Regulatory reform comes to Maryland

I harbor no illusions that my post from the other day regarding the declining optimism of Maryland business owners goaded him into action, but today Governor Hogan announced the formation of a Regulatory Review Commission (RRC), charged over the next three years with “(f)ixing our burdensome antiquated, broken and out-of-control regulatory environment in Maryland.” The ten members of the RRC are volunteering their time to “focus like a laser beam on these issues”, said Hogan.

It’s interesting that the Democrats are claiming the Augustine Commission (which was created in the waning months of Martin O’Malley’s second term) was intended to address these issues and saying Hogan shouldn’t need three years to address the problem. How soon they forget that Larry’s Change Maryland organization was convening business summits over the last three years to gain the business perspective, not to mention the fact it was their administration which put out a number of these job-strangling regulations in the first place.

To me it’s just sour grapes. Ask yourself: had Anthony Brown won, would curtailing regulations be a priority? Thought not. The Augustine Commission report would have been filed and ignored.

But I hope the RRC has the latitude to go beyond just regulations and into other areas like taxation and, more importantly, looking into where other states succeed. Take a state like Texas, where hundreds of thousands of jobs have been created (as a net gain over jobs lost, not as a one-for-one swap) over the last decade. What attracts these entrepreneurs and leaders, and what assets can Maryland use to emulate their gains? Granted, a good portion of the Lone Star State’s gain came from abundant energy resources that Maryland can’t match, but there are other areas we may be able to do as well or better if we make that a goal. Unfortunately, over the last eight years our state took its cues from states like California and New York, places where capital and population have been fleeing.

Another question is just how cooperative these Democrats, who are already trying to take credit for the little bit done in 2015, will be to the RRC’s agenda as they submit their findings.

Take the “rain tax” as an example – a Democrat introduced the vastly watered-down bill that eventually passed, so they will surely henceforth try and take credit for ending the “rain tax.” But the mandate for affected counties to have a watershed protection and restoration fund did not go away (page 4 here) – it’s just up to the county to fill it, and most will likely retain some version of the “rain tax.” The actual repeal of the “rain tax” on this Hogan-sponsored bill was killed in committee by the Democrats therein on a straight party-line vote. (I used that vote as one of the committee votes on the monoblogue Accountability Project.) So it’s a fairly safe bet the Democrats are only paying lip service to the issue of regulations now because to them more is better – that’s how they’ve run Annapolis for most of the decade I’ve lived here and probably my whole life before that.

So the RRC can’t just exist in a vacuum. Now that Larry Hogan has experienced the way Democrats in the General Assembly basically gave the finger to his mandate, he will need in the coming months and years to take a page from the Reagan handbook and go straight to the people. Democrats may claim the last election was about “divided government” but the motivation was clearly behind a more conservative direction for the state.

While I would have preferred a more rapid formation for the RRC, this is a definite feather in the cap for Larry Hogan. Let’s hope that it’s not just for show but instead gives us an agenda even the Democrats can’t stop.

Is the Hogan business mojo wearing off?

It’s only one survey of 280 small (perhaps micro-scale) businesses in Maryland, but a recent poll conducted by a company which should be familiar to regular readers calls into question the effectiveness of Larry Hogan’s efforts at improvement in Maryland’s business climate in his first few months in office.

In cooperation with the Kauffman Foundation, Thumbtack.com has done annual, quarterly, and now monthly surveys of small business sentiment around the country. (I’ve written about their surveys on business friendliness in the past.) While it comes in a more graphical form than I can readily share here, some items I gleaned from the most recent Maryland and national data follow:

  • In terms of revenue and overall financial outlooks, Maryland businesses are less positive than the rest of the nation in the former and fall right at the national mean for the latter. The good news, though, is that over 70% of these businesses have a positive outlook over the next quarter.
  • Less than half, however, rate their financial situation as “very good” or “somewhat good.” Maryland’s total is 45.9% compared to 48.1% nationwide.
  • Maryland businesses are more pessimistic about profitability than their national peers; still, over 60% think they will do better. On the other hand, their perception on business conditions is actually better than the national average – 53.4% in Maryland think they will be better in three months’ time, while only 51.9% nationally share that outlook.
  • Finally, 24% of Maryland micro-businesses anticipate hiring over the next three months, while just 22.1% do nationwide. But while only 2.1% of businesses nationwide thought they would need to furlough workers, that percentage was 2.5% in Maryland.

As I noted above, this data was compiled at different intervals. Until March, this was done as a quarterly survey; now it is monthly. But one asset of this approach is that I can go back to the beginning of the year, and in their release accompanying the information Thumbtack.com noted:

In June, respondents nationwide indicated reduced optimism about the economy for the third month in a row, though sentiment about current and future conditions continues to be higher than that reported one year ago.

