County Executive Elrich: ‘Make Montgomery County More Like Fairfax County’

Montgomery County has a problem: It’s losing ground to its neighbors.

That was the message from Montgomery County Executive Marc Elrich last week at Bisnow’s Future of Montgomery County. He said he has been studying the policies of neighboring Virginia counties that have led them to be perceived as more business-friendly, and he thinks Montgomery County should copy some of them.

“Montgomery County is missing something that some of our neighbors are better able to handle than we are,” Elrich said at the event, held at 2 Bethesda Metro. “We need to figure out how we can compete better with the neighbors in this region and around the nation.” 

To reach a point where it has a competitive edge, the county must be willing to make moves to be more like its neighbors, he said. 

“Since taking office in December 2018, I've focused very heavily on doing whatever I can to make the changes to try to make Montgomery County more like Fairfax County,” Elrich said.

Fairfax, Montgomery’s neighbor across the Potomac River, does better when it comes to attracting development and businesses and building public infrastructure, Elrich argued. He said the county should look to adopt some of its neighbors' tax, infrastructure and planning policies. 

“We are long past the point where we can afford to keep looking at the taillights of Virginia,” Elrich said. “We can't be in a position where we continue to ask ourselves, ‘How do they do it?’ We know how they do it. It's time for us to do what they do.”

The two counties are similar in size. As of 2022, Fairfax had a population of 1.15 million and Montgomery County had 1.06 million. Montgomery is about 25% larger than Fairfax by area, with 493 square miles to Fairfax’s 391 square miles.

But Fairfax’s gross domestic product, which the U.S. Department of Commerce calculates together with its much smaller neighbors, Fairfax city and Falls Church, was more than 40% higher in 2022 than Montgomery County’s.

Northern Virginia has a reputation for being more business-friendly. CNBC named Virginia the top state for business this year in its annual state competitiveness rankings, while Maryland was No. 31 on the list.

Fairfax County is home to 10 Fortune 500 companies, the majority of Northern Virginia’s 14 total. By contrast, there are only four Fortune 500 firms in all of Maryland, with just two in Montgomery County.

Montgomery County lost out to Virginia's Arlington County for Amazon HQ2 in 2018. Montgomery was one of 20 finalists, along with the District, in the high-profile site selection sweepstakes. 

Elrich said Montgomery County must look at the reasons Virginia keeps winning the economic development competition and start finding areas where it can change.

“I hear a lot about Virginia from people,” Elrich said. “I don't want people to talk about it if they're not willing to do what Virginia does.”

The top impediment Montgomery County has is transportation, Elrich said. 

Northern Virginia completed an 11.4-mile extension of the Silver Line at the end of 2022, adding six new stations connecting Fairfax County with Dulles International Airport and Loudoun County. Last year, Alexandria opened a new Blue and Yellow line station at Potomac Yard, helping spur big new transit-oriented development plans. 

On the other hand, Maryland's Purple Line project to connect Montgomery and Prince George's counties has been delayed for years. Originally scheduled to deliver in 2022, the new line is now projected to be completed in late 2027, with the latest delay putting the state another $425M over budget. 

“I believe Fairfax County understands exactly what they're doing, that building infrastructure is what brings companies to Fairfax County,” Elrich said.

Vikram Manikonda, chief technology officer at global defense company BlueHalo, said at Bisnow's event that it is important for Montgomery County to be able to provide public transit for the company's employees, who are increasingly commuting from Northern Virginia. 

BlueHalo already has offices in Rockville, and it announced in May that it would lease a new 57K SF facility in Germantown. The move is expected to bring 200 more jobs into Maryland, bringing its total employment in the state to 600.

“More and more people don't own cars. The younger generation don't. They like to live in the cities, maybe work in the suburbs,” Manikonda said. “So any infrastructure that can be developed to help people move easily will bring in more employees, employers and community growth. So I think infrastructure is really big.”

Virginia was ranked the No. 3 state for building infrastructure as part of CNBC's competitiveness report. It has achieved that in part because of its tax system, Elrich said, which harnesses development taxation more productively for county services.

Montgomery County relies on an impact fee system, where developers pay fees upfront for the burden they will exert on the county’s infrastructure. Those fees, which Elrich said can total millions, are then factored into the project's capital stack, putting upward pressure on rent.

“Virginia doesn't do that,” Elrich said. “Virginia has created special taxing districts, and inside the special taxing districts, commercial property is taxed differently than residential property.”

The revenue from those districts then goes specifically to transit projects, rather than the general fund.

“So it's not a back door to getting additional taxes out of development for the general fund,” he said. “It's a front door to get the money we need to raise in order to build the infrastructure that Montgomery County needs, and that, to us, is our biggest problem. We cannot build infrastructure here.”

Transportation is part of the hurdle to attract workers to Montgomery County, a hurdle that panelists said is the county's largest roadblock.

“It really is about jobs,” EYA Executive Vice President Evan Goldman said when asked about the county’s biggest challenge.

“We do need to figure out how to supersize our job growth to compete with Virginia,” he said. “Northern Virginia really does do a good job at this, and we see it on the sales side in our townhome projects in particular. The excitement around sales there because of all the new jobs that are there has resulted in more housing, housing demand, I would say.” 

Last month, Maryland Gov. Wes Moore announced $7.3M in Employment and Advancement Right Now workforce grants, the largest investment in the program yet.

He also announced the state would be getting nearly $23M in federal funding to connect 7,000 job seekers to apprenticeship programs.

An additional burden, Elrich said, is the county’s two-track planning system, which he argued negatively impacts development. 

“Our planning system makes it very hard to do business in Montgomery County,” he said. “It is different than any place else in the state and the region.” 

Development proposals in Montgomery County must go through The Maryland-National Capital Park and Planning Commission and then the county. 

That means developers have to “serve two masters and make two masters happy,” he said, “which takes time, which takes money, leads to delay and makes any project here more expensive than it would be if you were trying to do this in Virginia.”

It isn't all doom and gloom for Montgomery County. The area is one of the wealthiest counties in the U.S., and it ranks as one of the top markets in the country for the life sciences industry. 

But even where it succeeds, Elrich said it doesn’t do a good job of promoting its victories.

“I don't know if people know that, but we are the No. 3 area in the country in life sciences,” he said. “We're very unknown. For No. 3, we perform badly in terms of press and awareness, and our goal is to change that.”