ANNAPOLIS – Two new economic development bills introduced by Gov. Parris N. Glendening this session would create $60 million in revolving loan funds for Maryland businesses.
House Speaker Casper Taylor Jr., D-Allegany, also wants approval for a $40 million economic development package for distressed areas.
If passed, these new loan programs would be added to a growing list of similar financing programs run by the Maryland Department of Business and Economic Development.
Delegate Michael Busch, chairman of the House Economic Matters Committee, said the creation of so many different funds has become confusing and thinks the system needs to be streamlined.
“It’s like going to a Chinese restaurant…,” Busch said. “I like the food, but I don’t know if that’s the way we want to order our loan funds.”
Busch, D-Anne Arundel, said there are 22 different loan and economic incentive programs, including both an animal waste and an aquaculture fund that the state may not need in the future. “Ten years down the road, you may not have pfiesteria,” a fish-killing disease that distressed the state’s fishing industry in 1997.
There are other programs that are “almost in direct competition with themselves,” Busch said. “It just seems like there could be a greater use of the money if (they’re) given a little more flexibility in the department” rather than having “22 mini-pots.”
Business and Economic Development Secretary Richard C. “Mike” Lewin, told the committee Tuesday that his agency needs to consolidate some of the programs, but said he was not optimistic that it could be achieved this session.
The department’s programs range from loans for small businesses to large grants from the Sunny Day fund a program intended to enable the state to act on expensive economic development proposals. There are even loans specific to child-care facilities and technology companies.
Glendening’s new programs would add another small business loan program as well as a program to relieve demand on the Sunny Day fund.
The governor has included $2 million in the fiscal year 2000 budget for the Maryland Competitive Advantage Loan Program, a revolving loan fund that would provide direct loans from $10,000 to $100,000 to companies with sales less than $1 million.
“What we’ve heard from small business owners is that they are very concerned that a fund be targeted solely to small businesses,” said W. Kevin Hughes, the governor’s deputy legislative officer.
But similar state programs already exist. Before 1995, the Maryland Small Business Development Financing Authority, a quasi-public agency, ran the small business loan programs under the state economic development department. In 1994, the General Assembly privatized the loan programs. Glendening’s new program would create another small business program, but put it back under state control.
The new program is needed to make direct loans, which current programs can do in only a limited way, Hughes said.
“The governor wants the state to have the responsibility, accountability and management oversight for the program,” said Ray Feldmann, the governor’s press secretary.
Glendening also has budgeted $5 million for the Maryland Economic Development Assistance Fund. It would accrue to $50 million in three to four years, Hughes said, and provide below-market loans for buildings, real estate, machinery or working capital.
The loans ranging from $500,000 to $10 million, depending on the value of the fund will be targeted at businesses with strong potential for job creation or retention. A newly created Maryland Economic Development Assistance Authority would administer them.
The new fund would become the state’s primary economic development vehicle, replacing the Sunny Day fund, which then would be used for extraordinary grants, Hughes said.
“That’s probably the right direction to go,” Chairman Busch said.
Lewin said surrounding states have this kind of financing program and have been very effective.
Adding to the loan fund confusion is House Speaker Taylor’s “One Maryland” proposal to create a $40 million loan fund for economically distressed areas, specifically Allegany, Garrett, Dorchester, Somerset and Worcester counties as well as Baltimore City. The areas would receive funding for new buildings, roads and sewer systems in order to attract new business.
Economic Matters passed Taylor’s bill Wednesday, 21-1. The lone dissenter, Delegate Richard La Vay, R-Montgomery, said he felt that throwing money into these areas at the same time the governor is proposing a $1-a-pack cigarette tax would defeat the purpose of Taylor’s program.
“We need to do a little better homework before we start investing all this money,” he said.
The cigarette tax will hurt retailers in Allegany, Garrett and Washington counties, La Vay said. When Michigan implemented a $1 cigarette tax, he said, border counties saw sales decrease by 90 percent because business went to other states.
“In a nutshell, I don’t think (the bill) will do a damn thing,” he said.
As for Glendening’s proposals, La Vay pointed out, the state already has 22 different programs. “Using taxpayers money,” he said, “should be the last remedy.”