Key findings for Maryland include:

  • Maryland small businesses reported a sharp decline across each of the metrics tracked by Thumbtack, with the strongest declines coming in their expectations about future financial conditions and the economy.
  • Maryland experienced one of the largest overall business sentiment declines in the country in June; the state is now below the regional and national averages for small-business sentiment and ranks 30th overall nationwide.
  • Sentiment is still higher than it was one year ago, reflecting a broad-based increase in perceptions of economic conditions by small businesses across the country.
  • For the second month in a row, small businesses nationally expressed increasing pessimism about future economic conditions, which have been the largest contributors to the decline in overall sentiment.

Thus, it sounds like Maryland is reflective of a national trend.

But it’s also worth noting that the 2015Q1 survey showed broadly higher numbers across the board – revenue outlook has declined 10.9 points, financial outlook 5.2 points, profitability 11 points, and business conditions 8 points.

In addition, those who thought they may be hiring declined from 26% to 24.1%. Only the respondents’ assessment of their financial condition stayed relatively unchanged, declining just 1/10 of a point.

Unfortunately, these were the types of numbers we came to expect in the O’Malley administration. Obviously Hogan apologists would argue that their guy has been in office less than six months and it takes time to turn the ship of state around. And they would be correct, as the Augustine Commission agenda sailed through the General Assembly with its effective date in October.

Yet to me much of that was a simple rearrangement of deck chairs on the Titanic. While we can’t do a whole lot about the national economic climate, one thing Maryland could have done was allow these entrepreneurs to keep a little more of their money by reducing personal income tax rates; meanwhile, they could accommodate the entire elimination of corporate taxes with modest budget cuts of 3% or less. (The corporate tax brings in just over $1 billion of a $40 billion budget.) This would encourage larger businesses to consider Maryland for their growth and create more spinoff work for these micro-businesses.

Think of it this way under my scenario – Justin relocates from New York to work at the new Maryland corporate headquarters of XYZ Company, which was attracted here by the zero corporate tax rate as well as the other benefits Maryland brings. He needs a guy to fix his laptop, someone to watch the kids while Justin and Mrs. Justin are at work, and so on and so forth. Imagine what 250 Justins can do for a community and how many extra jobs they create. (I’m sure someone somewhere has done a study on this but today I’ll work without a net.)

The point is that addressing regulation and red tape is great, but the financial incentive has to be there as well. Among states with flat corporate tax rates, Maryland ranks among the highest. On a personal income level, Maryland’s rates appear to be a little better but that doesn’t add in the local county tax. (Granted, other states may also have the same practice.)

Let’s just say this: with an agenda that includes financial incentives as well as some cooperation from thoughtful Democrats in the Maryland General Assembly, by this time next year we can have a far more optimistic business community and in a few months after that they can better enjoy the results of hard work because the state takes a smaller cut.

Building a three-headed monster

Yesterday I posted on Third Friday, a monthly event that’s become so successful that it spawned a similar spin-off called First Saturday and may have pushed downtown redevelopment over the hump. Similarly, there are some new businesses and apartments going up on the northern edge of the city along U.S. 13, and even the venerable Centre of Salisbury – venerable as a 27-year-old mall can be, I suppose – has the promise of something Salisbury has longed for, a Cracker Barrel restaurant. It’s slated to be built in the parking lot outside the abandoned J.C. Penney store. (Shoot, I was happy when Buffalo Wild Wings finally made it here from Ohio.)

But there is one prime area that has all the ingredients needed for success – plenty of traffic, good visibility, and reliable city utilities. Yet it sits vacant and unused because its plans for development came along at a bad time.

Several years ago, before my unplanned exile from the building industry, I helped draw up a proposed project which would have established a third attraction for Salisbury. Obviously we know the Centre of Salisbury was a retail destination point and at the time the downtown area was being discussed as something which, as it turns out, it is in the process of becoming – a place where visual and performing arts serves as the draw, along with a handful of local eateries.

But the plot of land just south of Perdue Stadium had its own node, with a guaranteed gathering of anywhere from 500 hardy, weather-tested souls to overflow crowds of over 8,000 people 60 to 65 times a year during the spring and summer. Add in the thousands of travelers driving by and there was the potential for a destination of its own; close enough to the beach to be a viable alternative for budget-concious travelers looking for something with a slower pace, yet with the attractions to enjoy a summer evening without the need for driving around.

As originally envisioned, the development had several key elements for success: office space for workday usage, restaurants for both travelers and those seeking a place to have a business or casual lunch, and lodging for those who wanted to have an anchor point to explore the area yet not have to deal with beach crowds. Its misfortune was beginning the development process at a time when we were entering the Great Recession of 2007-whenever. (Some may argue the area is still in one based on employment numbers.)

One other proposal envisioned for the site was the construction of a new Civic Center on the opposite side of the Perdue Stadium parking lot. Besides the obvious plentiful parking available, a new Civic Center would have the advantages of making beer sales at events possible (a deed restriction for the property of the current Wicomico Youth and Civic Center prohibits alcohol sales as a condition of having it donated to the county for its use) and could be configured for more seating than the current arena to attract larger acts.

Any action on that, however, is several years to a decade away. Yet the county is putting money into 20-year-old Perdue Stadium and the owners of the Delmarva Shorebirds are committing themselves to another two decades as the station’s prime tenant. In short, the main attractions aren’t going anywhere.

