2012 saw some job gains, mounting fiscal cliff worries -- Gazette.Net


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Notwithstanding the “fiscal cliff” that would impact the Free State more than most, Maryland showed a few more signs of recovering from the Great Recession in 2012, though progress was slow.

The state added about 15,000 jobs between January and November, according to federal figures, fewer than the previous two years, when there was a combined gain of some 60,000. But even a smaller gain was better than losses in 2008 and 2009, analysts said.

With its large number of federal agencies and contractors, Maryland is probably the nation’s most federally dependent state, said Anirban Basu, chairman and CEO of Baltimore economic and policy consulting firm Sage Policy Group. That makes the state’s job hiring more susceptible to events like the looming fiscal cliff, which threatens drastic federal budget cuts, he said.

“Maryland is among the most impacted not only by the fiscal cliff but also the mere threat of the fiscal cliff,” Basu said.

The private sector drove the job increase in Maryland as government positions declined by about 7,000 so far this year. That’s despite military bases and surrounding private contractors adding a significant number of employees this year, with about 12,000 at Fort Meade alone, according to figures from the Maryland Department of Business and Economic Development. Some of those were contractors.

Other major job gains this year were seen by the U.S. Food and Drug Administration, which has its headquarters in Silver Spring, up 2,720; Johns Hopkins Hospital and Health System in Baltimore, up 1,520; and MedStar Health in Columbia, up 920.

Among the employers that saw jobs decline were the National Institutes of Health in Bethesda and Bethesda military and aerospace giant Lockheed Martin, which both lost about 1,000 employees.

Expanded gambling could help some businesses

Gambling triumphed this year, with Maryland Live! opening at Arundel Mills in June and voters approving around-the-clock gambling and table games to all licensed slots locations in the state.

Maryland Live!’s arrival brought 3,200 slot machines online and made it the third location to offer slots in Maryland, along with Hollywood Casino Perryville and the Casino at Ocean Downs in Berlin. Soon after, Maryland Live! owner Cordish Cos. in Baltimore faced a new potential market threat when Prince George’s County proposed a $800 million, Las Vegas-style MGM Resorts International casino at the National Harbor development in Oxon Hill.

Hollywood owner Penn National Gaming of Wyomissing, Pa., also owner of Rosecroft Raceway in Fort Washington, contested the proposal, which was backed by major Prince George’s developers and executives.

The option for a Prince George’s license was tied into the state referendum to expand casino gambling around-the-clock and initiate table games. More than $93 million was spent on both sides of the issue leading up to the election, according to the state Board of Elections. The measure passed 52-48 percent in November.

Maryland Live! has implemented 24-hour gambling and anticipates adding 150 table games — blackjack, roulette, craps, sic bo and baccarat — to its casino. That could mean the removal of no more than 10 percent of the existing slot machines, according to Cordish officials. Cordish also plans to hire 1,200 more people and is hosting a free, 12-week casino dealer course through Anne Arundel Community College.

Another controversal referendum topic that passed this year was the same-sex marriage bill. Maryland’s wedding industry is still figuring out how to position itself to benefit from the new market after the measure passed 51.2-48.8 percent in November. Some businesses and some tourism offices, such as Visit Baltimore, have launched website directories to help same-sex couples find vendors.

The state’s thoroughbred racing industry also came to consensus after many years of in-fighting. The Maryland Racing Commission approved a 10-year plan Dec. 21 that provides 146 days of live racing at the state’s two thoroughbred tracks in 2013.

The agreement then calls for a 100-day minimum that will be enhanced through a revenue-sharing program between track owner Frank Stronach and the Maryland Thoroughbred Horsemen’s Association for the duration. Rosecroft and the state’s thoroughbred industry also reached agreement on simulcast licenses, ending a three-year dispute.

InvestMaryland starts giving funds

InvestMaryland, Gov. Martin O’Malley’s $84 million initiative to pump investment into new high-tech businesses through approved venture capitalists, saw a promising first year.

The state originally had planned to raise $70 million for the program through an online auction of tax credits to insurance companies that operate in Maryland and exceeded that goal by $14 million. InvestMaryland has injected more than $2.5 million into six programs through the Maryland Venture Fund, with Hunt Valley venture capital firm Grotech Ventures the first to receive $12 million.

