The Maryland Department of Commerce offers many programs and services to assist businesses to create and retain jobs and to grow in Maryland. In Fiscal Year 2016, Commerce awarded projects that assisted 584 businesses, resulting in over 24,000 jobs and annual State tax revenues of $53.7 million.
Recognizing the importance of measuring these programs, the Maryland General Assembly passed the 2013 Maryland Jobs Development Act, requiring Commerce to report annually by December 31 on certain finance programs and tax incentive programs administered by the Department during the prior fiscal year. The intent of this report is to include data on the number of jobs created, the number of jobs retained; the estimated amount of State revenue generated; and any additional information by each program and each recipient.
Executive Summary
Commerce Incentives
Commerce incentives totaled $96,874,782 in FY 2016. Commerce invested $46 million in direct assistance and $50 million in tax credits.
Industry Support
Manufacturing received the largest dollar amount with $30.7 million in total assistance, including loans, loan guarantees and tax credits. Professional, scientific, and technical services companies received $14.7 million in total assistance. These include many technology companies such as those in biotech research, information technology and cybersecurity, as well as professional services and engineering.
Trade, transportation and warehousing received $15.6 million. The information sector, including film production received $12.5 million in assistance. Education and health care technology and services received $9.7 million.
Program Impacts
The program evaluation is organized according to the general economic development objectives of the programs:
- Job creation and retention
- Support for Local economic development
- Leveraging private sector investment
- Assistance to small and disadvantaged businesses
- Promoting startups and innovation through technology commercialization and investment
- Economic diversification through targeted growth industry promotion
- Special purpose such as promoting exporters
The Commerce incentive evaluation uses jobs, wages and investment as the main metrics to estimate the tax revenues returned to the State from its incentive investments. Direct jobs include newly created jobs and jobs retained by the project. In some cases where job numbers are not a requirement of the program, the amount of project spending in Maryland is used to estimate the number of full-time equivalent jobs supported by the project.
The total jobs number includes the secondary, or multiplier effects of the jobs (direct, indirect and induced). The estimates of secondary jobs and wages are based on the IMPLAN economic model for the State.
The programs supported retained or created 11,762 direct full-time equivalent jobs. Nearly two-thirds of those were new jobs and one-third were retained jobs. Including spin-off jobs, the combined programs generated over 24,000 jobs and total annual wages of $1.25 billion, for an average annual wage of $42,150. Overall, the combined programs generate $5.3 billion in economic output, generating annual State tax revenues of $53.7 million.
Return on Investment
The total number of direct and secondary jobs and wages generated by each program is used to estimate the annual tax revenues generated. This can be used to determine an overall ROI for the programs. For most of the State’s incentives, those annual tax benefits continue to accrue to the State for a period of years beyond the initial incentive year. For this report impacts are estimated for a one-year period, providing a snapshot of FY16 activity. However, this approach does not take into account the ongoing impacts generated by the incentives. In most cases, the jobs and investment supported by the incentives are required to remain in Maryland over a period of years. Those long-term impacts are not included in this report but should be considered when evaluating each program individually.
Because of the reliance on jobs and wage data as inputs, the ROI varies significantly by program. In total, the incentive programs generated $0.55 per $1 of FY 2016 incentive investment. Programs that are primarily focused on job creation have the highest measurable ROI per incentive dollar, with $1.40 in revenues per dollar of incentive.
The evaluation was conducted by the Department’s Office of Research and Information Services based on the Department’s Finance Tracker data and program reports for settled projects receiving incentives in FY 2016.
