LIKE their counterparts throughout the country, Stafford County economic development officials are constantly trying to attract new businesses to the region. They recently scored a win when a Baltimore-based commercial real estate developer announced plans to build a new Class A warehouse and e-commerce distribution center adjacent to the Stafford Regional Airport.
But these same officials acknowledge that the 486,720-square-foot distribution center, which will be the second largest building in the county’s history, would not have happened without a significant tax break.
Stafford’s merchant’s capital tax (MCT)—50 cents per every $100 worth of inventory—was the main obstacle to attracting such an inventory-heavy business.
“It was just too burdensome on them, and was preventing them from choosing Stafford as a location,” Stafford Revenue Commissioner Scott Mayausky explained. “Most localities don’t have this tax …. It was putting us at a disadvantage.”
Working with county officials, Del. Bob Thomas got the General Assembly to change the law to allow localities to lower the MCT for a specific subcategory: warehouses larger than 100,000 square feet. In April, the Stafford Board of Supervisors approved a much lower MCT for large warehouses: just 0.0001 cents per every $100 worth of inventory—a far cry from the previous 50-cent per $100 tax.
Baltimore-based CSG Group is the first company to take advantage of the lower tax rate, but other companies that are thinking about building a new warehouse or distribution center will likely now view Stafford County as a possible location thanks to this business tax reduction.
What’s in it for Stafford County residents? Jobs, for one thing. The new $35 million distribution center is expected to employ up to 200 people.
The distribution center is also expected to generate $450,000 per year in real estate and property taxes, according to an analysis submitted to the Board of Supervisors by the county administrator. Even forgoing the $175,000 per year that the higher MCT would have generated, Stafford County will still come out $275,000 ahead each year. That comes out to $8.25 million in new revenue over the 30-year lifespan of the project.
The new facility will be very close to Interstate 95, so no new county roads will be needed. Although it will create more traffic volume on the interstate highway as delivery trucks come and go, the owners will hopefully stagger the times to avoid adding to the region’s rush-hour congestion.
Besides its easy access to I–95 and local rail service, Stafford County is just three hours away from deep-water ports in Baltimore and Norfolk, and within a day’s drive of more than 60 percent of the U.S. population, so more supply-chain companies are likely to follow as online commerce continues to grow and the demand for more distribution centers continues to rise. But in order to capitalize on these inherent advantages, the county first had to be willing to significantly reduce its MCT in order to be competitive with other jurisdictions.
Lesson learned: Lower taxes on businesses and they will come.