Maryland started out fiscal year 2012 with negative fluctuations in venture capital investment overall for its first two quarters, but investment picked back up by the third. Investment fell to $25.5 million in the second quarter, the first time such investments had fallen below $30 million since the fourth quarter of 1996.

But the third quarter’s total of $158 million was the most investment in the state in a single quarter since the third quarter of 2010.

“It appears much more activity has been going on in the entrepreneurship sector,” said Robert Rosenbaum, president and executive director of Maryland Technology Development Corp. in Columbia. “When there’s good deals, money will follow.”

Following in the same vein of InvestMaryland, Prince George's County’s own $50 million Economic Development Fund, which began taking applications in March, has pumped $2.4 million into six county businesses, securing $26 million in private investment, according to county information.

“If you can find me anyone who said that was possible two years ago, I’ve got the Brooklyn Bridge I’d like to sell you,” Prince George's County Executive Rushern L. Baker III (D) said during a recent news conference. “Now we have people looking here [to do business] because we are willing to take the risk along with them.”

Projects move forward

In downtown Bethesda and North Bethesda, some 20 projects are under construction or being planned.

A mixed-use project at Woodmont and Bethesda avenues, known as Lot 31, will include up to 250 residential units and 40,000 square feet of retail, as well as about 1,200 underground parking spaces, said Doug Firstenberg, principal of StonebridgeCarras. The Bethesda development firm is spearheading the $200 million project with Montgomery County and PN Hoffman of Washington, D.C.

The first phase of residential and retail space should be open by 2015, he said.

Another under way is the Gallery of Bethesda at Auburn and Rugby avenues being developed by Donohoe Development Co. of Washington, D.C. That project is planned to have 234 apartments and 4,660 square feet of retail by 2014. A second phase is planned to be completed by 2015.

Pike & Rose broke ground this year on a massive project to replace the Mid-Pike Plaza shopping center at Old Georgetown Road and Rockville Pike with a Town Center-type development. The first phase, with 150,000 square feet of retail, 80,000 square feet of office and some 500 residential units, is slated to open in 2014.

In Prince George’s, the 460,000-square-foot Tanger Outlets in National Harbor began construction last month and will feature up to 80 high-end stores in eight buildings. Other Tanger Outlets feature retailers such as Saks Fifth Avenue, Nike, Gap, Brooks Brothers, Tommy Hilfiger, Under Armour and J. Crew.

Montgomery, Prince George’s battle for new FBI headquarters

Montgomery County was the latest entity to join the competition for a new FBI headquarters with some 11,000 jobs. Prince George’s, Fairfax and Alexandria are also bidding on the project.

The General Services Administration is seeking a 2.1 million-square-foot complex for a new headquarters for the FBI, which is now in the J. Edgar Hoover Building in downtown Washington, D.C. That building opened in 1974 and is obsolete, officials say.

“This is a once-in-a-generation federal relocation opportunity,” Prince George’s County Executive Rushern L. Baker III (D) said in a statement.

In Prince George’s County, a plan to move the state Department of Housing and Community Development to near the New Carrollton Metro Station fell apart in October when project developer Grand Central Development could not secure financing. Another request for proposal was issued this month, with state and county officials saying they would like to keep it in Prince George's.

Companies bought out

Maryland could be down to three Fortune 500 companies next year after having as many as seven in 2009.

Baltimore’s Constellation Energy Group, the state’s second-largest business on last year’s Fortune 500 list with $13.8 billion in revenues in 2011, completed its sale to Chicago power giant Exelon in March.

Rockville pharmacy benefits manager Catalyst Health Solutions, the fifth largest with $5.3 billion in revenues, was also acquired by another Illinois company, SXC Health Solutions.

And Bethesda medical insurance company Coventry Health Care — the fourth largest with revenues of $12.2 billion — agreed to be acquired by health insurance giant Aetna in a $5.7 billion cash-and-stock transaction. That deal could close by mid-2013.

Personnel changes

Maryland Department of Business and Economic Development Secretary Christian S. Johansson announced this month that he is leaving in January for a private-sector job after four years in the position. Deputy Secretary Dominick Murray will take over.

