Hogan says city should drive state economy

Erin Cox
Contact ReporterThe Baltimore Sun
Of Baltimore, Larry Hogan says "taxing and spending and pouring millions into the city" has not helped.

Gov.-elect Larry Hogan, developing a strategy for improving Maryland's economy, says Baltimore should be the state's primary economic engine.

"It should be a driver of the whole state," Hogan told The Baltimore Sun Tuesday. "It hasn't been as strong as it should be, and that's what we're going to try to fix."

The Republican businessman has said his victory in Democratic Maryland is evidence the state wants change — including in the way it helps the largest city attract residents and businesses.

He reiterated his plans to cut spending, and said previous efforts to revitalize Baltimore have not been effective.

"What has been happening — taxing and spending and pouring millions into the city — has not helped. It has really hurt," Hogan said.

"There's no businesses, there's no jobs. The city's declining rather than improving. We're going to try to turn that around. … We're basically going to have to find a way to incentivize people to move into Baltimore City."

Voters gave Hogan a decisive upset win over Democratic Lt. Gov. Anthony G. Brown, endorsing the Republican's plan to improve the state's economy by curbing state spending and rolling back taxes.

Although Baltimore went for Brown, Hogan said the city has been affected more than any other part of the state by the sluggish economy, and deserves a chance to move in a new direction.

Hogan declined to offer specifics on his plans, which he said he will roll out in the coming weeks. He is to be inaugurated Jan. 21.

Hogan said he has yet to make up his mind on two large state-backed projects in the pipeline for Baltimore: the $1.5 billion State Center development and the $3 billion Red Line light rail project to run across the city.

Hogan said he considers Baltimore's Red Line and the state's other major rail project, the Purple Line in the Washington suburbs, to be "night and day." He said although both are huge projects the state may not be able to afford, he said the projects serve different populations and accomplish different goals.

As he looks to close a state budget gap of nearly $1.2 billion over the next 18 months, Hogan told reporters that state spending would decline.

"People are going to have to brace. We're not going to pay for every single program that everybody wants and everyone would like to have," Hogan said. "We're going to make very tough decisions, which is what the voters elected me to do. It's the reason that I'm governor and Anthony Brown is not."

Baltimore Mayor Stephanie Rawlings-Blake got that message during an hours-long dinner with Hogan this month. Rawlings-Blake said after the meeting that it was important to do "an assessment of the city's reliance on state aid, state revenue."

Revitalization efforts aside, House Speaker Michael E. Busch said, any potential cuts in state aid have sparked concern that Baltimore could take a disproportionate hit.

With its high poverty rate, the city receives more state tax dollars than any other jurisdiction — more than $1.2 billion a year. The state spent nearly $2,000 per capita on Baltimore residents in 2012, according to the most recent analysis by the Department of Legislative Services. That was $800 more than the state average.

Most of the money goes to education, but the state also pays to run the Baltimore City Detention Center and the Baltimore City Community College. In 2013, the legislature passed a law that eventually will pay for $1 billion in school projects in the city.

Because spending on local governments accounts for roughly a quarter of Maryland's $39 billion annual budget and 40 percent of its general fund, many in Annapolis believe it will be difficult to find meaningful cuts without reducing aid to local governments.

Busch said any efforts by Hogan to revitalize Baltimore "will be welcomed."

But he pointed out that much of the improvement in city neighborhoods today was spurred by big public investments in sports stadiums, the Inner Harbor, the port of Baltimore and Harbor East, along with state tax credits for biotechnology and stem cell research.

"It's not like you're going to attract business unless there's some kind of incentive for them to go in there and make money," Busch said. "Tax incentives attract people. What the proper balance is, is what you have to measure."

Anirban Basu, the economist Hogan tapped to recommend strategies for improving the state's economic climate, said he believed tax incentives to lure start-up companies and so-called young "knowledge workers" is an important tool — along with expanding manufacturing and distributors at the port of Baltimore.

"The implication is that without a vibrant Baltimore City, Maryland will fail to attract sufficient levels of national and international investment to help repair and diversify the state's economy," Basu, who was traveling internationally this week, wrote in an email.

"In other words, without the ongoing renaissance of Baltimore City, Maryland cannot hope to achieve what states like Massachusetts (Boston), Oregon (Portland), Washington state (Seattle), Texas (Austin, Houston, Dallas, San Antonio), Colorado (Denver) and other rapidly recovering states are presently achieving in the way of economic expansion," Basu wrote.

Statistically, Basu said, Montgomery County is a stronger economic force in Maryland than Baltimore. But the city's history, concentration of institutions, schools and museums and the port make it a smarter bet for attracting economic development.

Daraius Irani, the chief economist at Towson University's Regional Economic and Studies Institute, said years of investment in Baltimore has created the foundation for a renaissance.

Baltimore still has a substantial financial sector, Irani said, a vibrant entertainment industry, most of the state's law and investment firms, museums, the Johns Hopkins University, huge medical centers and a harbor that can accept huge ships from the newly widened Panama Canal.

"There's a lot of pieces in place in Baltimore City that if targeted specifically, that if nurtured and encouraged could make a big impact," Irani said.

He pointed to programs in other cities that allow rent-free development of vacant public land as an example of a policy that could be effective here.

"There are a lot of things that could be done, little things," Irani said. "They don't have to be grand."

ecox@baltsun.com

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