The Washington PostDemocracy Dies in Darkness

Study: Montgomery Co. economy is stagnant, and leaders are ignoring job creation

Purple Line construction on Elm Street at Wisconsin Avenue in downtown Bethesda in February. (Michael S. Williamson/The Washington Post)

In 1991, defense contractor General Dynamics was looking for a place to move its 200-job headquarters. The Montgomery County executive at the time, Neal Potter, had a ready answer: Not here.

Potter said the county needed “to ease off” creating new jobs — because of the problems, like traffic, he said they would bring. The company ended up building in Northern Virginia.

It’s hard to imagine that happening in today’s Montgomery County, where officials are scrambling to court’s second headquarters and its 50,000 jobs. But the county’s complex relationship to business could pose a challenge for the next elected leader of Maryland’s most populous jurisdiction. A report released Friday says sluggish job and business growth — and rising debt and office vacancy rates — could spell economic disaster for the mostly wealthy county in the not-too-distant future.

“Montgomery County has been underperforming its economic potential for a long time,” said Charles K. Nulsen III, president of Washington Property Company in Bethesda and a founder of Empower Montgomery, the nonprofit advocacy formed by business leaders that commissioned the report. “By not paying attention to business creation, we are disproportionately burdening the citizens of Montgomery County with higher taxes to pay for increased population, increased services.”

Read the Empower Montgomery report

Business leaders are trying to push the economy as an issue in this year’s elections, which will usher in a new county executive and at least four new members on the nine-seat County Council. Because Montgomery voters are overwhelmingly Democratic, those leaders are likely to be determined in the June 26 primary, just over eight weeks away.

At a forum Friday at the Universities at Shady Grove in Rockville, all six Democrats running for county executive were asked about the report, which is ominously titled “The Coming Storm” and was researched by Baltimore-based Sage Policy Group. It offers gloomy statistics about the county economy at a time when the fast-growing school-age and senior-citizen populations illustrate the need for new spending.

“You have to ask yourself the question, is that tax-base growth sufficient to support the quality of life in Montgomery County?” Sage Policy Group chair and chief executive Anirban Basu said before an audience of several hundred.

Among the findings:

●Despite bursts of development along Rockville Pike, in downtown Bethesda and select other locations, the county of about 1 million people overall had only six more businesses in 2016 than it had in 2011 — compared with growth of nearly 6,300 businesses in the state in that period. Between 2006 and 2016, Montgomery County added 210 jobs, while jobs in nearby Fairfax County, Va., grew by 6,030.

●The office vacancy rate was 14 percent at the end of 2017 — and no new office space was being built outside of Bethesda/Chevy Chase and Silver Spring. There was a 28 percent vacancy rate in Kensington and Wheaton.

●Private-sector jobs fell by 12,511 positions between 2006 and 2016, while public-sector jobs rose by 11,603, a net loss.

The report also highlighted the “immense local economic dependence on declining federal activity,” pointing out the county’s historical relationship with — and fiscally troubling reliance on — the federal government.

It also found that Montgomery is “the largest borrower among all Maryland counties,” with $5.9 billion in debt in fiscal 2016 and debt service taking up more and more of the county’s budget. The county had the fourth-
fastest annual growth in debt in the state between 2012 and 2016, behind Prince George’s, Garrett and Worcester counties.

But the report also pointed out some of Montgomery’s greatest strengths — good schools, a highly educated and talented workforce, growing transportation options — which the authors said make it the “finest possible location” for a certain headquarters-hunting tech giant (the landing of which, incidentally, would help to solve pretty much every many of the economic problems the county faces).

Absent Amazon’s arrival, the report recommended several salves, including a move to embrace business, not “merely” tolerate it; reduce energy taxes and impact fees on new development; and increase economic development resources. Amazon founder and chief executive Jeffrey P. Bezos also owns The Washington Post.

The candidates’ responses to the report varied, with some who haven’t worked in county government blaming those who have.

“Friends, this should outrage you,” said Del. C. William Frick (D-Montgomery). “It’s an indictment of the folks up here that have been part of this and allowed this to happen.” Potomac businessman David Blair likened the findings to a “fire alarm” and said he would work to create a “culture of yes” in the county.

Council member Roger Berliner (D-District 1) agreed that the county relies too much on the federal government, but he noted that Montgomery outperformed Fairfax in certain areas, such as private-sector wage growth. And council member George L. Leventhal (D-At Large) said the business leaders need to work with the government to make clear what they need. “Political leadership is only one part of the equation,” he said.

Rose Krasnow, a former county planning official and Rockville mayor, said she created that city’s economic development corporation in part “because I saw how important business was to our county.”

Council member Marc Elrich (D-At Large) said the report left some questions unanswered, pointing out that Fairfax County and the District saw more robust economic growth, despite some tax increases in Fairfax and restrictive zoning in the nation’s capital.

“People have to start talking about what regulations specifically get in the way of doing things,” Elrich said. “What do we need to do at the local level to stimulate local business?”

Even if government regulations in Montgomery aren’t much different from other regions, “it seems to be more onerous,” George Mason University economist Stephen Fuller said in an interview. In Northern Virginia, Fuller said, “land-use regulations are simpler. The perception is, you can go and talk to elected officials, and they’ll work with you to make it happen.”

Bob Buchanan, chairman of the Montgomery County Economic Development Corp., said the county had made strides. In an interview, Buchanan pointed to an increasing sense of regional cooperation, a healthy biotech industry in the county and, of course, the fact that Montgomery was the only Maryland jurisdiction to land on Amazon’s shortlist for its second headquarters. (Locations in the District and Virginia made it, too.)

“I think Montgomery County is getting some belated recognition that it’s not so hostile,” Buchanan said. “I think it’s too easy to stick with that perception of the past.”

Read more:

Bezos’s support for LGBT rights an unspoken factor in Amazon HQ quest

Crowded field for county exec makes it anybody’s race

Amazon tours Md., D.C., Va. sites as part of headquarters search