Yet this valuable land sits as a part of Salisbury time and economics seemingly forgot.

I understand the emphasis our city fathers have placed on revitalizing downtown and trying to make it a close-by gathering place for both young professionals and Salisbury University students. With a transit system already in place to ferry students from campus to downtown several nights a week and grand plans to spruce up the Business Route 13 corridor from SU to the east edge of downtown, city visionaries and elected officials have it covered. Meanwhile, the part of town encompassing the Centre of Salisbury up toward Delmar seems to be doing just fine although admittedly some of that retail may be getting long in the tooth and due for upgrades. The closing of J.C. Penney was just another pockmark on a facility which may need its own transformation in the next decade lest it suffer the fate of the old Salisbury Mall it replaced.

But that rebirth can be set on the back burner for now. Downtown development may be the place where the cool kids go, but there are other assets Salisbury can put in play with the proper foresight and investment. Imagine what could be there now if things had proceeded a decade ago, and work to make it a reality in the next few years. The infrastructure is already there thanks to the aborted previous plans, so let’s get this diamond in the rough to shine.

The easy way out

A couple weeks ago I pointed out that about two dozen bills passed by the Maryland General Assembly this year were still pending after Larry Hogan had his final bill signing session May 12. Here was the list of bills I urged him to veto:

If he wishes to let the decriminalization of marijuana become law without his signature, that’s quite all right.

So I’m very disappointed to report that the deadline came and went while Hogan was away in Asia, and only two of those bills were properly vetoed: HB980/SB340 and SB190.

Yet while he turned aside the travel tax, Governor Hogan increased a number of court fees and kept an additional O’Malley fee increase scheduled to sunset this year for another five years.

The governor who claims to be business-friendly and who wanted to create jobs went against the wishes of his party on flexible leave and thwarted the introduction of fracking to Maryland for another two years. This after announcing during the campaign:

States throughout the country have been developing their natural gas resources safely and efficiently for decades. I am concerned that there has been a knee-jerk reaction against any new energy production.

Now we have our own knee-jerk reaction.

He also added yet another unnecessary mandate to health insurance with in-vitro fertilization coverage for same-sex couples, and if Bruce, uh, “Caitlyn” Jenner were born in Maryland s/he could legally have his/her birth certificate changed to reflect the “fact” he bills himself as a female.

Perhaps you believe Hogan was making the political calculation about whether a veto could be sustained. With the Senate in Democratic hands by a hefty 33-14 count, it’s not likely a veto could be sustained there. However, a 50-seat group of Republicans in the House only need seven Democrats to keep a veto in play, and given enough political pressure there are still a handful of centrist Democrats who could go along with the governor.

These were the House votes on the eight measures I advocated a veto for. I’m also adding the votes on the handful of bills he vetoed for policy reasons.

  • House Bill 51 passed the House 97-40. It would have difficult to uphold this one.
  • House Bill 54 passed the House 82-58, after originally failing on third reading. This veto could have been sustained.
  • House Bill 345 passed the House 86-52. This one was right on the cusp of a maintaining the veto; definitely doable.
  • House Bill 449 passed the House 93-45, and its crossfiled SB409 passed 103-36. But if Governor Hogan had vetoed this and put the whip to his department heads to come up with regulations by next January they may have upheld this veto.
  • The margins on HB838/SB416 were 94-44 and 93-45, respectively. That’s iffy but the onus should have been placed on the General Assembly to vote on it again.
  • Similarly, HB862/SB743 only won the House by margins of 85-50 and 91-49. Still unlikely to hold, but should have made them vote again.
  • HB980/SB340 only had 82 votes apiece in the House, which makes these good candidates to be upheld.
  • SB190 only passed 84-56, which means it’s also a good possibility to be sustained.
  • SB517, which decriminalized marijuana possession but was vetoed, is right on the cusp of overturn as it passed 83-53.
  • Similarly, SB528, which dealt with seizure and forfeiture (also vetoed), passed the House 89-51 so it’s also a possible overturn.

I suppose I should be happy with the half a loaf I have received from Governor Hogan considering the absolute disaster we’ve had to endure under eight years of Martin O’Malley. But the leftists are crowing about the fracking ban, and see it as just an initial step to a permanent halt.

The only way to curb an ambitious, leftist agenda is to put up a conservative one of your own and stomp out any attempt to sneak things through. Instead, what we are receiving is a leftward drift in lieu of pedal-to-the-metal liberalism. However, to borrow the words of a former governor, we really need to turn this car around and not using the veto pen as much as it should be won’t get us going in the correct direction.

The next big thing in Salisbury

May 15, 2015 · Posted in All politics is local, Business and industry, Delmarva items, Politics · Comments Off 

Rumor has it that he’s going out the door by not standing for re-election as mayor, but if this is so Salisbury Mayor Jim Ireton is declaring war on private property as his swan song.

