Montgomery County considers investing in companies

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Photo - Rockville in Montgomery County (Examiner file photo)
Rockville in Montgomery County (Examiner file photo)
Local,Maryland,Kate Jacobson

Businesses that receive economic development money from Montgomery County soon might have to share some of their profit with the county government.

A bill being introduced in the Montgomery County Council would give the county up to 25 percent ownership in companies that receive economic development funds. That means if a company is successful, the county can profit off it.

Steve Silverman, director of the county Department of Economic Development, said the county currently gives forgivable loans to companies that promise to create a certain number of jobs and occupy a certain amount of space in a certain time period. He said it makes sense for the county to consider having a stake in companies it invests in.

Since 2007, Montgomery has spent about $8.8 million helping 95 companies take root in the county. About one-third of those businesses are technology and biotech companies.

"[The bill] amends the economic development fund so that [the county] can get an upside out of supporting a company rather than writing them a check that is solely based on job creation," Silverman said.

Stephen Fuller, director of the Center for Regional Analysis at George Mason University, said the change could indeed turn a profit for the county. And the practice is common around the country.

But he said investing wouldn't be his first suggestion for a county that has been struggling to improve its economic development.

"It wouldn't be what comes to mind first -- or second or third," he said, adding that stronger recruitment of companies or better advertising of Montgomery County might help the department more in the long run. "How do we know what Montgomery County is? How do businesses find Montgomery County? That's the question."

He pointed out potential repercussions if a company goes bankrupt; a county government investing in startups, particularly biotech companies, is risky business.

But Silverman said he sees no real loss for the county. The county would have only partial ownership, and it would lose its money anyway since it hands out loans that don't have to be repaid if the company goes under.

"It would be no more of a loss, if they went under, if they didn't make the jobs or lease the space that we agreed to," he said. "If we do that deal and the don't pass that test, we lose our money anyway."

kjacobson@washingtonexaminer.com

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Kate Jacobson

Montgomery County reporter
The Washington Examiner