Job growth curbed by economic uncertainty, access to capital, regulatory hurdles

'There's an image, whether it's reality or not, that Maryland is more difficult to do business in'

June 04, 2011|By DON AINES |

Economic uncertainty, access to capital and regulatory hurdles are among the issues holding back job growth in Maryland and Washington County, according to some local officials.

"There are many times when some of the feedback we hear is, 'It's just easier to do business in West Virginia or other states,'" Del. Andrew Serafini, R-Washington, said last week. "There's an image, whether it's reality or not, that Maryland is more difficult to do business in."

The Maryland Economic Development Commission agrees.

"Uncertainty and lack of confidence in the current economic environment are profoundly influencing consumer and investor behavior," the MEDC wrote in "Charting Maryland's Economic Path," a report issued this spring. "Likewise, lack of certainty and clarity in policy, tax and regulatory spheres hold back growth and innovation."

"The extent to which government ... gets in the way of business is inherently difficult to quantify, yet the topic is very real to the business community," the report states. "At it's worst, perceived or real government intransigence is a competitive disadvantage to Maryland, and has been debated within the state for decades."

"If you had to start all over again, would you?" is a question Hagerstown-Washington County Chamber of Commerce President Brien J. Poffenberger said he often asks small-business owners. For a "disappointingly high percentage" of those asked, the answer is "no," he said.

"The hassle factor has gotten so high ... you almost need a full-time person to do that stuff," he said of the regulatory, permitting and licensing requirements faced by business owners. The interest of the business person, he said, is focused on making the product or performing the service, and having to do excessive amounts of paperwork on top of that can be discouraging, he said.

"Maryland is so diverse that a law is written that makes sense in one geographic area, but doesn't make sense in another," Poffenberger added. For instance, a regulation that applies to Montgomery County might not be practical in Washington County, he said.

"I don't know if regulations are any more onerous here or less onerous than in Maryland," said L. Michael Ross, president of the Franklin County (Pa.) Area Development Corp. Regulations are accepted by industries as a cost of doing business, but how they are enforced and how much regulators assist businesses with the process varies among states, counties and municipalities.

Taxing policies are another factor businesses look at, but an apples-to-apples comparison of taxes from Virginia, West Virginia, Maryland and Pennsylvania can be difficult to make because of variations in how the states, counties and municipalities levy taxes, Ross said.

The sales tax is 6 percent in Maryland, Pennsylvania and West Virginia, but local taxes can vary widely in a place such as Franklin County, where there are six school districts and 22 municipalities that can levy taxes. Washington County, Ross noted, has a countywide school system, something he thinks would bring greater educational and tax equity to Franklin County.

Banks are poised to provide capital for business startups and expansions, but demand is still down from pre-recession levels, one banker said.

"We're closing more loans this year than we did last year ... but relative to four or five years ago, it's still way off," said Bradley D. Pingrey, administrative vice president and retail regional manager for M&T Bank. "I see the economy recovering very slowly."

Businesses that suffered financially during the recession still might have issues that negatively affect their credit worthiness, Pingrey said. Conversely, companies that weathered the storm are being conservative about taking on additional debt, he said.

"Banks want to make loans and, as an industry, we have money to lend," Pingrey said.

The MEDC report mapped strategies in four areas: Technology and innovation; protecting "leading drivers of economic growth"; embracing regional and economic diversity; and making it easier to do business in Maryland. That last category calls for making the regulatory, licensing and permitting processes more predictable, transparent and automated, and creating a centralized licensing system.

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