Enterprise Zones, Winners/ Losers: Cecil County Council Falters, Ponders, Reverses Course

NEWS ANALYSIS

Which retirement account investment option would you prefer: 100% of $100,000 or 70% of $1 million? Seems like a no-brainer: $100,000 or $700,000 in your later-years pocket. But it took a while for the fiscal lightbulbs to be turned on at a Cecil County Council worksession on Tuesday (10/15/2019), after Councilor George Patchell and the county’s economic development director flipped the light switch.

As a result, Councilor Jackie Gregory (R-5) lost a vote to challenge individual projects proposed for inclusion in “enterprise zone” economic development plans, and some of her initial supporters on the panel changed course. By the end of the day, Gregory acknowledged the obvious and supported approval of the enterprise zone list at an evening Council legislative meeting.

At issue was legislation to designate five properties to be included on an application to the state of Maryland for possible designation as “enterprise zones,” which provide temporary property tax abatements for land on which new economic development projects are developed. Fundamentally, the zones give temporary property tax breaks at the state and county level during the first 10 years of a project, while greatly increasing the taxable value of the land due to the new development on the site.

The higher value of the land, due to economic development, the greater the bottom-line tax revenues to the county and state. In addition, the county reaps huge recordation, building permits and other fees related to new development that can often fully offset the property tax abatements.

Initially, the county administration had proposed a broader array of properties to be included on a wish list to the state—which has the ultimate authority on whether to approve or deny enterprise zone status to a site. [SEE previous CECIL TIMES report here: http://ceciltimes.com/2019/09/cecil-county-wants-20-properties-added-to-enterprise-zones-for-econ-development-council-frets-over-elkton-southside-project/ ]

But in amended legislation sent to the County Council, the list was pared down to exclude land within the Elkton town limits, such as the deteriorating Big Elk Mall and the controversial Southfields mixed use housing, recreation, and commercial development proposed for land off Route 213. Instead, the county administration submitted a list of just five properties, including three linked parcels totaling nearly 49 acres on Baron Road, owned by Complete Recycling Group; a 71-acre site on Red Toad Road, the North East Business Center property in the county’s growth corridor that is owned by former County Council President Robert Hodge; and a 662-acre site on Belvedere Road, adjacent to the booming Principio Business Park, owned by York Building Products, part of the Stewart family enterprises in the county.

Gregory made a motion to consider and vote upon each proposal separately, and Councilor William Coutz (R-2) seconded her motion. Gregory said she wanted the Council to render a decision on each individual property because “we’re using taxpayer dollars to fund these” projects. She said that it was essentially a no-brainer to approve an enterprise zone designation for the Great Wolf Lodge project in Perryville several months ago, but the same could not be said for these new proposals.

Coutz singled out the large site adjacent to Principio, which is proposed for an expansion of that successful business park. He said that the property’s current zoning as a mineral extraction site suggested to him that it would be re-developed regardless of any tax incentives from the county or state. Coutz also said that land in Cecil County was “cheap” and that many development projects would locate here because of that fact and did not need property tax incentives to lure them to the area.

But Chris Moyer, the county’s Director of Economic Development, challenged that assertion, saying that businesses could locate “anywhere” in the nation and that local and state tax incentives were often the deciding factor in business location decisions. For example, he said, the Great Wolf Lodge project—which is expected to create hundreds of jobs and millions of dollars in tax revenues for the county for decades to come—absolutely would not have considered locating in Cecil County without an enterprise zone designation.

He noted that the enterprise zone designation gives developers property tax reductions over a ten-year period but the state reimburses the county for part of its temporarily lost revenues. So the county would get 70 percent of the property tax revenues assessed during the ten-year period covered by the enterprise zone incentives. More importantly, Moyer pointed out, the land developed in enterprise zones increases vastly in value due to the new projects—so the county collects much more in net property tax revenues on the new development than if the land was still undeveloped and therefore worth a lot less.

“So 100 percent of $5 million is less than 70 percent of $50 million,” Moyer said, reflecting the higher property assessments of a newly developed site versus the as-is value of an undeveloped site outside an enterprise zone And the county reaps much more revenue from a new business project than if the same land were to “sit fallow” and only be used “by a couple of deer hunters a few times a year.”

Council President Bob Meffley (R-1) seemed to side with Gregory, as he often does, but sought to play both sides, saying he was not “questioning” the enterprise zone program but that his constituents did not understand it and needed reassurances. He said the county needed “safeguards” and wondered whether “used tire” sellers might locate in enterprise zones and conduct businesses that were deemed undesirable by citizens.

Moyer pointed out that it would be economically foolish to put a low-income/low return business like that in a more desirable enterprise zone property and no rational landowner would do so.

The worksession seemed to be in a standoff, until Councilor Patchell weighed in with a lengthy, impassioned speech on his objections to the County Council selecting “winners and losers” and trying to select which businesses should be allowed to locate in the county.

“I personally don’t think it’s the county’s job to pick winners and losers for economic development,” he said. And in a strong defense of small business owners, he said the county should not give preferences to massive projects over collections of small business entrepreneurs. Furthermore, if properties are developed to a higher and more valuable use, “you’re still going to get the same revenues” or more from property taxes, he said.

Patchell said it was not the county’s role to decide which business should locate on which parcel of land and to pass judgment on whether only a certain type of business should be allowed to locate in an enterprise zone. If a business “makes it” and is successful, or is not a winner, it should not be government’s role to decide its fate.

“I just think we’re dangling into dangerous areas when we start deciding whether we think it’s one person or a hundred” who will be employed or benefit from a project, Patchell said, pointing out that there were broader benefits, such as new workers purchasing food and other goods from local merchants with their salaries. He said it was a bad message to send that the county won’t “take a risk” on entrepreneurs and small business operators and would only back huge ventures.

Gregory said she just wanted to make sure that the “county coffers” received a “suitable” return on its investment. “It’s not to be oppositional in any way,” she told Patchell.

Gregory sought to back down, at least temporarily, and suggested she would come up with another amendment to be voted on at the evening legislative session. But Councilor Al Miller pressed the point that there was already a motion on the table, brought by Gregory and seconded by Coutz, and it should be voted on at the worksession.

On the vote, Coutz abandoned Gregory and joined the majority to vote, 4-1, against her motion to demand separate consideration and voting on each proposed enterprise zone property. Then, at the evening legislative session, Gregory joined all the other councilors to make it a unanimous vote to approve the five-site proposal for enterprise zone designations to the state.

Gregory, who is a candidate for re-election to her council seat in the 2020 election, has been under pressure from some of her former allies in conservative groups, such as the Campaign for Liberty, that oppose any county tax incentives for economic development.