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Baltimore’s cost-competitiveness and economic development

March 31, 2012

Last week, both Baltimore Business Journal and The Baltimore Sun reported that Baltimore ranks sixth in KPMG’s survey of the least-costly U.S. cities in which to do business. The BBJ suggested that “[b]usiness owners complaining of high taxes in Baltimore might be exaggerating their pain.” That statement is mildly disingenuous: telling a prospective Baltimore City business owner that Greater Baltimore is an inexpensive area to do business is something like telling a Baltimore City parent that Maryland has the nation’s top-ranked public school system. These are true statements, of course, but misleading.

KPMG attributes Baltimore’s cost-competitiveness to its low suburban office lease costs and low property-based taxes. But suburban office space is just that and Baltimore City’s property tax rate is more than twice that of any county in Maryland. In this context, Baltimore’s ranking is a bit deceiving, because Anne Arundel, Baltimore, Carroll, Harford, and Howard counties are all distinct and competing jurisdictions to the city.

Because the readership for both publications extends beyond Baltimore City, touting the KPMG rankings is understandable. But as a matter of economic development policy, the area’s high ranking and the cost-competitiveness of surrounding counties only legitimizes complaints that Baltimore City is less conducive to cultivating, retaining and growing business than jurisdictions that immediately surround the city.

Of course, there are other factors outside of cost-competitiveness that can make a location an attractive place to do business, and an argument likely can be made that surrounding jurisdictions are too business-friendly, but the rankings don’t seem as favorable to a city looking to advance its own innovation economy within the region.

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