Is Maryland Governor Larry Hogan Right About the “Mass Exodus”?

Maryland Governor Larry Hogan stated during his first state of state address, that there is a mass exodus of tax payers, packing their bags and moving to other states. “Our economy is floundering, and too many Marylanders have been struggling just to get by,”… “We’ve had the largest mass exodus of taxpayers fleeing our state, of any state in our region and one of the worst in the nation.” said Governor Hogan.

But is Governor Hogan painting a worrisome economic picture that's not worth the canvas? Based on at least one important measure the current economic situation in Maryland could be more dire than he alluded to in his speech.

Over more than a decade, Maryland has lost several large companies through mergers and acquisitions, while some have simply moved out of the state. Fast forward to today and the total number of Fortune 500 companies in Maryland has dwindled down to four and dangerously close to zero. This is exacerbated by the gap with competing states, including Massachusetts, Connecticut, Pennsylvania, New Jersey and Virginia. The competing states all have a Fortune 500 count in the double digits; significantly more than Maryland by a very wide margin.

Compared to Maryland’s four Fortune 500 companies, Massachusetts has 14, Connecticut has 14, often criticized New Jersey still has 14, Pennsylvania has 14, and arch-rival Virginia has 24.

The city of Baltimore lost its last Fortune 500 in March 2012 with the buyout of Constellation Energy. Baltimore and its metro have been bombarded with unfortunate situations that have raided the region for some of its biggest companies. The latest company to announce a headquarter move is McCormick & Company (NYSE:MKC). The biggest spice maker in the world is looking at other states for a headquarter campus, including Pennsylvania and Virginia.

Maryland is perceived as having an anti-business climate. Complaints range from regulations and adversarial nature of government agencies when dealing with businesses to the high business, sales and personal taxes when compared to competing states. When the corporate income tax was raised from 7.0 percent to 8.25 percent in 2007 under former Governor O’Malley, Maryland has lost about half of its Fortune 500 companies since that time and hasn’t been able to recover. The sales tax is also the highest in the region at 6 percent when it was approved to be raised under former Governor O’Malley from 5 percent. Virginia has been stable at 5 percent, while Washington, D.C. recently lowered it's sales tax to 5.75 percent from 6 percent, albeit to be more competitive against Maryland.

The market conditions for office space construction have been lackluster as well, with the capital region of Maryland having the lowest amount of office space under construction in the D.C. metro in the fourth quarter of 2014 according to reports from Transwestern and Colliers International. That means less jobs on that side of the Potomac in the long-run.

Governor Hogan has a lot of work to do as far as Maryland's economy is concerned, and luring a number of Fortune 500 companies to the level of competing states may be an impossible task. But at the least he shouldn't have to deal with obstacles from the opposing democratic party to try to make that happen, it's a major problem that both sides need to solve and fast because the Fortune 500 list isn't partisan. What it has become is an embarrassing failure that sits on the face of the entire Maryland government. 

State

Number of Fortune 500 Companies

Virginia

24

Connecticut

14

Massachusetts

14

New Jersey

14

Pennsylvania

14

Maryland

4

 

Notable Companies that no longer have a large presence or their headquarters in Maryland.

Constellation Energy – (Baltimore’s last Fortune 500 Company bought by Illinois-based Exelon)

Coventry Health Care – (Bethesda Fortune 500 Company, purchased by Connecticut-based Aetna, part of what was a growing health insurance industry in Montgomery County)

Catalyst Health Solutions – (On the verge of Fortnue 500 status before being bought out by Illinois-based SXC Health Solutions Corp which renamed itself to the Catamaran Corp and left Rockville. Catalyst was part of what was a growing health insurance industry in Montgomery County)

CapitalSource – (Bank that moved headquarters to Los Angeles, California)

Hanger Orthopedics – (Medical firm that moved headquarters to Austin, Texas)

CoStar Group – (Moved headquarters from Bethesda to Washington, D.C. - largest commercial real estate tracking firm in the United States)

Chevy Chase Bank – (federal charter moved from Montgomery County to Mclean, Va in 1996. Finally vacated de facto headquarters in Bethesda after Capital One purchase in 2009)

Washington Real Estate Investment Trust – (Will leave Rockville for Washington, D.C.)

Provident Bancshares – (Provident Bank of Maryland was purchased by Buffalo, NY-based M&T Bank in 2009)

MedImmune – (Bought out by AstraZeneca, presence remains in Gaithersburg, Maryland but no longer independent)

SunEdison – (Growing solar energy company, moved headquarters from Beltsville after being purchased)

Vocus – (PR tech firm moved headquarters to Chicago from Lanham after going private merger)

Jos A. Bank – (bought out by Men’s Warehouse of Texas in highly publicized battle. Was Carroll County’s most valuable company)

Digene – (Biotech bought by Qiagen)

Micromet – (Biotech bought by Amgen)

Human Genome Sciences – (Biotech famous for Lupus drug, bought by GlaxoSmithKline and now defunct)

Vanda Therapeutics – (Biotech, moved headquarters to Washington, D.C.)

Black and Decker – (Century-old tools company bought by smaller Connecticut-based Stanley Group)

Bill Me Later – (Fast growing Timonium-based payment system company that was bought by Ebay)

Grotech Ventures – (Venture capitalist firm that shifted headquarters from Hunt Valley to Tysons Corner)

Hughes Network Systems, LLC – (Satellite tech company bought out by EchoStar)

Marriott Vacations Worldwide Corp – (Recent publicly traded spinoff from Marriott based in Orlando, Flordia)

Micros Systems – (The Columbia-based company was purchased by Oracle Corporation and is no longer independent)

SourceFire — (Columbia-based firm part of a new, but already shrinking cyber security industry in Maryland. The company was recently purchased by Cisco Systems)


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