On Monday, according to a press release from his office, Ireton will set the wheels in motion to eliminate the non-conforming “4 to 3″ or “4 to 4″ properties in the city, with the stated goal that all housing units in the city will either have no more than two non-related occupants or be single-family housing. Approximately 400 households in the city would be affected.

Ireton is also looking to hire a Community Development Specialist, with the stated goal for this new position being “someone who can identify funding sources, and coordinate with the various agencies involved to shepherd properties through the tax sale process.” That last part is interesting because it brings me to my main point: it looks to me like the city wants to become a much larger landowner. To wit:

According to Salisbury’s Vacant Building Registry, there are 187 vacant and/or abandoned houses within City limits. The effect of these properties on their surrounding communities is demonstrably negative, causing losses in neighborhood property values, increases in crime and vagrancy, and public health concerns. The proposed budget amendment would set aside $45,000 for a fund which the City would use expressly to purchase vacant and abandoned homes at tax sale. Starting in FY2016, an additional $500,000 in bonded debt would be earmarked for acquisition, rehabilitation, repurposing, demolition, and legal fees. Homes bought by the City would be determined to be either eligible for donation to Habitat for Humanity or Salisbury Neighborhood Housing Service, or unfit for rehabilitation and demolished.

Imagine if you will an entrepreneur suddenly deciding to go out a purchase a whole bunch of houses at a tax sale, and the hoops this owner would have to jump through to secure all the permits, inspections, and other hassles a prospective investor would endure because the wheels of city government move so slowly. It’s a climate that discourages investment, so oftentimes properties sit vacant or abandoned. Factor in the difficult economic times of the last several years and there’s no question that too many people believe investing in Salisbury would be a losing cause.

So instead of addressing the situation of why investment is such a risk, the city will go into the business of home ownership. Not only that, they plan on running up plenty of debt to get themselves into a position to decide whether to renovate or tear down these dwellings.

It seems to me the better use of tax dollars would be to take care of what they do own. For example, I live across from a city park that is essentially an empty, semi-wooded lot with one lonely basketball hoop in the middle of it. For a few thousand dollars they could perhaps install a walking path, nice flower beds, and perhaps a couple trash receptacles. It’s not a large space, but it is a focal point of this little neighborhood.

If you believe the rumors that Jim is going to try and trade places with Jake Day, this isn’t the way to do it. Six years ago, we were promised that “help is on the way” but this isn’t going to be much help in making Salisbury an attractive place in which to invest. Why take a chance on buying a house when your next door neighbor could be a property owned by the city?

A First State failure

As a person who now has a job created in Delaware, I’m taking more of a vested interest in what goes on in the First State. I’ve been on the mailing list of the 9-12 Delaware Patriots for some time now, and today they sent out an update from the state’s Senate Republican Caucus. (Like Maryland, the Senate GOP is on the short end of the stick insofar as numbers are concerned, but the deficit is closer as it’s only a 12-9 Democrat majority there.)

The one thing I found interesting was a twist on the trend of states becoming right-to-work states. In Delaware, Senator Greg Lavelle had the thought of creating small “right-to-work zones” encompassing specific employers. I’ll let the Delaware Senate GOP pick it up from here:

The Senate Labor and Industrial Relations Committee declined this week to release a bill aimed at revitalizing Delaware’s manufacturing industry.

By not releasing Sen. Greg Lavelle’s (R-Sharpley) legislation to create right-to-work zones in Delaware, the Democrat-controlled committee has essentially killed the bill.

Under the measure, workers within these zones could not be forced to join or financially support a union as a condition of employment. It would also exempt manufacturing businesses adding at least 20 new workers from paying the Gross Receipts Tax for five years.

During Wednesday’s hour-long public hearing in Legislative Hall advocates of the bill, including representatives from several business organizations, argued such an initiative would create a more competitive environment, attract new businesses to Delaware and generate more jobs.

Sen. Lavelle identified multiple Delaware locations where the idea could take root, such as the former General Motors Boxwood Road plant near Newport, as well as other existing facilities in New Castle, Kent and Sussex counties.

His feeling after the meeting was that while the bill may be dead, the idea is not.

“For me, what came out of the meeting was that this was the first formal discussion that we’ve had about this issue in Delaware,” he said. “The fact is, coming out of the recession, where many other states have added manufacturing jobs, Delaware has lost another 3,000. So the conversation on how to turn that around has to continue. And judging from the many comments we heard in committee supporting this bill, there’s no doubt this conversation will continue.”

Worth pointing out is that Delaware has lost many of its manufacturing jobs over the last decade, declining from 33,800 such jobs in 2005 to 25,500 a decade later. That’s a 25% decrease, meaning for every 4 manufacturing jobs the state once had one was lost over the last decade. If you were the unlucky one to lose your job, it means you either had to relocate out of state or change careers, with the unfortunate byproduct of that choice being that skills gained atrophy over time.

