conducted by Seattle-based business intelligence company Onvia of 668 state and local government procurement staff. Issues with response agility, customer service and reputation all led to an overall decrease in procurement agencies’ overall effectiveness, according to the report.

“Smart governments recognize that strategic investments in their procurement teams translate into more value for the citizens they serve,” said Ben Vaught, Onvia for Government director, in a statement.

Successful procurement teams saw their funding increased, engaged better with stakeholders, used more efficient purchasing methods, and adopted some form of e-Procurement. Nearly 40 percent of government procurement professionals has implemented e-Procurement to cut down on processing times, according to the report.

Time-constrained buyers require more information on purchasing processes up front.

Four out of every 10 agencies reported failing to attract enough bids, a slight improvement on last year. But it remains an area requiring greater state and local government attention.

Transportation’s Transformation: NACo Webinar Today At 2pm

Transportation is undergoing a transformation – its starkest one since the first Model T rolled off the assembly line, argues Stephen Goldsmith for Governing.  How should counties adapt? The National Association of Counties (NACO) is hosting a free webinar today at 2 p.m. on this very subject – and it’s not too late to register.

Opportunities to share rides, cars and bikes already dramatically change the local transportation landscape, and we have yet to see what impact driverless vehicles will bring. Meanwhile, jurisdictions have miles to go in ensuring that transportation infrastructure accommodates those low- and middle-skill workers who are only able to reach about one quarter of their jobs within a 90-minute commute, according to BrookingsFrom Governing:

With more and better data available now than ever before, we need to think in terms of true mobility management. …

In the new data-enabled, service-oriented model, mayors and urban county executives will appoint mobility managers to enhance convenience and remove the transit deserts that plague many individuals who cannot afford cars and for whom inconveniently located bus routes provide little relief. These mobility managers will help smooth transitions between public, private and shared transportation services. Individuals will be able to plan and pay for trips all in one place. Gone will be the days of chasing after the bus — the bus will come to you right when you expect it.

[A government’s] goal … should be to improve mobility for all of its residents, creating a seamless system of transportation from what once were discrete components. Mobility managers should not be in the business of protecting any given transportation mode but should instead focus on creating value and reducing inefficiencies and inequities for the commuters they serve. ….

In a time when trust in the government is very low, improving mobility offers a great opportunity …. [A]ny improvements we can make to mobility will be felt quickly and broadly. The bus is leaving the station.

NACo’s webinar this afternoon, “Keeping Counties Moving: Innovations in Infrastructure, Goods Movement and Vehicle Technologies,” features Gary Piotrowicz, PE, PTOE, Deputy Managing Director/County Highway Engineer, Oakland County Road Commission, Michigan, and Andy Alden, Group Leader for Eco-Transportation and Alternative Technology, Virginia Tech Transportation Institute, and Executive Director of the I-81 Corridor Coalition. About the webinar:

Join us on this interactive webinar to learn how counties are improving transportations systems by working within and across megaregions to leverage technological innovations. Transportation experts will discuss national trends and current county projects in regional planning & autonomous and connected vehicle research, development and deployment.  This discussion will provide county elected officials and staff members a clearer picture of where the field of transportation is heading in the face of rapidly evolving freight infrastructure and vehicle technologies.

Unemployment Down, But So Are Total Jobs

Maryland lost 1,600 jobs in May, but even so, the state’s unemployment rate has still fallen to below the national average. Unemployment fell from 4.3 percent in April to 4.2 percent. The U.S. unemployment rate was 4.3 percent in May. Maryland added 43,100 jobs over the last year.

From the Baltimore Business Journal

The overall decrease was driven by a loss of 1,300 private sector jobs and 300 government jobs, according to preliminary data released Friday by the U.S. Department of Labor. …

The construction sector gained 4,800 jobs over the month, the most of any sector. A month after posting the biggest decline with 900 jobs, the trade, transportation and utilities sector rebounded by gaining 1,600 positions. The professional and business services sector gained 400 jobs.

On the flip side, education and health services saw the biggest decrease in May, losing 2,900 jobs. The leisure and hospitality sector lost 2,200 jobs and the financial services sector decreased by 1,700 positions. The manufacturing sector lost 1,500 jobs, a month after it gained 200.

Florida saw the greatest gains in jobs this past month with 29,600 jobs. New Jersey saw the greatest loss, with a decrease of 13,100 jobs.

