ANNAPOLIS — A local delegate's plan to lower corporate taxes and open a bank to fund local transportation projects came before state lawmakers Thursday.
Delegate Galen Clagett testified that 33 states already have infrastructure banks, and Maryland should get on board to keep up with needed capital improvements.
"If we don't think out of the box, we're going to continue to do business the way we're doing business. We're way behind other states as far as this is concerned," Clagett, D-District 3A, told lawmakers in the House Ways and Means Committee on Thursday.
His bill would establish an infrastructure bank filled with funds from corporate income tax revenue, any other state appropriations and investment earnings. Local governments or private entities could then apply for loans from the bank to finance transportation projects, according to Clagett.
During the hearing, Delegate Andrew Serafini questioned Clagett about what would happen if borrowers don't repay the bank.
Clagett said the state is not obligated to bail out the fund if it runs into financial difficulty.
"The bank stands or falls on its own," said Serafini, R-Washington.
"Absolutely," Clagett said.
The board in charge of overseeing the bank would include state business and transportation officials, a member from the Maryland Association of Counties and two private industry representatives appointed by the governor, according to the bill. The board would develop a system for deciding which projects should receive loans from the bank.
Clagett's bill would also decrease the corporate income tax rate from 8.25 percent to 7.25 percent for businesses that form or locate in Maryland starting this year. In five years, the rate would sink to 7.25 percent for all businesses, according to the proposal.
In addition, about 12 percent of corporate income tax revenue would start flowing toward the infrastructure bank starting in fiscal 2015.
Because of the tax cut and new revenue distribution, the state's general fund would lose out on an estimated $96 million in fiscal 2015 and $150.6 million in fiscal 2019, according to a legislative analysis.
Clagett's proposal picked up support from the city of Baltimore, which submitted written testimony to the Ways and Means Committee.
"Continuing to divert local dollars to transportation projects is not a sustainable model," wrote Andrew Smullian, deputy chief of legislative and government affairs for the Baltimore mayor's office of government relations. "We need to support and enrich our transportation partnership with the state to move our visitors, businesses and citizens safely along Maryland's roadways."
The infrastructure bill is part of a group of economy-related proposals Clagett has put forward this session.
Clagett last week presented a proposal to create a state business ombudsman who would work for the Maryland governor. The ombudsman would be tasked with helping businesses interact with the state, sort through any permit holdups and fast-track projects.
State analysts estimated that creating the new office would cost more than $124,000, enough to pay salaries of an ombudsman and an administrative assistant.
Follow Bethany Rodgers on Twitter: @BethRodgersFNP.