This is a different approach than the one tried in Maryland, where Delegate Warren Miller has annually introduced a statewide right-to-work bill where the compelling arguments in its favor unceasingly fell on deaf Democratic ears in the Economic Matters Committee. Personally I think the way to go about it is a piecemeal approach, beginning with the Eastern Shore. Far from what Big Labor critics believe, Indiana – a recent convert to right-to-work – added 50,000 union jobs last year as part of an overall surge in employment growth. We can use the Eastern Shore as a petri dish for a right-to-work experiment, because Lord knows they try to impose everything we don’t want on us (tier maps, onerous septic regulations, and the PMT, to name a few.)

One big difference between Maryland and Delaware is the fact that over half of its Senate will be at stake in the 2016 elections – it is possible for the GOP to gain a majority by winning 6 of the 11 contested seats. The state GOP should make this an issue in trying to decrease joblessness – after all, a union does you little good if you are not working and over 8,000 onetime factory workers are doing something else because the state lost its competitive edge.

Delaware has always had a reputation of being business-friendly, but in this changing employment climate they have to step up their game. Going into an election year, an issue has to be made of how the state will compete going forward – after all, my job depends on it.

Hogan’s first veto?

I don’t know our governor’s position on Senate Bill 190, dubbed by some as the “travel tax,” but no less than Grover Norquist of Americans for Tax Reform is urging a veto. His organization has sent a letter (detailed at the previous link) to Governor Hogan asking him to reject this bill that was passed by both chambers during the session. As they explain:

This legislation would disparately impact the Maryland travel industry by apply the Maryland sales tax to online travel agents, brick and mortar travel agents, wedding planners, tour operators, and other service providers. With summer almost here, and tourism season gearing up, a new tax would hurt many small businesses in Maryland who rely on tourism for revenue.

Interestingly, the ATR letter quotes local Delegate Christopher Adams, who cites the hundreds of travel agents who would be affected by the bill. On the other hand, his Senator, Addie Eckardt, was the only GOP sponsor of the bill and lone GOP Senator to vote in its favor.

Perhaps the best explanation of the legalese of the bill comes from its Fiscal Note:

Online travel companies (OTCs) typically obtain access to hotel inventory (rooms) through contractual agreements with hotels. OTCs pay a discounted rate for these hotel rooms that they sell (as room rentals), and then retain certain fees that are part of the total price paid by customers. The purchaser of the room rental is typically charged the same rate as the person would be if the hotel room rental was purchased directly from the hotel. The issue that has arisen in recent years is the definition of taxable price that state and local sales and use taxes and hotel rental taxes are to be based on. OTCs have typically been paying and remitting these taxes based on the reduced rate that they pay for the hotel rooms; however, states and local jurisdictions have been arguing in court that these taxes should be collected on the total room rate paid, which is the base for which the taxes would have been imposed if a customer rented the hotel room directly from the hotel.

As I understand it and to create an example, let’s say a hotel room rents at $150 per night to the general public. An OTC comes to the hotel and says they will rent the remaining lot of rooms for $75 apiece – obviously the hotel profits by not having to deal with unsold inventory for the night while the OTC can provide a discount to the standard rack rate and still make money. Everybody wins – but the state.

The contention is that OTCs are paying room taxes based on the $75 rate, while the state believes they should be paying based on the $150 rate. That’s what this law would provide for, and while some jurisdictions in the state have come to agreements with the OTCs (and there is a court case on the subject pending) this law would force OTCs to pay taxes based on the higher rate, eating into their bottom line for dubious overall benefit. The Travelocity vs. Comptroller case cited by the Fiscal Note involves $6 million over eight years; even if Travelocity is accounting for just 10 percent of the overall market the amount in question is only a few million dollars out of a $40 billion budget.

If Hogan vetoes the bill, the margin in the House is close enough to make it very possible a veto would be sustained as it passed in the House of Delegates by an 84-56 margin – one vote short of 3/5. Delegate James Proctor could be the swing vote since he was absent from the original balloting.

Because Maryland law allows the governor to sign bills well after the legislative session has concluded, it’s quite likely that Hogan can wait as long as he needs to make the decision. While this bill is dubbed the “travel tax,” there is the complication of Marriott possibly moving from Maryland that Hogan may have to consider.

But the idea of electing Hogan was that of no new taxes, regardless of whether this is a “clarification” or not. Let the court case take its course, and veto the bill. It’s another vote that is likely to find its way to the monoblogue Accountability Project.

The state of our state: an ambitious agenda

Now that the shoe is on the other foot for the first time in eight years, thousands were interested in how newly-inaugurated Governor Larry Hogan assessed the state of our state. And it didn’t take long for him to assess that:

But while our assets are many, and our people are strong and hopeful, their state is simply not as strong as it could be – or as it should be.

