Montgomery County's moribund economy just needs...more cowbell, Planning Dept. says

Montgomery County's moribund economy isn't a new problem. I've been writing about it for over a decade. In more recent years, The Washington Post editorial board has finally acknowledged that MoCo, once the economic engine of the Washington, D.C. region, has become stagnant - - though only in the service of their Ahab-like crusade against their chief nemesis, Marc Elrich. Even a handful of politicians have begun admitting it, from Elrich himself, to his twice-vanquished opponent David Blair, and even Maryland Gov. Wes Moore. But despite the arrival of more-powerful voices at the table, Montgomery County and Maryland's policies have yet to change. In fact, the Montgomery County Planning Department is now arguing that the solution is to double down on the failed path we've been on: "More cowbell!"

In a recent series on the department's relentlessly pro-developer blog, The Third Place, we find the latest example of the Montgomery County cartel phenomenon we might call, "Now more than ever..." Whatever the latest crisis to befall a sector, demographic or geographic area of the County, their solution is always the same: Build more luxury housing. Whether it's the moribund economy, failing schools, increasing poverty, or the decline of an area like Friendship Heights, our elected officials tell us the answer - "now more than ever" - is to build more luxury apartments.

The Third Place series is just the latest example of this "More cowbell!" argument. 

It is ostensibly a deep dive into the stagnation of the Montgomery County economy. But as the series advances beyond a deceptive twisting of statistics that aren't actually the root cause of the stagnation, it eventually arrives at a familiar conclusion - we need to build more luxury housing.

More cowbell!

Most residents will never read this blog series, but you the taxpayer are not the target audience, anyway. Like most reports generated by the Planning Department, the purpose is to provide Astroturf data and analysis our developer-funded elected officials can point to as justification for upzoning greater and greater areas of the County. But if a resident of one of the most highly-educated jurisdictions in America were to read this blog series, they would quickly sense that something is amiss.

For example, Part I classifies Montgomery County residents who make $138,750 and above as "high-income" residents. In the real world, that's called "barely-keeping-your-head-above-water" in Montgomery County. Many County residents skating by on maxed-out credit, the bank-of-Mom-and-Dad, and assorted other survival tactics would be shocked to learn that they are "rich." 

The reason for this low wealth bar becomes clear as you continue reading. It is a way to make it seem that the "rich" portion of the population has merely remained constant. In reality, the flight of the rich from Montgomery County has been well-documented, down to the amount of tax revenue in millions that those wealthy expats have taken with them to lower-tax jurisdictions in the area. 

Were we to classify "high-income" more accurately, we would see that those numbers have declined significantly. The exodus has been most clearly seen in Montgomery County plummeting entirely off of the Forbes Top Ten Richest Counties list last decade, and in the collapse of "Montgomery County's Rodeo Drive" in Friendship Heights, which in recent years has become a stretch of aging apartment buildings and vacant storefronts.

As the rich have fled, they have been replaced - and then some - by low-income residents. The Third Place acknowledges this. "Specifically, our analysis shows that between 2005 and 2022, Montgomery County’s low-income population grew faster than the other groups. Montgomery County’s middle-income population shrank." Charles, Frederick, Howard, Loudoun, and Prince William counties can surely attest to the latter, as they've welcomed those cash-strapped, taxed-to-death MoCo refugees, along with the Virginia exurbs.

While that tax revenue has flowed outward, our business growth has dropped to the lowest in the region. Our job creation numbers have collapsed, and even fallen behind Prince George's County in recent years. And Montgomery County hasn't attracted a single major corporate headquarters in over a quarter century, a time frame that neatly dovetails with the MoCo cartel's seizure of the County Council in 2002 with the "End Gridlock" slate. As does the shift of population growth to the bottom of the income scale.

What urgent strategic and policy changes does The Third Place recommend to turn the tide, and attract the business and commercial revenue we need?

"The main, actionable takeaway from this research is to encourage the production of market-rate infill housing."

We know, of course, that "market-rate" housing in Montgomery County is expensive. There's no shortage of expensive housing in the County. We also know, from hard experience since 2002, that massive construction of new luxury housing does not reduce rents or home prices. Period. And because new residential housing generates more costs in County services than it does in tax revenue, building more won't solve our structural budget deficit. Much less restore our moribund economy.

Did the rich flee Montgomery County because home prices were too cheap? Not quite. Would middle class residents return en masse from the exurbs if we produced more $1 million townhomes and $2 million duplexes? Nope.

What would actually make Montgomery County a booming jurisdiction, make it possible for more residents to afford living here, and fill the County's revenue coffers? High-wage jobs from major corporate employers. 

