ANNAPOLIS — Local legislators have attempted for several years now to get tax breaks for development in targeted areas of Washington County. But each year, bills to provide those breaks have failed.
This year, however, Sen. Andrew Serafini said support for the measures is growing — although the final product might be a little different than originally drafted.
Serafini presented a bill to the Senate Budget and Taxation Committee this week that would permit refunds for sales and use taxes paid on construction material or warehousing equipment for development on the former Fort Ritchie site at Cascade.
There are a number of similar bills from around the state being considered this year, he said, and he’s hoping an overall policy for granting these refunds will emerge.
As originally written, Serafini’s bill would allow the county to target a particular area, the developer would have to purchase the materials and then apply to the Comptroller’s Office to get a credit against future taxes.
The exemption would apply to purchases made in 2020 through 2025.
Serafini said that because of jobs created in new development, the state would quickly recover the credits — probably in the first year.
“The estimates are for every dollar spent (on the development), eight-fold is the economic activity it would create,” he told committee members.
“This one is based on the idea that it’s gonna create a lot of jobs.”
Serafini told Herald-Mail Media the idea “will definitely work … I’ve been told that somewhere between six to 12 other states already do it. We’ve already done it in this state. Just not in Washington County.”
A measure sponsored in 2016 by committee Chairman Guy Guzzone, D-Howard, exempts construction materials from the redevelopment of the former Bethlehem Steel Corporation site in Baltimore County from the sales and use tax.
Del. William Wivell, R-Washington, cited that bill in previous efforts to get the exemptions for Washington County. Wivell filed similar bills in 2017, 2018 and 2019. Serafini also filed a companion bill last year.
This year, Serafini said, “there are multiple bills coming from various entities … the idea is a one-time (refund) on sales and use tax. In the instance that I think could happen in our community would be a tremendous number of jobs. And when you look at the number of income-tax revenue from these jobs, the state recovers in as early as the first year, maybe the second.
“So any time we invest in education or anything else, are we getting a return on our investment? When we’re using taxpayer dollars, that’s a question we should ask ourselves. And in this case, this one has been proven in other states and I believe the evidence is quite clear here.”
As an example, he told the committee that for a 2 million square-foot building costing $138 million, construction materials might cost $43.35 million. The one-time tax on those purchases might be about $2.6 million, which the state would lose.
But if the construction results in the employment of 1,500 employees paid $15 per hour, the state would recover $2.2 million in the first year. After five years, he said, the state would get about $11.5 million.
“Frankly, behind the scenes, there’s people that say this is a good policy, you could argue, but we live in the world of Kirwan (education spending proposals) so there’s going to be that conversation,” he told Herald-Mail Media.
The Department of Legislative Services’ analysis of the bill only shows what the state would initially lose, he said. “They don’t ever take the time to say … this is what may come out of this activity.”
Guzzone still likes the idea, he said, “but whether we can swing it in this year will be the challenge.”
But Serafini said he thinks all the similar bills being offered “will all be brought together” to consider a statewide policy.
“It’s not going to go away,” he said.