Yet in reading through the speech, I didn’t see it as a negative in any way. Instead, Hogan proposed a number of solutions which, instead of spending money or growing government, generally worked in the opposite direction. Breaking the laundry list into eleven parts, it’s easy to summarize the Hogan plan for year one:

  • Analyzing and enacting portions of the upcoming Augustine Commission report on business competitiveness. The idea here is to make Maryland more business-friendly and hopefully wean the state’s economy off a long-term dependence on federal government jobs.
  • Restructure government to be more efficient and effective, using the new faces placed at many of the Cabinet-level departments.
  • Legislation repealing the “rain tax.” This may get some serious opposition from the environmentalist groups who believe this is a fair way to pay for Bay restoration efforts, even though the fees were set by county and only affected ten of 24 county-level jurisdictions.
  • Legislation proposed to exempt military, police, fire, and other first responder pensions from state income taxes. Eventually Hogan would like this to cover all retirement income. It’s an effort to improve Maryland’s dismal standing and reputation as a place not to retire.
  • Legislation to exempt the first $10,000 of personal property from taxation, a move Hogan claims would eliminate the tax for half of Maryland businesses.
  • Legislation to repeal the automatic gasoline tax increases baked into the Transportation Infrastructure Investment Act of 2013.
  • Restoring the local share of Highway User Revenues, a sore spot among the state’s rural counties in particular.
  • On education, strengthening the charter school laws. More controversial will be the oft-tried BOAST tax credit, which gives a tax credit to those who contribute to parochial or private schools. Hogan noted previous iterations have passed the Senate only to fail in the House.
  • Hogan has already shelved the Phosphorus Management Tool, and called for farmers and environmentalists to work on a better, more equitable solution. He also promised to address the “long-ignored impact of upstream polluters,” including the problems at Conowingo Dam.
  • An executive order to deal with the heroin epidemic. Lieutenant Governor Boyd Rutherford has been tasked with this issue.
  • Reinstating the Fair Campaign Financing Act fund by bringing back the checkoff on the tax returns, and also establishing a commission to examine the state’s redistricting process via executive order. If I have the time, I’d love to serve on that one because we really do need to reform the system.

Certainly it’s not the strongly conservative agenda some may prefer, but I would consider it a good first step. Much of the reform will have to go through the General Assembly, and perhaps the strategy is that of picking off just enough Democrats on various issues to build an ever-shifting coalition with the Republicans. The fifty Republicans in the House and 14 in the Senate would be joined by one group of Democrats who consider education reform a must, but may not agree with Hogan’s approach to cleaning up the Bay. Yet some Democrats may like that idea, but won’t budge on changing the gas tax – and so on and so forth. Just as long as Larry gets 71 votes in the House and 24 in the Senate, the means do not matter.

Because of the nature of how our state’s political process, the honeymoon for Hogan was barely existent. He had to have a budget mere hours after taking office, and some legislation he probably wouldn’t support was already being discussed in the General Assembly. Obviously Larry was working in a shadow government of sorts as he awaited inauguration, but once he took the reins that horse quickly accelerated to full gallop.

So while it’s not necessarily less government, at least Larry is working on making things more efficient and streamlined. Hopefully we can get it to such a level that it wouldn’t be missed when the reductions occur. That’s the next logical step.

Different perspectives

January 16, 2015 · Posted in Business and industry, National politics, Politics, State of Conservatism · Comments Off 

It’s not quite a GO Friday, but relatively close. I’m going to point out a piece on the Manufacture This blog, which is a product of the Alliance for American Manufacturing. In it, they note: “We asked Americans in manufacturing about the State of the Union. Here’s what they said.” The post excerpts from interviews with 10 Americans about how they assess the current economic situation; of course, most are worried about some of the pet issues AAM talks about and advocates for as well.

Jobs, opportunity, and a growing economy are what middle-class families want President Obama to speak to during Tuesday’s State of the Union address. The faces in the Alliance for American Manufacturing’s (AAM) “Manufacturing State of the Union Box” will not be in Washington for the speech. Instead, they will watch from home or work, hoping President Obama will offer solutions on issues that matter to them, including manufacturing jobs that afford them a middle-class lifestyle.

Quite honestly, the AAM’s leftward bias shows through in that statement because it’s highly likely both the Republican and TEA Party responses will advance possible solutions for what ails the middle class as well. In fact, I would be brash enough to state that government is not the solution at all – getting it out of the way as much as possible seems to me a more likely prescription to cure an ailing economy. Let entrepreneurs of all stripes thrive, workers have the freedom to work in a union shop without joining the union, and minimize regulations so that more labor is spent being productive than reactive. Somehow, though, I don’t think these will be addressed in either the State of the Union speech or its responses, although the TEA Party one may come relatively close. Unfortunately, not a lot of people will see it because viewership for the SotU is relatively light to begin with and the patience of most Americans with Barack Obama wears thin quickly.

So it will be interesting to follow the reaction of the AAM ten after the speech on Tuesday, and whether they paid any attention to the Republican or TEA Party responses.

Losing momentum?

The big news around these parts today was the announcement that Labinal Power Systems would be closing its Salisbury plant and consolidating operations in Texas. Gone will be an estimated 600 jobs as the plant phases out operations over the next two years.

On top of that, there are rumors that both of the April tourist draws to Salisbury – the annual Salisbury Festival and Pork in the Park – have been scrubbed for 2015. While another local blogger swears this is not true and the Salisbury Festival is simply being repositioned to the fall, one has to ask how that would fit into an October already crowded with other local events. (As for Pork in the Park, my understanding is that it was a money loser as the county had to plow too much into it up front for its continued survival.)

