The following was sent to Harford County Executive David R. Craig. A copy was provided for publication.
In reference to all the information provided about the Economic Development Policy, I submit the following from my committee, The Citizens of Harford County Watchdog Committee, an organization for fiscal responsibility and representative government in all matters of governmental fiduciary accountability, regarding economic development.
These are indeed interesting times where government at all levels has created development incentives better known as hand outs as policy in order to draw an enterprise into its jurisdiction. The matter is deserving of debate and the ultimate conclusion as a prudent policy is dependent upon the following: A positive benefit to the community; jobs are gained at all skill levels; income tax revenues are enhanced; intangible items including continuance of the enterprise and cost of services make the investment a net return to the taxpayers; there is a need for the product or service within the jurisdiction; the policy does not become a standard matter of doing business; no other existing business is affected in a loss of competitive position; the enterprise is not financially capable of opening a new facility without assistance; the taxpayers are rewarded by reductions in the property tax rate brought on by the profitability of the sponsored enterprise; the enterprise is not currently receiving its revenue from taxpayers; there is a reporting process whereby the recipient provides information about the use of funds and its job creation results.
In the past, business competed to enter into an area. Management was responsible for the success of the business. Therefore businesses located in communities where they determined they could prosper. They made a commitment to employ capital and utilize it to sustain the business and return a profit to the owners. They paid taxes and fees, hired people, made products or provided services and made a profit. The jurisdiction provided services, roads, schools for employee's children, recreational opportunities, libraries and a secure environment.
In today's environment, the new axiom is that government must provide economic stimulus to a business on order to have that business be competitive. Likewise governments operate as if, without an economic stimulus the business will not be attracted to or consider locating within their jurisdiction. Government still provides the same services, but new business is not expected to pay taxes or fees in the same amount that existing business does. Government is misguided under this new axiom, as it is a counterproductive policy. A business success or failure is the responsibility of management and no amount of government assistance can change that. Management decisions should be based on a success driven model not a model of how much can be received in the form of a hand out, especially when the hand out is not a valid consideration.
Government is a not for profit organization. It does not have any funds as a result of its operation other than the money derived from borrowings or grants. It is the taxpayers who are responsible for the interest and debt service of governmental borrowings. Government money comes from its residents. The same residents, who pay income taxes for defense, are now told that they are investing in Harford County's economy by paying incentives, in addition to all moving costs, for these tax funded defense companies to move here.
The best justification supporting this axiom is that Harford County will not be business friendly if we don't. Some other county or state will give more and be considered more business friendly. It does not seem to matter that all companies that moved into Harford County did so because their business model required them to collocate with their customers. The proximity to Washington, D.C,, without being inWashington, D.C., affirms that business will come to Harford County without economic stimulus because this is where they need to be.
Harford County should invest its tax dollars to increase its economy to be business friendly but it must be done under the guidelines described above. Any use of taxpayer funds in this manner requires the strictest adherence to independence and ethical standards. Economic stimulus should never be accepted as a standard method of doing business. Government acting in this manner has too much discretion in choosing who they are going to accept and who they are going to reject. A study should be undertaken to make certain only the enterprises that truly meet the guidelines described above and who fulfill a need in the county are properly considered for any economic development assistance.
Regardless of how we came to this point, as investors, we would like interim and annual reports to know just how well our investments are doing. Justification for this report is that every other public business is required to report on its operations, so should Harford County.
The interim and annual reports should contain the following:
• Companies Provided Economic Development Assistance. Total number of companies that moved into Harford County since the program started, arranged by business sector, gross sales, total assets, net income, and number of employees.
• Economic Development Assistance in the Form of Loans that Must be Repaid. Total loans made since program started; Total dollars amount of loans made since program started; Total number of loans outstanding; Total dollar amount of loans outstanding; Total number and dollar amount of loans repaid in full; Total number and dollar amount of loans forgiven; Total number and dollar amount of nonperforming loans; Interest rate on all loans and payment requirements for interest; Guarantee, security, and collateral agreements.
• Economic Development Assistance in the Form of Loans that do not Have to be Repaid -- Total loans made since program started; Total dollars amount of loans made since program started; Total number of loans outstanding; Total dollar amount of loans outstanding; Total number and dollar amount of loans repaid in full; Total number and dollar amount of loans forgiven; Total number and dollar amount of nonperforming loans; Interest rate on all loans and payment requirements for interest; Guarantee, security, and collateral agreements.
• Economic Development Assistance in the Form of Training Grants -- Description of qualified technical training eligible for grant funding; Total number and dollar amount of training grants; Total number of jobs supported by training grants; Hourly wage of jobs supported.
• Economic Development Assistance in the Form of Tax Credits -- Total number of companies in receiving tax credits; Total dollar amount of tax credits; Date when tax credits expire; Number of companies still in county after tax credits have expired.
• Tax Revenue From Companies Benefiting From all Forms of Economic Development Assistance -- Income tax, Real property tax, Personal property tax, Special fees for operating.
• Job Creation From Companies Benefiting From all Forms of Economic Development Assistance -- Total number of jobs established; Total number of jobs still in the Harford County employment calculations; Total number of Harford County residents employed.
• Harford County Annual Budget for Economic Development -- Amount of appropriation for economic development for current and preceding five budget periods; Actual appropriation expenditures for economic development for current and preceding five budget periods.
• Special Taxing Districts - Tax Increment Financing -- Status of land development including amenities at Beech tree Estates; Status of house sold and under construction compared to projections; Status of interest payments on the $14 million bond issue; Status of real property taxes collected and used for bond debt service; Debt service schedule by year; Full accounting of payments from the bond proceeds; Report on period of time the debt retirement must be paid by the developers if property tax revenues cannot meet debt service; Report on bond default or possibility of bond default; Any payments by the County from taxpayer's funds other than those lawfully allowed for bond debt service; List of all Special Taxing Districts now and under consideration.
• Reporting Requirements -- The recipient of economic development assistance must provide an annual performance report describing how it met the terms of the assistance; Harford County should be required to document in its annual report a schedule of all appropriation expenditures and if the recipient is in compliance with all terms and conditions; All financial terms should be disclosed along with a statement of exactly what form of assistance was provided whether it is cash, tax abatements, and or loans; Proration of real property tax bills for amount allocated to debt service as in the terms of the TIF and Special Taxing District at Beech tree Estates.
Goals for next year and four years out [need to be included as do] measures of effectiveness used to determine value of the program. It would be nice to get the answers to these very important issues.
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