The Third Place worries that currently, "there will be nowhere for affordable-housing residents to go once they are ready to upgrade." But it doesn't explain how janitors, cooks and grocery store bakers will suddenly be flush with the cash needed to buy that luxury housing that The Third Place wants to overdevelop even more than today. 

Here's a hint: Jobs. Good jobs. The kind we haven't been attracting to Montgomery County for a couple of decades now.

Gov. Wes Moore seems to understand this, noting that Maryland's economy today simply can't provide the revenue to fund his ambitious agenda. This year's legislative session in Annapolis seems to indicate that his message fell on deaf ears among his General Assembly colleagues. Likewise, Elrich has come around to the idea that the County should be attracting high-wage jobs. But his legislative colleagues on the County Council haven't joined him yet. 

The cumulative impact of elected officials who write the laws remaining stubborn in their ways - and loyal to the real estate developers who elected them - will only hasten the exit of wealth and revenue from Montgomery County. In addition to the massive property and recordation tax hikes passed last year, low and middle-income workers will soon be paying several hundred dollars to register their work trucks and soccer mom minivans. A 75-cent tax on every Uber ride. Even a $1.25 more on each pack of smokes. All of these are extremely regressive taxes.

A quick look at the press release pages of Gov. Moore and Virginia Gov. Glenn Youngkin gives just a small sense of the problem. Both men have Rolodexes stuffed with Wall Street and corporate connections. Surprisingly, Moore has so far failed to convince any of his friends in the Hamptons or Martha's Vineyard to relocate their Fortune 500 companies to Maryland. And that's even amid a downward trend for Virginia under Youngkin. The GOP 2028 aspirant's announcements of new, major corporate headquarters relocating to the Old Dominion have come at a much more sporadic pace than under his two Democratic predecessors.

But even as Virginia begins to flounder a bit, and budget woes creep up on legislators in Arlington and Fairfax counties who have begun to follow the big-spending ways of MoCo, we have not been able to seize any momentary advantage.

Not only has Youngkin failed to tee up many big wins, but when he does, he now has a legislature that is more like the one in Annapolis to block him. That's partly his own fault, for bizarrely making the last state election about abortion, a sure losing crusade even in red states - much less a blue one like Virginia. And he even turned away a Ford electric vehicle battery plant. Tired of winning, perhaps?

Yet, even as Virginia slips into a lower economic gear, 2024 has brought another major corporate HQ to Virginia. CoStar - which once was headquartered in Bethesda(!!), before fleeing to the District in 2010 - purchased the 1201 Wilson Boulevard office tower in Rosslyn for its new global HQ. It will bring its existing 500 jobs, and add 150 additional jobs in its new Virginia home. 

CoStar joins Northrup Grumman, Capital One, Hilton Hotels, Volkswagen, Lidl, Intelsat, Gannett, General Dynamics, Blackboard, Corporate Executive Board, Nestle, Gerber, Lego, and the rest of a truly-headspinning list of household-name companies to select Northern Virginia over Montgomery County in recent times.

During the same Q1 period in Maryland, Gov. Moore was only able to announce the relocation of Blink Charging Co. from Florida to Bowie. That's certainly a positive and welcome development, but it's not a major or Fortune 500 company. The number of existing corporate expansions in Maryland so far this year has also been dwarfed by the number in Virginia. 

Over the first three months of 2024, Gov. Youngkin issued press releases announcing 9 other new or expanding businesses adding jobs to the state. During the same period, Maryland only had 2, another resounding defeat in regional competition.

It was encouraging news that when Moore received the phone call about the Key Bridge collapse, he was on an unannounced business trip to Boston. This at least shows he may currently be working on something big behind the scenes.

Montgomery County was once the place where such big economic development news was made in the DC region. What I've argued for over a decade has been further vindicated by the collapse of the office market after the pandemic rise of working-from-home. 

We need to be attracting major corporate headquarters, and research and manufacturing facilities, from the aerospace, defense and tech sectors. These are the sectors that need large, secure campuses in suburban office parks, the kind we - thankfully, for now - still have plenty of. And room to build plenty more. The anonymous apologists for the County Council said I was a fool, and that companies wanted to be in traditional office buildings by Metro stations in urban areas. 

It turns out I was right. "Now more than ever," you might say.

Currently, the ever-increasing and regressive tax burden caused by our elected officials' profligate spending is falling almost entirely on residents. We are leaving all of the commercial, business tax revenue - and income revenue from high-wage jobs, on the table for our rivals in Virginia, for whom we've become a bedroom community. 

By adopting more-competitive business policies, adding missing infrastructure like a new Potomac River crossing to provide direct access to Dulles International Airport, and being aggressive in attracting the evergreen industries that provide high-income employment in good times and bad, we can ease the tax and fee burden on residents.