Baltimore Business Journal: ‘Expect the unexpected’ Maryland businesses cautious as 2020 General Assembly begins

By Holden Wilen

Jan. 9, 2020

Politicians from across Maryland flock to Annapolis every year for the annual legislative session and talk about how they will be passing laws that will affect the state for generations to come.

Billions of dollars are at stake as Democrats push a plan to reform Maryland’s public education system. How the state will pay for that plan is important to businesses and residents statewide.

The future of the Preakness Stakes in Baltimore will also be on the line after the city and the company that owns Pimlico Race Course reached a preliminary deal last fall. If the deal is passed by lawmakers, it will have a major impact on Maryland’s thoroughbred horse racing industry and ensure the second jewel of the Triple Crown stays in Baltimore.

The top priority for Jones, Ferguson and the Democratic majority in the General Assembly will be to pass a law creating a new funding formula for public schools based on the recommendations of the Commission on Innovation and Excellence in Education.

The commission, known as the Kirwan Commission since it was led by William “Brit” Kirwan, the former chancellor of the University System of Maryland, has recommended a plan that would be phased in over 10 years and eventually invest $4 billion into public schools. The state would provide $2.8 billion and local jurisdictions would invest $1.2 billion.

During the 10-year phase-in period, the cumulative cost for the Kirwan Commission recommendation is $32 billion.

Democrats have not said how they will pay for the Kirwan Commission’s recommended formula. Hogan, a Republican, has warned that implementing Kirwan could result in massive tax hikes. Democratic leaders said they do not intend to increase sales, property or income taxes.

Until lawmakers explain how they will pay for Kirwan, the business community finds itself in a holding pattern. Business advocacy organizations including the Maryland Chamber of Commerce, the Greater Baltimore Committee and the Maryland Free Enterprise Foundation have not taken official positions on the Kirwan recommendations.

Protecting tax credits

Instead of advocating for bills, the business community could find itself playing defense because some Democrats are eyeing changes to tax credit programs that are used to incentivize businesses to move or expand in the state.

Several reports over the past few years have identified issues with certain tax credits. An audit of the Maryland Department of Commerce last year found a lack of oversight in how some tax credits are administered. Altering or getting rid of some tax credits could free up some of the money needed to pay for Kirwan.

Del. Julie Palakovich Carr, a Democrat from Montgomery County, is proposing a package of bills addressing tax credits and what she considers to be “loopholes” in the state’s tax code.

One of Palakovich Carr’s bills would add sunset dates for some tax credits that do not currently have end dates. Those tax credits include the Biotechnology Investment Incentive tax credit, the One Maryland tax credit, enterprise zone tax credits and enhancements to the More Jobs for Marylanders tax credit related to opportunity zones.

Another one of Palakovich Carr’s bills deals with some outstanding issues related to state incentives for businesses located in the opportunity zones created by the 2017 federal tax reform law. She wants to ensure businesses do not receive incentives under the law for work they were already going to do anyway.

Business advocates want to preserve tax credits and other incentives.

Donald C. Fry, CEO of the Greater Baltimore Committee, said it is not inappropriate to analyze tax credits to see if they can be improved, but he does not think any of them should be eliminated.

“We feel that the tax credits that are in place that are effective should be in place,” Fry said. “There is already a process in place for reviewing them. Only a small percentage of the state budget is utilized for tax credits but the return on investment is substantial.”

Saving the Preakness

The other big-ticket item on the General Assembly’s agenda has a major impact locally in Baltimore.

Lawmakers will be considering a bill codifying the deal agreed to by Baltimore and the Stronach Group, which owns Pimlico and Laurel Park, to rebuild Pimlico and keep the Preakness in Baltimore.

The sides have tentatively reached a $375.5 million deal to redevelop the 150-year-old Pimlico Race Course and Laurel Park. Pimlico would remain the home of the Preakness while Laurel would become the day-to-day center for the horse racing industry in Maryland.

The agreement calls for $348 million in bonds to be issued to pay for most of the cost. The Maryland Stadium Authority would issue the bonds and handle construction. Slots revenue already dedicated to the horse racing industry would be used to pay the debt service.

While Democratic leaders have expressed support for the deal, Hogan so far has been mum. The bill could also run into hiccups because it involves how casino money will be used and some Prince George’s County lawmakers could oppose it. Those lawmakers want to ensure a future for the land currently occupied by the Bowie Race Track.

Fry, who has expressed support for the deal, said he remains optimistic of the bill’s chances for being passed.

“This has been a controversial issue and oftentimes when you have such a huge difference of opinion between groups and then find a compromise, then the chances of it being resolved are much better than most pieces of legislation,” Fry said. “The major players are in agreement and the leadership in both the House and Senate is supportive. That bodes well for this type of legislation. It doesn’t mean it won’t get passed without changes, but the concept and the funding and the principles will be accomplished.”

Other issues

With so many changes in the leadership of the General Assembly and little known about how the state will pay for the Kirwan Commission’s recommendations, businesses should be ready for anything to happen.

Despite the uncertainty, lawmakers are again expected to submit a record number of bills.

“Expect the unexpected,” Fry said.

To read the full story, visit the Baltimore Business Journal’s website.

Source: Baltimore Business Journal