Bethesda defense and aerospace giant Lockheed Martin, the largest business in Maryland with $46.5 billion in revenues last year, announced that CEO Robert Stevens will retire in January. Bethesda hotel giant Marriott International, the third-biggest company in the state with revenues of $12.3 billion last year, also saw longtime CEO J.W. Marriott Jr. step down.

The Tech Council of Maryland renewed its search for a CEO after Art Jacoby announced last month that he will step down in February. Jacoby took over in August, after Renee Winsky resigned in December 2011. He was chosen from a list of 125 applicants, said council chairman Larry Letow president and COO of Convergence Technology Consulting in Glen Burnie. The council expects to see a similar number of applicants this time, Letow said.

“The thing that’s very exciting is we’re going to have new leadership in place,” Letow said, adding that the council is watching to see what changes in personnel occur at the state, local and federal government levels. “Leadership changes influence the climate and require the develoment of new relationships. They can delay or enhance things getting done.”

The Maryland Chamber of Commerce also saw some personnel changes, with Matthew J. Palmer stepping in to lead the chamber’s lobbyist team following the departure of Ronald Wineholt. Palmer, senior vice president of government affairs, represents the first major shift for the team in nine years.

New laws

The state chamber played a lot of defense in the legislative session this year, opposing bills that could have made the state less competitive in attracting and retaining employers, president and CEO Kathleen Snyder said. Some 90 percent of legislation the organization lobbied against did not pass, such as combined reporting, which would require companies that operate in multiple states to pay a portion of all combined profits based on revenues in those states and other factors, and expanding the sales tax.

Many that did pass — like a review of tax credits for biotech investment, research and development, and other expenses, and the new health insurance exchange system — were amended to make them more agreeable to businesses, she said. The new federal health law authorizes the exchange, a network in which businesses and individuals can purchase medical insurance, to contract with health insurance carriers and establishes the framework for a small-business program.

Among bills that were amended were a tax credit proposal that deleted a proposed automatic termination provision, and the health insurance exchange bill that some say makes it more difficult for the exchange board to exclude health insurance carriers after 2016.

The Montgomery County Chamber of Commerce focused on legislation that would strengthen small businesses, said Georgette “Gigi” Godwin, president and CEO of the organization.

Two key bills that passed that the chamber worked on loosen restrictions on small businesses seeking to qualify for the state reserve contracting program, and allows a state tax credit for certain costs incurred by a business to obtain security clearances for employees and to construct or renovate a facility within Maryland where sensitive information may be stored.

Many of the counties’ small businesses are government contractors, Godwin said.

The contracting legislation was authored by Del. Kirill Reznik (D-Dist. 39) of Germantown and Sen. Karen S. Montgomery (D-Dist. 14) of Brookeville. The Small Business Reserve Program, created in 2004, requires 23 state agencies to reserve at least 10 percent of the dollar value of their procurements for bids by certified small businesses.

But the total has remained below that goal, reaching 6.2 percent in fiscal 2010, up from 5.6 percent in fiscal 2009, according to state figures.

The security clearance proposal, sponsored by Sen. Roger Manno (D-Dist. 19) of Silver Spring, is administered by the Department of Business and Economic Development and awards a maximum of $2 million in credits each year. It will be another incentive to attract and retain government contractors, Godwin said.

One setback to many business leaders was the failure of lawmakers to triple funding for the state’s research and development income tax credit — from $6 million to $18 million. The legislation unanimously passed the Senate but bogged down in the House.

Transportation funding was among the issues left unaddressed, as the rising price of gasoline and diesel fuel was a key factor in thwarting a measure to tie a fuel tax increase to road and transportation improvements. Some business groups, including the Greater Baltimore Committee and state chamber, supported hiking the tax, which has not been raised since 1992.

Raising the tax on gasoline would have been disastrous to most businesses, especially those that rely on deliveries and already have had to adjust prices, said Elda Devarie, president and CEO of EMD Sales. The ethnic food distribution business, which has a fleet of trucks, started in Landover before moving last year to Baltimore.

kshay@gazette.net, lrobbins@gazette.net