Montgomery Council Green Lights “Flash” Transit Project

The Montgomery County Council wants bus rapid transit (BRT) between the Rockville and Wheaton metro stations, and passed a resolution enabling it to move forward. The plan would provide a east-west dedicated bus lane along Viers Mill Road.

County residents have named the project “Flash,” according to coverage by WTOP. From that article:

Under the plan for the “Flash” bus service, improvements would be made to segments of the 6.7 mile route so that riders could board at one of 12 stations without delays to traffic. The project is expected to cost $79 million dollars according to Glenn Orlin, deputy council administrator.

According to county studies of the bus route, time savings for transit users could vary from seven to 13 minutes on the eastbound route, and six to seven minutes on the westbound route. Eleven bus routes currently run on the east-west road, which experiences considerable congestion during rush hours. According to the county’s analysis, the roadway carries between 24,000 to 47,000 vehicles a day.

Howard Extends Tax Credit Promoting Green Homes

Howard County has extended its green building tax credit for another five years. County Executive Allan Kittleman signed into law legislation extending the property tax credits for residential “high performance” buildings, in an effort to continue encouraging sustainable building practices for new residential construction and remodeling projects. To qualify for the credit of up to $5,000 per property, the residential properties must receive LEED certification at the Silver level or higher from the U.S. Green Building Council and applications must be submitted prior to April 1, 2022.

From the county’s press release:

“The residential High Performance Building Credit program has been successful in promoting sustainable building as 134 residents have purchased ‘green’ homes and received the tax credit, said Kittleman. “In Howard County, we want to continue that momentum in a sustainable and economically viable way.”

Joshua Greenfeld, Vice President of Government Affairs for the Maryland Building Industry Association, commented, “By going through the process of designing homes to the LEED standards, builders learn about green building technology and it becomes more main stream and accepted while providing homeowners a great product at a price they can afford. This is a win for the county and for homeowners. We applaud County Executive Kittleman in his support of this very important program.”

Revenues Fall Short In Most States, Report Finds

Maryland is not the only state experiencing its tax revenue growing more sluggishly than expected. According to a new study by the National Association of State Budget Officers (NASBO), “Spring 2017 Fiscal Survey of States,” fiscal year 2017 general fund revenues in 33 states were coming in below forecasted levels – the highest number of states since 2010, when 36 states had revenues fall short of projections. In comparison, in 2015, only seven states saw revenues come in short of expectations. (Fiscal years in all but four states end on June 30, like Maryland’s.)

From Route Fifty:

The survey refers to a number of factors that could be contributing to lackluster state revenues. One is that high earners could be shifting income into the year ahead, anticipating that federal tax cuts will be enacted under President Trump and the Republican-controlled Congress.

Other factors include: declines in oil and natural gas prices and coal production that have affected states with economies that depend on these commodities; greater amounts of economic activity falling outside of the sales tax base of many states; and low inflation.

The report finds that at least 23 states (including Maryland) have made mid-year budget cuts in fiscal 2017,  totaling $4.9 billion.

States are preparing their fiscal 2018 budgets quite conservatively in response – factoring in not only slow revenue growth, but also limited budget flexibility and substantial uncertainty about decisions to be made at the federal level.

Budget proposals governors put forward for fiscal 2018 would increase general fund spending by just one percent compared to estimated levels for this year. That would mark the lowest nominal growth rate in spending since 2010, the NASBO report says.

Maryland’s fiscal 2018 budget, as passed by the General Assembly, increases general fund spending by only 0.5 percent.


Fed Raises Rates 0.25%

The Federal Reserve has raised its benchmark interest rate by 0.25 percent, making the new range 1 percent to 1.25 percent, for a rate that is currently 0.91 percent. The Federal Reserve last raised the interest rate in March and has indicated that it plans to implement one more raise this year. While still low, the interest rate increases will mean higher borrowing costs.

NPR reports:

In a statement Wednesday, the policymakers said that “the labor market has continued to strengthen and that economic activity has been rising moderately so far this year.”

The economy grew at a rate of 1.2 percent in the first quarter of this year, about half as fast as it did in the final three months of 2016. Unemployment dipped to 4.3 percent in May, a 16-year low.

“Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined,” the Fed statement said. “Household spending has picked up in recent months, and business fixed investment has continued to expand.”