Salisbury’s downtown has been doing well with the increased popularity of 3rd Friday, a successful New Year’s Eve event, the upcoming opening of Headquarters Live - an entertainment venue which is the remodeled former Fire Station 16 – and a popular Thursday – Saturday night trolley service connecting these venues with nearby Salisbury University, but other parts of town haven’t done as well over the last year. The closing of Labinal decreases further the traffic to a once-booming part of the outskirts of Salisbury that formerly boasted the old Salisbury Mall, torn down several years ago for a development that never got off the ground.

Everything is cyclical, of course, and one example is the development around the SU campus. But losing these Labinal jobs would be a major blow to a county already on a long losing streak when it comes to year-over-year jobs. And the problem with such a long transition to a shutdown (almost two full years) is that lag time is going to be longer than some potential employers want to wait for the facility.

We all better hope that Maryland becomes a lot more business-friendly over the next two years. It’s ironic that Senator Mikulski made a big deal out of a large federal contract secured for the facility just weeks before the announced move to Texas. Call it Rick Perry’s revenge.

186,000 reasons to smile (and one to worry about)

In the quest to get America back to making things, it was good news to find that manufacturers added 17,000 jobs in December. That brought the 2014 growth in that sector to 186,000, continuing the steady growth in that sector since the job market hit bottom there in 2009-10. When you consider that 2012 predictions saw the manufacturing sector losing jobs through this decade, having a very positive number nearly halfway through is a good sign.

Naturally Barack Obama tried to take some credit for this during a speech at a Ford plant near Detroit last week. As I noted in a piece I wrote for the Patriot Post, it’s ironic that the plant was idled due to slow sales of hybrids and small cars built there, but the auto industry has played a part in the resurgence of manufacturing jobs in America. This is particularly true in the construction and expansion of “transplant” auto plants in the South by a number of foreign automakers.

But there has been criticism of Obama from his political peers. As a carryover from my American Certified days I often quote Scott Paul, the president of the Alliance for American Manufacturing, because his organization is strongly influenced by Big Labor and presumably supported Obama in both his elections. Yet Paul is none too happy with Obama’s progress:

Manufacturing job growth slowed to 17,000 in December, which portends some of the challenges an overly strong dollar, weak global demand, and high goods trade deficits may bring in 2015. While President Obama is touting factory job gains and our Congressional leaders are looking for ways to rebuild the middle class, what’s missing for manufacturing is good policy.

Congress and the president need to hold China and Japan accountable for currency manipulation and mercantilism, and invest in our infrastructure. New innovation institutes are a good thing, but their presence alone won’t bring manufacturing back. And as the president enters the final half of his second term, he’s falling way behind his goal to create one million new manufacturing jobs.

The innovation institutes Paul refers to are public-private partnerships being created around the country in various fields, in the most recent case advanced composites. But Obama lags behind on his promised 1 million new manufacturing jobs for this term as it nears the halfway mark as he’s created just 283,000. It’s great if you’re one of those newly employed workers, but his policies are leaving a lot of chips on the table. In fact, National Association of Manufacturers economist Chad Moutray frets that:

…manufacturers still face a number of challenges, ranging from slowing global growth to a still-cautious consumer to the prospect of increased interest rates. With the start of the 114th Congress, manufacturers are optimistic that there will be positive developments on various critical pro-growth measures, including comprehensive tax reform, trade promotion authority and a long-term reauthorization of the Export-Import Bank, and focusing on important infrastructure priorities like building the Keystone XL pipeline and addressing the solvency of the Highway Trust Fund.

While manufacturers would like to see these measures, attaining some of them may be tough sledding in a conservative Congress. There are a number of representatives and conservative groups who don’t want to give the President fast track trade authority, wish to see the Export-Import Bank mothballed out of existence, and will not consider increasing the federal gasoline tax – an action for which Moutray uses the euphemism “addressing the solvency of the Highway Trust Fund.” These actions may benefit the large manufacturers but won’t help the bread and butter industries solely serving the domestic market like the 24-employee machining shop or the plastics plant that employs 80.

Turning to the state level, our local manufacturing (so to speak) of poultry has a big week coming up. On Wednesday morning, the final deadline to submit new regulations to the Maryland Register for the January 23 printing will pass. You may recall that the December 1, 2014 Maryland Register featured the new Phosphorus Management Tool regulations as proposed (page 1432 overall, page 18 on the PDF file.) The new regulations were not in the January 9 edition, so January 23 may be the last chance to get these published under the O’Malley administration due to the deadline being set in MOM’s waning days.

Yet I’m hearing the rumors that a legislative bill is in the works, to be introduced in the coming days by liberal Democrats from across the bridge. Doing this legislatively would perhaps buy a few months for local farmers because such a bill would probably take effect in the first of October if not for the almost certain veto from Governor Hogan. If Democrats hold together, though, they would have enough votes to override the veto in January 2016, at which time the bill would belatedly take effect. Still, it will be difficult to stop such a bill given the lack of Republicans and common-sense Democrats in the General Assembly. To sustain a Hogan veto would take 57 House members and 19 Senators, necessitating seven Democrats in the House and five in the Senate to join all the Republicans.

