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Baltimore: America's biggest branch town

The name "Constellation Energy" will still be around. The energy trading firm will still be doing much the same thing it ever has in a large, new building on Baltimore's waterfront. It will have somewhat fewer employees, but it will, at least for the next several years, maintain its status as one of the region's largest corporate philanthropists. And it's not as if Constellation was universally beloved around town anyway; despite its many contributions to the local economy and charitable scene, the company was often derided, as was its CEO, Mayo A. Shattuck III. So why should we mourn the sale of Baltimore's last Fortune 500 company to Chicago-based Exelon?

Baltimore has never been a hot spot for the headquarters of the nation's largest companies, but it has always had at least one spot on the Fortune list, dating back to its inception in 1955. For much of that time, the city was represented by venerable manufacturers, such as the Martin-Marietta Corp. and Black & Decker. USF&G only appeared briefly on the list before its sale in 1998. Constellation was a Johnny-come-lately to Baltimore. It was created in 1985 as a subsidiary of Baltimore Gas & Electric, which was at the time diversifying into a wide range of side businesses beyond its historical role as a utility. Constellation as we know it now didn't exist until 1999, when the legislature authorized BG&E to create a holding company to help it compete in the state's soon-to-be-deregulated power market. Buttressed by a fast-growing energy trading operation, it moved quickly up the Fortune list.

But throughout nearly its entire history, Constellation's presence in Baltimore has been tenuous. In the 1990s, a proposed merger between BG&E and PEPCO was to take it (and BG&E) out of the city to a new headquarters in Annapolis. A decade later, Constellation tried to sell itself to Florida Power & Light; then, amid a bankruptcy scare, it was almost bought out by Berkshire Hathaway but instead sold part of its nuclear business to the French firm EDF. This week's sale to Exelon, then, comes as no surprise, and even as that deal was being debated, there was little doubt that even if it fell through, Constellation would soon be looking for a new partner. Its growth strategy depended on it.

But with the departure, Baltimore is now the largest city in America without a Fortune 500 headquarters, and it's not even close. The nearest on the population chart is Albuquerque, which is 11 spots below us on the list of the nation's biggest cities. That distinction is certainly a blow to the municipal ego and puts us behind in the bragging rights to regional competitors like Philadelphia, Pittsburgh and Cleveland, all of which have five Fortune 500 companies, and Washington, which has four.

But beyond pride, what does it really mean? Far smaller and less prosperous cities than Baltimore have multiple Fortune 500 headquarters. And greater Baltimore, despite its lack of corporate headquarters, is one of the most prosperous metropolitan regions in the nation. When combined with Washington, it ranks second in median household income, according to the Census Bureau, and even taken by itself, Baltimore and its suburbs rank 17th, slightly ahead of Fortune 500 king New York City and far ahead of runner-up Houston.

As much as some like to bemoan Maryland's business climate, there's little indication that anything about the state's tax or regulatory policy explains the relative paucity of big corporations headquartered here. The Tax Foundation's top 10 states for business can boast 79 Fortune 500 headquarters among them; the bottom 10 have 192. The traditional red states (defined as those that went for George W. Bushin 2000) are home to 205 Fortune 500 companies. The Al Gore states have 295.

For better or worse, our economy is centered not around big corporations but around government and health care, much of which is in the nonprofit sector. That carries some risk if and when the federal government gets serious about deficit reduction, but it has also largely insulated the region from the worst of the recent recession.

The loss of the Constellation headquarters, then, is no reason to panic, but it does present a good opportunity to take stock of the region's potential and opportunities for economic growth. Although no Baltimore-area companies are on the Fortune 500 now, Legg Mason was just a few years ago, and it could be again. Among up-and-comers, Under Armour has a shot at the Fortune 500 someday. Its revenues last year were about $1.4 billion, well short of the $4.4 billion earned by No. 500 on the list,Seaboard Corp., an agricultural products company headquartered in Merriam, Kan., which is near Kansas City. But given the athletic apparel company's phenomenal growth rate (its revenues increased by more than 38 percent last year), it could crack the list before the decade is out.

But that's not Baltimore's only hope. The region is home to some of the most advanced biomedical research in the world, and the discoveries made here have real potential to transform Baltimore's economy the way information technology transformed Silicon Valley. The state's higher education and business development strategies are increasingly merging, with the leaders of both groups focused on turning research into commerce. If they succeed, Baltimore may not be the nation's biggest branch town for long.

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