Report: Montgomery County business incentives not keeping business

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Local,Maryland,Kate Jacobson,Montgomery County

Almost 40 percent of businesses that received economic incentives from Montgomery County have moved out of the county or closed up shop, according to a new report.

The report compiled by the county's Office of Legislative Oversight also shows that the county lost about $3.7 million in incentives given out to businesses that could not meet the stipulations of the grants from 1996 to December 2012. Businesses that do not meet the requirements must pay their grant back to the county.

The report was requested by the County Council and released on Tuesday. (Read the complete report in the embedded viewer below this story.)

About 60 percent of the businesses that received money through the county's largest incentive program -- the Economic Development Grant and Loan Program -- did not fully meet the criteria to receive an award. If a significant number of criteria are not met, a company must give back the money awarded.

The county issues grants on the assumption a business will meet the criteria, which include creating a certain amount of jobs and occupying a certain amount of space, among other requirements.

Despite a somewhat low retention rate, the report says incentive awards provided a $1.24 billion return in private investment, $38 million in annual net economic benefit and created about 26,775 jobs as of December. The county has given out about 250 grants since 1996, investing about $40 million in county companies.

The most successful companies were those in biotechnology, business services and media and communications. Technology and information technology jobs had some of the worst numbers, with about 29 percent of companies receiving Grant and Loan Program awards meeting all performance criteria.

The report does not, however, categorize Montgomery County's incentive programs as "successful" or "unsuccessful." In general, the county adheres to what most consider the best ways to get the most out of financial incentives, Office of Legislative Oversight staff wrote.

The staff issued recommendations to County Executive Ike Leggett and the Department of Economic Development to improve the program, including enhancing data collection.

County Council members briefly discussed the report Tuesday, though it is scheduled to be fully examined by the council's Planning, Housing and Economic Development Committee on March 7.

Councilwoman Nancy Floreen, D-at large, said her initial reaction to the report was generally positive.

"Bottom line is -- it seems to me we're doing the right thing, and we'll do it better over time," she said.

In a letter to the oversight agency, Chief Administrative Officer Timothy Firestine agreed with the agency's recommendations. Stronger tracking of long-term outcomes for businesses that receive loans and better benchmarks for determining performance will help the county.

"In this environment, strategic local incentives will continue to play an important role in many business decisions," he said.

kjacobson@washingtonexaminer.com

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