We haven’t received the data yet to know whether the installation of Bob Culver as County Executive was enough to break an 11-month job losing streak year-over-year here in Wicomico County, but his task would be that much tougher with these regulations put in place.

Is it time for wind power to step up?

January 9, 2015 · Posted in Business and industry, Radical Green · Comments Off 

The outburst of cold weather during the first few days of January was the result of a meteorological anomaly which happened to occur on the same days for two years in a row. The polar vortex which occurred on January 6 and 7 in 2014 struck again with full force on those same dates this year, and the cold weather proved to reinforce a point made by a surprising beneficiary.

According to the American Wind Energy Association, which advocates for wind power as an alternative source of energy, consumers saved $1 billion in the 2014 polar vortex thanks to the availability of wind power. As they note:

Wind energy does this by protecting against spikes in the price of other fuels in the Mid-Atlantic and Great Lakes states. While other power plants failed in last January’s extreme cold or faced skyrocketing prices for fuel, wind energy continued producing electricity with zero fuel cost, not only keeping the lights on but also keeping money in consumers’ pockets.

With extreme cold now gripping much of the Eastern U.S., wind energy is once again helping to keep the lights on and protecting consumers against energy price spikes by diversifying the nation’s electricity mix. This is a repeat of the value wind energy provided to consumers during the “Polar Vortex” event exactly one year ago (Wednesday.)

Further, I also learned that the amount of electrical power created by wind reached an all-time high in two regions of the country overnight Tuesday night. Yes, it was blowing hard the other day so wind turbines were at their maximum effect and production.

In the last 24 hours wind set a new output record for the MidContinent ISO (MISO) and for the Southwest Power Pool (SPP), an area that covers much of the Midwest. Wind also performed at near-record levels in the PJM market (PJM).

Overnight on January 6-7, the MISO experienced a record 11,725 MW of wind production while the SPP region added another 7,625 MW – between the two, they powered 15 million homes. AWEA also claimed “near-record” production in the PJM area, which includes our region. In some areas, wind power was a far more significant provider during the event than its overall 4 percent share of the market.

Yet while wind power has made some significant achievements, no story is complete without pointing out a couple of realities: wind energy is not as reliable as fossil fuels, and its distribution pattern in this country makes it a tenuous backup plan for some regions, such as the southeastern part of the country. Negligible wind energy production exists there because of unfavorable conditions.

The reason wind power was so useful in this instance of cold weather was that natural gas has to serve two masters when it’s cold: electricity generation which occurs all year and home heating for the winter. With the difficulty in building the infrastructure needed to move our abundant supply of natural gas to markets in some areas of the country, the spot price surged. AWEA’s $1 billion assertion was based on that price spike for natural gas.

Because of the fickle nature of wind power, it’s interesting to note that PJM keeps a constant eye on the output of its wind turbines and their predicted effects. As of the moment I write this, the wind turbines are producing 4,424 megawatts, which is slightly below the 4,585 megawatts forecast. To meet needs other sources will have to come into play if they’re not already accounted for.

The economics of wind are fickle as well. While the on-again, off-again nature of the Wind Production Tax Credit of 2.3 cents per kilowatt-hour produced has affected the building of turbines – opponents consider them a handout both to the industry and Wall Street – state government mandates for clean energy prop up the demand. Without the prescribed mandates from states like Maryland, which has a current goal of 10% of its energy source generation from wind and other renewables, it’s likely the wind energy industry would be non-existent in America.

But its legitimacy was bolstered from a surprising source this week. Each year, the American Petroleum Institute puts out a State of American Energy Report, and for the first time it addressed a number of alternative energy sources including wind power. As Jack Gerard of API puts it:

Rather than focus solely on the oil and natural gas industry, API this year is pleased to partner with organizations representing various energy sectors to highlight the contributions of each toward America’s current and future economic wellbeing, and collectively stress the importance of adopting a lasting “all of the above” energy strategy.

In their section of the API report, AWEA notes that potentially 35 percent of America’s electricity could be created from wind power by 2050. Of course, there are questions about the health risks of living near a wind turbine which will merit further study, but it is relatively convenient that most of the best places for wind production are in sparsely-populated areas.

If you subscribe to the “all of the above” energy strategy, you may be setting a place at the table for wind energy. Certainly it won’t serve all of our needs as well as the versatile roster of fossil fuels has over the years, and it may have to navigate a brave new world without the tax credits that have built the industry up over the last two decades – in fact, I think it should. Logic would dictate that, since the fuel is free of charge, the only cost should be the infrastructure, transmission, and occasional maintenance and monitoring, so who needs a tax break?

We won’t always have a polar vortex, but if the wind energy industry is where its backers say it is, we won’t need one to make wind a good choice. Let’s put it on a level playing field and see how it fares.

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