In the wake of the financial crisis, the central bank added Treasury securities and mortgage-backed securities to its balance sheet. Now it’s making plans to reduce those holdings, which total more than $4 trillion.

The Fed said it “currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.”

The press release issued by the Board of Governors of the Federal Reserve System is available here.

MD Technology Development Corp. Names New CEO

The Maryland Technology Development Corporation (TEDCO) has a new chief executive officer, starting June 26.

George Davis’ wealth of business experience includes serving as partner of GM3/Gamma 3 LLC, a Baltimore-based investment initiative that provides early-stage funding to advanced technology companies; CEO of Gemstone Biotherapeutics LLC, a Baltimore-based research and development company founded in conjunction with Johns Hopkins University; director of Perthera Inc, a new venture that is at the forefront of the evolving bio-informatics industry; board of directors/CEO of Avatech Solutions/Rand Worldwide Inc, a publicly traded CAD software and engineering support company; president and vice chairman of Aether Systems, a pioneering wireless data company; and contracts, operations and program manager at Westinghouse Electric Corporation.

From TEDCO’s statement:

“After a thorough search, the Board of Directors is excited to have George Davis take the helm of TEDCO as our new CEO. George brings to TEDCO a wealth of demonstrated leadership skills, diverse C-Level experience acumen and a history of successful investment and operational engagements within the Maryland Innovation Ecosystem,” said TEDCO Chairman Newt Fowler. “He’s an entrepreneur’s entrepreneur. And he will execute on Governor Hogan’s strong priority of supporting small businesses, including tech startups, as the foundation for improving Maryland’s economy.”

TEDCO has been carrying the “innovation to market” banner for almost two decades and has added tremendous value to the evolving entrepreneurial ecosystem. Recognized as one of the most active seed/early-stage investors in the nation, TEDCO has a portfolio of more than 400 seed investments. TEDCO’s $22 million awarded to startups led to more than $1 billion in follow-on funding; 4,358 jobs created at an average salary of $74,700; and more than $36 million in annual government revenues attributed to TEDCO activities.

TEDCO is an independent organization created by the Maryland General Assembly in 1998 to facilitate the transfer and commercialization of technology from Maryland’s research universities and federal labs into the marketplace and to assist in the creation and growth of technology-based businesses in all regions of the State. TEDCO indicates on its website that it “strives to be Maryland’s lead source for entrepreneurial business assistance and seed funding for the development of startup companies in Maryland’s innovation economy.”

Not-So-Deep Pockets: Lawsuits Are Bankrupting Counties

It’s not uncommon for lawsuits to bankrupt local governments, according to a recent article in Governing – and there is little a county can do to protect itself, aside from maintain healthy reserve funds. While only 54 local governments have filed for bankruptcy since 1980, legal judgments played a factor in nearly 30 percent of those.

Governing reports on Nebraska’s rural Gage County, where a federal jury awarded $28.1 million in damages plus attorney’s fees last year to six people wrongfully convicted of rape and murder. With 22,000 residents and an insurance carrier which declines to cover the liability, there is little more Gage can do.

“No county could prepare for that,” Myron Dorn, chairman of the county Board of Supervisors, said in an interview.

Increasing taxes to cover the judgment would be difficult, because Nebraska’s property tax cap limits the county from raising taxes by more than about $3.7 million. Residents could theoretically vote to exceed the state-imposed limit, but that is unlikely.

The county has appealed the verdict and is awaiting a decision; in the meantime, officials have hired bankruptcy attorneys to explore their options in case they lose the appeal.

Boise County, Idaho filed for bankruptcy six years ago after receiving a judgment of $5.4 million for a Fair Housing Act violation. It managed to stay solvent after paying the judgment using bond proceeds and receiving state legislative approval to raise property taxes so it could repay the bond. Governing provides a number of other examples in its article here.

MACo engaged in a contentious battle last session to protect counties against a bill which would have increased counties’ exposure to litigation by making it easier for courts to award attorney’s fees to prevailing plaintiffs for Maryland constitutional law violations. HB 903 / SB 705 died in the Senate, but only after coming to the floor, getting recommitted to the Senate Judicial Proceedings Committee, and returning to the floor again. Read about it in MACo’s 2017 End of Session Wrap-Up: Government Liability & Courts.