Monthly Archives: January 2019

transportation

Corruption at MTA

Maryland Reporter has the story:

In response to a call to its waste, fraud and abuse hotline, the Office of Legislative Audits investigated complaints about contracting at the Maryland Transit Administration, which runs the buses, subway and light rail line in the Baltimore region.

“Our review disclosed that MTA included language in certain contracts that allowed its employees to circumvent State procurement regulations by directing the contractors to use specific vendors as subcontractors,” chief legislative auditor Gregory Hook said in a letter to lawmakers. “The MTA management employee used this capability to direct work to specific vendors as subcontractors including one vendor with which the management employee had less than an arm’s-length relationship (related vendor). The related vendor was paid $3 million for the subcontracted work. Due to the questionable nature of certain of this activity, we referred this matter to the Office of the Attorney General – Criminal Division. We also identified possible violations of State ethics law that may require referral to the State Ethics Commission.”

“Our review also identified questionable procurement and contract monitoring practices, which may have limited competition and precluded effective monitoring of contracts and related payments,” Hook said. Contracts were issued without proper approval, and payments were made without invoices to back up the work.

Four contracts for snow and ice removal totaling $6.2 were issued to a contractor that the project manager had a relationship with.

While Secretary Rahn says that his office takes the “findings of the audit seriously,” he has yet to apologize or take responsibility for this occurring in his office on his watch on his pet project. When Gov. Hogan promised to make Maryland more business friendly, presumably he wasn’t talking about featherbedding of the form so appreciated by President Trump.

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Economy, Montgomery County

Anemic business growth is the problem. So why does Empower MoCo think residential growth is the solution?

Empower Montgomery (EM) released a report today, displayed at the bottom of this post, arguing that Montgomery County faces strong economic headwinds. In particular, it highlights “a disproportionate, unhealthy reliance on residential tax base” for new revenues and a corresponding lack of growth in commercial business.

And this is where they lost the plot.

Despite having identified the lack of growth in commercial business, and “unimpressive” commercial real estate valuations, as critical challenges for the county, EM’s number one solution is bizarrely geared towards promoting more residential growth.

Specifically, EM’s report expresses alarm that several areas in the county could soon face building moratoria because of the lack of sufficient spaces in public schools to educate more kids. Empower Montgomery regards moratoria as a major business challenge and calls for building more schools to prevent them.

Leaving aside the question of the best places for needed capital investment in the public school system, often in existing schools, the problem facing Montgomery County is not residential development but commercial business. Put another way, we need more businesses that produce goods and services other than more housing.

Though this is the central point of the entire report, EM’s number one solution (literally, it’s numbered “1”) is obliviously to promote more residential housing growth. EM links school construction, rather than improving what’s inside the schools, to better outcomes. Perhaps it’s not accidental that the former but not the latter enables more housing construction.

In a similar vein, EM comes up with concrete ways to fund school construction. But their report is silent on the question of funding operations, which is far more critical to long-term student success and a heavy ongoing cost. Again, one might almost think schools are more about housing development than child development.

Beyond failing to make the connection between school construction and student performance, EM’s report completely neglects to explain why building more residential housing attracts new commercial business. That may be because the report itself inadvertently shows that it doesn’t. After all, EM’s report reveals that Montgomery’s housing stock and population have grown without attracting needed new business.

The truth about residential development is that it is often unprofitable from the county’s perspective. Once the builders are gone, they leave a new group of residents demanding additional infrastructure and services. While commercial business brings both employment and tax revenues, new residential development is much closer to a break-even proposition.

Even new residents who don’t need special government services—and many will—still require more police and fire protection. More residents mean we need more people at the 911 call center to take just one mundane example.

One set of new residents is especially expensive: children. Education is by far the most expensive service that local government provides. It takes up roughly one-half of the current county budget. Very few families are net contributors to the county budget while they have kids in the public schools. Unless we’re willing to increase classroom sizes, it’s also not easy to achieve economies of scale.

Depending upon who moves into new homes and infrastructure required, and the county school system remains a core asset, residential development can even exacerbate county balance sheet problems. I’m not saying education is not a worthwhile expense. As an educator, I have a decidedly vested interest in promoting it. But it’s not cheap.

