Montgomery County's Department of Economic Development is seeking $2 million from the county's rainy day fund to attract biotech companies.
The County Council passed a bill in March allowing the department of economic development to offer biotech firms tax credits, as an incentive for them to relocate to Montgomery.
"We don't have a funding source at this point," Steve Silverman, director of the economic development department, told The Washington Examiner. "It will require a special appropriation of money that would be likely to come out of reserves."
He said it's not unusual for the county to dip into its rainy day fund for economic development projects costing more than $100,000.
Credit agencies threatened to lower the county's AAA bond rating this year after County Executive Ike Leggett recommended using reserves to help fill Montgomery's $1 billion budget gap. The county raised energy taxes 85 percent to make up the difference.
Montgomery also now has the power to invest in biotech startups and other venture capital projects.
Maryland law prohibits local governments from making equity investments, but the General Assembly this year allowed Montgomery to do so at the urging of county delegation members.
Montgomery's legislative analyst, Sheila Sprague, helped draft Montgomery's investment bill and testified in support of it before House and Senate committees. She said the development would draw from its $850,000 economic development fund for investments.
The county uses its taxpayer-supported development fund to lure companies to Montgomery in the form of grants and loans.
Sen. Brian Frosh, D-Bethesda, said he thought the county would use its new investment authority to replace grants and loans with investments, rather than pour money into both endeavors.
"What I think most people heard was that this gives the county an extra tool -- not to use on its own or exclusively, but to use as a replacement of a grant or loan" he said. "Biotech investments are speculative investments. As an individual investor, it isn't something you would put your whole portfolio in. It's a gamble. I don't think the legislature was thinking the county was going to go out and spend lots of money on these investments."
Silverman said the $850,000 in the fund would continue to fund grants and loans -- and the $2 million for tax credits would be temporarily placed in the development fund before it is dispersed to biotech firms.
Silverman said $2 million is only a goal, and he doesn't expect funding until January 2011, when the department can reassess the county's economic wealth.
The County Council will have to approve any additional funding to the economic development fund.