New tax incentive programs approved last week by the Fredrick Board of Aldermen help the city keep pace with neighboring jurisdictions and attract new businesses, according to Richard Griffin, Frederick’s director of economic development.
“We have to compare ourselves to our brother and sister communities,” Griffin said. “... Many of our peer jurisdictions have in place incentives to make them attractive.”
The five aldermen unanimously approved consolidating all of the city’s tax incentives within the municipal code in one section, instead of being part of the city charter or scattered throughout the code. The board also approved two new programs and reauthorized a third at a meeting Thursday. Griffin said the city looks to neighboring communities in Montgomery and Washington counties, such as Rockville and Hagerstown as a means of gauging what the city offers.
In addition to reauthorizing an incentive program for the economically troubled Golden Mile stretch of Md. Route 40, two new programs were added, including the New Jobs and Enhanced New Jobs Property Tax Credit and the Historic Preservation Property Rehabilitation Tax Credit Program. The tax programs don’t directly cost the city money, as the programs only affect revenues that would be generated after renovations are complete.
The new jobs credit has two tiers: a property tax credit for businesses expanding by 5,000 square feet and adding 25 jobs over two years, and one for large employers that occupy 250,000 square feet of newly-constructed space and employ more than 2,500 workers. The preservation credit covers 10 percent of the documented expenses for exterior renovations of historic properties.
Griffin said the benefits of the program are two-fold: encouraging businesses to locate and improve vacant areas, and to encourage investment and reinvestment into existing properties, which could include updates like those made to the Frederick Shopping Center on Seventh Street.
He said most of the incentives last for seven years, but that the city continues to see tax revenue in each year, with the amount of credit decreasing each year depending on how much the upgrades cost. For example, if a building on the Golden Mile worth $100,000 receives upgrades to make it worth $200,000, property taxes would also double, Griffin said. After the credit, the owner receives a break on taxes on the additional $100,000 value for seven years, with the amount of the benefit decreasing annually. There are three categories of projects eligible: less than $1 million, $1 million to $4 million and greater than $4 million, with the tax savings varying depending on the cost.
The city doesn’t lose any tax revenue they’re already receiving, as the incentives are only for significant upgrades that would add property value, such as rewiring a building or an addition, he said.
“The purpose of these credits is to help offset the cost of rehabilitating these vacant buildings rather than have them sit empty,” he said.
Griffin said the largest pockets of empty buildings are located on the Golden Mile and in Frederick’s downtown, but said there are vacant properties located throughout the city.
Frederick Chamber of Commerce President Ric Adams said the chamber supports the credits as a way to encourage job creation and private investment in Frederick.
Chuck Mclaughlin, senior vice president and treasurer of Wolf Furniture, said the company wasn’t the direct recipient of the incentive, which largely went to their landlord, but that it did help the company in choosing a location for their new showroom in Frederick in 2004. The company participated in the first incarnation of the Golden Mile Property Rehabilitation tax credit program, which ended in 2010, Griffin said. Griffin didn’t know how much the company received in tax credits, and Mclaughlin referred comment to landlord Greenberg Gibbons Commercial, which did not return calls for comment.
He said the tax incentive was one of many issues the company discussed after the project started.
“It did favorably impact us,” he said. “... We had another location that was a building we owned. We sold the building and moved out on the [Golden Mile] to update our presence in the community.”
Griffin said the credits would hopefully encourage similar choices for businesses elsewhere.
“The credit helps encourage people to invest in a building that needs rehabilitation,” he said. “The dollars we gain are dollars we might not have obtained otherwise.”