Proposed amendments to the Maryland Economic Development code appear to expand a pool of capital available for eligible businesses and eligible local governments. SB 67, pre-filed last October by Maryland senate committee chairman Thomas Middleton changes the name of the Maryland Economic Development Assistance Fund to the Advantage Maryland Fund.
In addition to the fund’s name change, SB 67 proposes lifting the maximum amount for local economic development project assistance from $2 million to $5 million. Recipients of this type of funding may include an individual, private business, a non-profit entity, or a corporation. Assistance may take the form of a grant, loan, or an investment.
Local governments seeking assistance in the form of grants, loans, or investment will see the cap on funding increase from $3 million to $5 million.
As written, SB 67 introduces some uncertainty as to the amount of interest the fund will charge on loans. The bill eliminates Section 5-325 (c)(1) through (e)(4) addressing particular levels of interest rates that are assessed depending on the type of project or loan recipient. Those sections are replaced with language reiterating that the Maryland Department of Commerce shall determine the payment terms of loans as well as the amount of interest assessed. The amendment also provides the Department the authority to assess a zero interest rate on loans and that for defaulters, the Department may impose a default interest rate.
In my opinion, Maryland, like the rest of the country, is entering a 2018 that promises rising interest rates. The Federal Reserve has signaled three more increases of its intrabank lending rate. The massive tax cuts approved by Congress this week with President Trump’s signing-off on tax legislation expected shortly will put upward pressure on rates as the federal government will no doubt enter the debt markets to borrow additional money at higher rates. I doubt if the Maryland Department of Commerce will authorize a zero interest rate on loans. In addition, project managers approaching the Fund for assistance may have to be extra persuasive when arguing that their projects will provide positive returns on investment and the creation of jobs.