In short, focusing on residential development as the solution ignores the critical problem. Even more myopically, it utterly ignores election results not just in Montgomery but also in other parts of the state, such as Anne Arundel, expressing frustration with the lack of infrastructure to support current residents.

Let’s be blunt. For too long, the county has often conflated building and business. We need to spend a lot more time thinking about how to attract and to grow commercial businesses into commercial spaces than building more residential housing. Attracting more business would sure help us afford the new residents for whom there is already ample zoning.

EM is right that expanding the commercial tax base has to be a key part of addressing that problem. As the previous county council under the leadership of Councilmember Nancy Floreen revised the zoning code in a pro-business manner, it would be welcome if the new council would turn its attention to promoting new commercial business.

In contrast, pursuing EM’s approach on development would be a perfect example of trying the same solution again and expecting a different result. Why on earth shoring up residential development is touted as essential when the central problem is a badly anemic commercial business sector remains a mystery.

Empower Montgomery is a business group—it supported David Blair for county executive—and it unsurprisingly contains pro-business recommendations. In terms of residential development, their approach represents more of the same, and it’s not going to cut it.

We are not going to solve our problems in attracting new commercial businesses by building more residential homes. At the same time, EM is right that expanding the commercial tax base has to be a key part of addressing that problem. Other ideas in the report may be well worth considering. I’m certainly a fan of privatizing the liquor monopoly.

The previous county council just revised the zoning code in a pro-business manner. It would be welcome if the new council would shift its attention to promoting new commercial business. We have a bunch of new councilmembers who hopefully can bring new perspectives on how to bring new business vitality to the county.

It would also be terrific if the business community would partner with the new executive and council in figuring out ways to both make Montgomery County government more innovative and efficient, and also work far better to attract business. Reforming county government has been a central plank of Marc Elrich’s platform. If business doesn’t take him up on it and keeps making him out to be the boogeyman, they’re missing a real opportunity.

Business needs to play a bigger role in helping move Montgomery County forward. But this report’s focus on residential development as a solution to commercial business problems suggests that the political representation of business may be just as skewed towards the residential developers as the county’s tax base is to residential development.

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Montgomery County

Elrich Sends Pro-Business Signals – Anyone Listening?

Immediately after taking office as county executive, Marc Elrich confronted a budget dilemma. The way he handled it deserves far more notice that it has received.

Outgoing Montgomery County Executive Ike Leggett promised bond rating agencies that he’d move towards a reserve fund of 10% of the country budget. Increasing the county’s reserves provides evidence of fiscal prudence that bond-rating agencies like, so adherence to Leggett’s target helps preserve the county’s AAA bond rating.

But revenues for the current fiscal year so far have fallen short of projections. I don’t view this as due to wildly unrealistic projections by the outgoing executive or council. Projections are called projections and not certainties for a reason. Sometimes, we end up with more money than expected too.

The shortfall presented newly minted County Executive Elrich with tough choices. Elrich could have declared that the 10% reserves target was unnecessarily high and that he would not be bound by Leggett’s commitment. Alternatively, Elrich could have taken a wait-and-see attitude in expectation that the final revenues for the fiscal year will prove higher.

Elrich chose neither of these more expedient options. Instead, he made the tough choice and pledged to cut spending. By asking county agencies for a variety of options, Elrich also used it as an opportunity to do in a smart, policy-oriented way rather than a uniform across-the-board cut. In short, it’s a first small step towards reshaping country government.

In his first major decision, Elrich also acted in an inclusive way by bringing in Council President Nancy Navarro to discuss it in advance of the decision, though the Council will, of course, need to scrutinize Elrich’s independently developed proposal for cuts.

Business, taxpayers and the bond-rating agencies could hardly have asked for a more fiscally responsible approach. In his first move, Elrich sent a message that he intends to pursue strong, responsible fiscal management and work within fiscal constraints.

Throughout the campaign, Elrich repeatedly explained, at times to deaf ears, that he wants to reshape country government to make it more efficient. He understands that this is imperative if only because the county’s current fiscal path is simply unsustainable.

Moreover, Elrich wants to realize savings precisely because he wants the county government to do more. If the county maintains its current trajectory, that won’t be possible. Squeezing more out of residents isn’t really much of an option, as previous councils have already more or less maxed out the local income and property tax.

It’s a pity that the opinion pages that predicted an Elrich administration as dire for business and proper fiscal management haven’t paid more attention.

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