I oppose the county's economic development efforts. The main reason is that owners and developers of commercial and industrial land have sufficient economic incentives to attract businesses without government assistance or subsidies. State and local government economic development efforts simply fuel a financial struggle between states and local governments to attract business entities. This struggle produces no net gain in jobs nationwide. The only winners are business entities that go to the highest bidder. The taxpayers are the losers.

• Economic Development Revenue Bonds. This is a gimmick that permits local governments to give a developer or an established business access to low interest, tax free financing normally reserved for governmental bodies. Here's how it works:
  
  

  Bob Business desires to borrow $1 million. Larry Lender is willing to loan that amount to Bob at an annual interest rate of ten percent (10%). Since the interest Larry will receive on the loan is considered income, Larry will have to pay taxes on the interest income. Assume Larry's marginal tax rate is forty percent (40%). For every $100,000 of interest income Larry receives, he only gets to keep $60,000. He pays the other $40,000 in income taxes.

  However, if the County allowed Bob to obtain an Economic Development Revenue Bond, the interest on the loan will be tax-free. Because the interest isn't taxable, Larry is willing to make the loan at a lower interest rate because he wouldn't have to pay income taxes on the interest. At a tax-free interest rate of six percent (6%), Larry gets to keep the same amount of profit $100,000 x 6% = $60,000, with no income taxes. Larry is indifferent when he can loan money at a tax-free rate of 6% or a taxable rate of 10%.

  Although Larry doesn't care, it makes a big difference to Bob and the U.S. Treasury whether or not the loan is taxable. If the interest on the loan is a taxable rate of 10%, Bob will pay $100,000 per year in interest, $40,000 of which will wind up in the U.S. Treasury. However, the interest on the loan is a tax-free rate of 6%, Bob will pay only $60,000 per year in interest and the Treasury is out $40,000.

  By authorizing businesses to obtain Economic Development Revenue Bonds, the county commissioners effectively make gifts to businesses and developers at the expense of the U.S. Treasury. This mechanism distorts the credit markets because it allows politically-connected local businesses to obtain cheaper financing than would otherwise be the case. If the people understood what was going on, they would not approve of it and they would demand a change.

• Tax Increment Financing. Would you be better off financially if you could use your property tax dollars to pay your mortgage? Who wouldn't? That's how the Tax Increment Financing ("TIF") gimmick works. Imagine you want to borrow $100,000 to build an addition to your house. The addition will also raise the amount of the assessed value of your home for purposes of the general property tax by $100,000 (residential properties are assessed at 100% of market value). The addition will raise your property tax by $100,000 ÷ $100 x $1.00 = $1,000. If you could apply the $1,000 increased amount of property taxes toward the loan, you would substantially decrease your cost of borrowing. In effect, you're not paying any property taxes on the addition. Why would any government official want to do this? It is a roundabout way of forgiving property taxes for a select few. Sorry, only land developers get these types of deals. Again, if people knew what was going on, they would demand a change.
• Direct Lending. The County sometimes loans public funds to businesses. This practice is unwise for several reasons. First, if banks or venture capitalists (who are in the business to make loans) won't make the loan, why should the taxpayers? Second, politicians make poor bankers. The County will make its decision primarily on political considerations rather than sound banking practices (the taxpayer are current stuck on a $1.7 million loan to a borrower who has filed bankruptcy not once but twice!!!). Third, if the borrower has sufficient political clout to get the loan in the first place, he or she can usually get away with defaults on the loan (the county once agreed to make renew a loan to a borrower who had delinquent property taxes outstanding).
• Airport Subsidy. If present trends continue, the County will be paying $1.7 million in subsidies for the Frederick Municipal Airport over the next six years. The only justification offered for it is that it is "economic development." This "Airport Welfare" is unnecessary. The better policy is to allow the Airport to stand or fall on its own as an independent economic entity, free of government subsidies. If the wealthy few who use the Airport are willing to pay enough in user fees to make the Airport a viable entity, then raise user fees. On the other hand, if the users of the Airport don't want to pay, then why should the general taxpayer? In either case, there is no reason to subsidize the operation.
• Water and Sewer Subsidies. Although the current board of county commissioners has made good progress toward eliminating public funding of water and sewer projects for developers and influential businesses, much remains to be done. The practice of having the county, rather than the developers, fund these projects is often justified as "economic development." In reality, it is nothing more than a transfer of wealth from the county coffers to developers and real estate speculators. Here's an example:
  

  Sam Speculator owns Green Acres, a 100 acre parcel of land that doesn't have sewer service. It will cost $500,000 to extend sewer lines to the land. Dan Developer is willing to buy Green Acres "as is" for $2 million. If sewer is provided, Dan is willing to pay $2.5 million. Sam requests that the county finance the installation of the sewer line as an economic development gesture. The county installs the line, at no charge to either Sam or Dan. Dan buys Green Acres for $2.5 million, all of which goes to Sam. The net result of the transaction is a transfer of $500,000 from the county coffers to Sam.

• Fast Track. The county often awards selected developers and businesses "Fast Track" status that allows them to go to the head of the line in the permitting queue. The decision as to who makes the Fast Track list is purely a political one. The Fast Tracking process is at odds with the generally accepted social more that everyone should wait their turn. The better practice is for the county to charge higher permitting fees in exchange for faster service. The county's development review staff will receive enough incentives to induce them to want to work evenings and weekends on a project. The extra cost is passed along to the developers who want faster service. This is a far better policy that the current one.

The recent increases in property and income taxes demonstrate that business growth is not a panacea. If it were, we would be cutting taxes, not raising them. After you factor in all of the hidden costs of business growth (mainly traffic congestion and tax subsidies) the benefits are far less than what they're cranked up to be.