My Baltimore Business Problem
What it’s like to operate a company 150 yards from the burned out liquor store—and why it’s hard to create jobs.
By Jay Steinmetz in the Wall Street Journal
The supply-chain management company I started in the late 1990s and lead today is in downtown Baltimore. On the night of the worst violence last month, there were more tempting targets than our cement, nondescript building, like the liquor store 150 yards away that was looted. Yet on any given day what takes place in this neighborhood is a slow-motion version of recent events. Graffiti, which anyone with experience in urban policing will affirm is the first sign of trouble, regularly appears on the exterior of our building. From there the range of crimes escalates to burglarizing cars in the parking lot, and breaking and entering our building.
City policies and procedures fail to help employers address these problems—and make them worse. When the building alarm goes off, the police charge us a fee. If the graffiti isn’t removed in a certain amount of time, we are fined. This penalize-first approach is of a piece with Baltimore’s legendary tax and regulatory burden. The real cost of these ill-conceived policies is to the community where we—and other local businesses in similar positions—might be able to hire more of those Baltimoreans who have lost hope of escaping poverty and government dependency.
Maryland still lags most states in its appeal to companies, according to well-documented business-climate comparisons put out by think tanks, financial-services firms, site-selection consultants and financial media. Baltimore fares even worse than other Maryland jurisdictions, having the highest individual income and property taxes at 3.2% and $2.25 for every $100 of assessed property value, respectively. New businesses organized as partnerships or limited-liability corporations are subject, unusually, to the local individual income tax, reducing startup activity.
The bottom line is that our modest 14,000-square-foot building is hit with $50,000 in annual property taxes. And when we refinanced our building loan in 2006, Maryland and Baltimore real-estate taxes drove up the cost of this routine financial transaction by $36,000.
State and city regulations overlap in a number of areas, most notably employment and hiring practices, where litigious employees can game the system and easily find an attorney to represent them in court. Building-permit requirements, sales-tax collection procedures for our multistate clients, workers’ compensation and unemployment trust-fund hearings add to the expensive distractions that impede hiring.
Harder to quantify is the difficulty people face who want to live here. Our employees reduce their tax burden and receive better public services in the suburbs. I live in the city, however, and it is a challenge to stay here. My two children attend a public elementary school where classrooms are filled beyond capacity with 30 or more students. Bathroom stall doors and toilet-seat lids are missing. The heat goes out in the winter and the air-conditioning goes out in hot weather. It’s hard to explain the importance of developing science and math skills to students wearing winter coats in the classroom.
Contrary to President Obama’s suggestion in a news conference following saturated television coverage of the riots, lack of urban “investment” is not the problem. The Maryland state and Baltimore city governments are leveraging funds to float a $1 billion bond issue to rebuild crumbling public schools. This is on top of the $1.2 billion in annual state aid Baltimore received in 2015, more than any other jurisdiction and eclipsing more populous suburban counties. The financial problem Baltimore does face is a declining tax base, the most pronounced in the state. According to the Internal Revenue Service, $125 million in taxable annual income in Baltimore vanished between 2009 and 2010.
Leadership can change this. Maryland last fall elected a new governor, Republican Larry Hogan, who campaigned on improving the state’s business climate and bipartisanship. Baltimore’s mayor since 2010, Stephanie Rawlings-Blake, says she is committed to rebuilding the city. Despite some minor jabs at each other in the past few months, both showed an effective working relationship during the crisis of the past few weeks. Their political futures will now be linked as the real work begins to repair Maryland’s largest city.
They will be building on perceptions of the Baltimore area that go far beyond the 24-hour, instant-news cycle. We have corporate success stories to tell the world about, including Under Armour, a global leader in sports apparel, and McCormick, the classic American spice company founded here in 1889. But these companies succeed despite the business climate, not because of it.
The simplest, most direct way to offer hope to discouraged people is to hire them. The Baltimore business community has a simple message to law enforcement and elected officials: “Help us help you.” People making good wages, working at jobs they are proud of don’t destroy themselves or the place where they live. We have the political and business talent to rebuild one of America’s great cities, once we focus on creating the conditions for job growth.
Mr. Steinmetz, a former member of the Maryland Small Business Commission, is the CEO of Baltimore-based Barcoding Inc.
Here’s three comments about this story
Why are you still there. You pay confiscatory taxes for mediocre services. You risk getting robbed, beaten, murdered . Your kids go to terrible schools where they get a lousy education. Explain to me why you are still there. Plenty of other places in this country which would welcome you. So, move already.
I ready can't sympathize with him. He needs to speak with his money and his feet. Close the business and move it somewhere else preferably below the Mason Dixon line which is usually much more business friendly.
Mr. Steinmetz's company is doomed it he elects to stay in Baltimore. The tax base is shrinking and the liberal mentality is to tax what is left until they tax it out of existence. In his place, I would be gone, and probably out of Maryland as well