Please consider this your refrigerator magnet, t-shirt, or tchotchke from my summer up in Maine.  It’s a top ten of sorts, though it is grouped by subject than in order of importance…



Wage and salary income is 43.0% of Mo Co personal income, compared to 50.2% of U.S. personal income and 47.6% of Maryland personal income. Mo Co personal income includes a lot more “dividends, interest, and rent” (23.3%) and “proprietors’ income” (14.2%) than the U.S. or Maryland.  In contrast, Fairfax County is much more dependent than Montgomery County (and other places) on wage and salary income (66.0%), while proprietors’ income makes up a much smaller portion (5.8%) of total personal income than it does in Mo Co. The source for this is BEA Personal Income data for 2001-2019 (CAINC5N).

A key takeaway from this is that big picture economic data like GDP tends to overstate the strength of the Mo Co economy as it pertains to “working stiffs”, and some of the weakness in terms of jobs and salaries is obscured by disproportionately large shares of income and value add that come from something other than “the labor of people who work for other people.”  Also, as discussed later, this does lead to a lot of year-to-year volatility in income tax revenue that makes budget planning very difficult.


Wage and salary income in Mo Co is increasing at a compound average annual rate of 3.4%. For the U.S., wage and salary income is increasing at a compound average annual rate of 3.6%; for Maryland, it is 3.5%. In contrast, Fairfax County wage and salary income is increasing at a compound average annual rate of 4.0%.  At the same time, Mo Co proprietors’ income is increasing at a rate of 5.2% annually, well above the rate for the U.S. (3.9%), Maryland (4.6%), and Fairfax (1.5%). The source for this is BEA Personal Income data for 2001-2019 (CAINC5N).      

Not only is wage and salary income a smaller portion of total personal income, but it is growing more slowly here than elsewhere, and growing more slowly than other components of personal income. The good years in Mo Co’s economy, whether you are measuring production or income, are correlated with big jumps in income that is not wage and salary income (again, that darned volatility!).


Look, you can buy goods and services with financial assets that were earned in exchange for labor or for capital. But most people don’t have excess capital, so they go to work for a living. And most people who have excess capital have reached a point where a lot of what they earn doesn’t get spent on goods and services and therefore never enters the local economy.  It is possible to draw the wrong conclusions from a simple headline number like GDP growth or personal income when you aren’t digging in to see which components of income are growing. I think we have an obligation to look at how regular working-folk are experiencing the economy, and their experience as measured in wages and salaries is getting “a little less better every year” than it is elsewhere.        

Capital is a lot more fickle – and mobile – than labor, so there is also a real danger in relying on capital and accumulated wealth to generate revenue to the degree that Montgomery County does.  For example, four years ago the top 50 taxpayers in the County reported a 50% drop in capital gains income, which amounted to a corresponding drop in County revenue of $21 million. In that instance, the cause was a change in taxpayer behavior (fewer stocks sold) in anticipation of tax law changes made when the U.S. government was under unified GOP control.  The excerpt below was clipped from my memo to the Council on that topic in December of 2017.

To a large degree, that volatility is the result of the year-to-year variations in the capital gains income of a small number of County residents. Illustrating this point, part of the projected FY18 decline in income tax revenue can be traced to a sharp drop in the capital gains of the County’s top 50 taxpayers, who realized gains in tax year 2016 that were 50% of the gains realized in tax year 2015, resulting in $21 million less in County income tax revenue (Revenue Administration Division of the Maryland Comptroller). Staff’s review of tax return data published by the Comptroller indicates that roughly 1.8% of Montgomery County returns report income of $500,000 or greater. On average, these returns explain more than half of any year-to-year increases in income tax revenue and explain more than 100% of any year-to-year declines in income tax revenue.  

             Montgomery County and Maryland have chosen to have tax structures that are quite progressive and that is a good thing for most taxpayers when it comes to their annual income tax payments.  However, in adding to the burdens of high-income taxpayers and the businesses that they own, lawmakers should be cognizant of how easy it is for capital to flee (or lay low for a year!) and take pains to protect their budgets from unmanageable year-to-year volatility.



Government and government enterprises accounts for a large share of personal income and gross domestic product (or “value added”) in the Mo Co economy.  For example, the industry accounts for 19.7% of Mo Co GDP, compared to 13.3% in Fairfax County and 11.1% nationally.

This mostly speaks for itself. The government presence is why the troughs are never as deep and the peaks are never as high as they are elsewhere.  Is it possible that this is also why the County generally has less business formation than almost any other jurisdiction in the region, or a political culture that often seems somewhere between indifferent and hostile to the concerns of businesses? Maybe. But that goes way beyond the numbers I am working with so we’ll just put that to the side.

What I do know is that the large public sector presence has been a stabilizing force, but it has not been an engine for growth.  And in terms of trajectory, it is possible that some large federal effort (e.g., related to vaccine development) could lead to a lot of new federal jobs and employees in the County; however, the general direction of U.S. politics makes me very skeptical that a consensus will be reached on massive new government (civilian) spending efforts in the capital region. We can’t even agree on whether to wear masks, and that should be a lot simpler to reach agreement on than publicly funding a massive public health program in a blue state in the capital region.


I’ve written before about the surprisingly strong performance of manufacturing – specifically, non-durable goods manufacturing – in the recent economic data. In some circles, manufacturing gets fetishized in a way that isn’t helpful to the discourse. Suffice it to say, that is not where I am coming from.

Manufacturing has been among the best performing industries when it comes to employment, personal income, and value-added/GDP is an industry that is a relatively small part of our local economy (5.2% of GDP) and probably can’t get a whole lot bigger. There just isn’t a lot of industrially zoned land, the County is heavily developed (including a lot of very valuable residential development), and cheap land really isn’t our value proposition. So…while I am a believer that we should do everything we can to support a diverse economy that makes room for manufacturing, my larger point is that I’m not optimistic about manufacturing picking up a lot of the slack created by the office-inclined employment sectors over the longer term.  Put bluntly, manufacturing is not the future of the Mo Co economy.

Along those lines, last week I noted that most of the new investment nationally in non-residential structures is in manufacturing, data centers, and warehouse/distribution centers.  Montgomery County isn’t capturing that investment, and I’m guessing that office and retail development will remain below pre-pandemic levels for several years. If we aren’t seeing capital investments in the industry that is performing well, and if the structures that are being built nationally are not the kind of things that ever get built in Montgomery County, then economic growth and revenue assumptions will need to be changed to reflect that reality.  

Whether regulatory structure (e.g., development review times) or politics (of elected officials, or at the neighborhood/NIMBY level) are affecting the level of investment in non-residential structures, the market is unambiguously telling us that what we have – in terms of land, approvals, and existing structures that could be retrofitted – does not meet their needs for data centers, warehouse & distribution, etc. – at current prices.

Finally, given the fact that Fairfax County and Northern Virginia are really making rapid gains in terms of employment in life sciences R& D, our edge in bioscience manufacturing is likely more tenuous than you think.


I’m not going to flog this topic much more than I already have.  If you still need to see the data, you can check out this report I wrote for Empower Montgomery earlier this year and some accompanying new coverage like this article in the Washington Post, or this opinion piece I wrote for Bethesda Beat.  There are a few angles of this that are worth exploring briefly, however.

First of all, private sector employers are making decision right now about where, whether, when, and how much to invest in real estate.  It may very well be that many of them will choose not to make any investment in real estate at all, but most will continue to have a physical presence somewhere even if significantly smaller than their physical presence today. We should tell the world that we want these companies to choose Montgomery County because commercial real estate is really important to our economy and our fiscal health. For example:

  • Without commercial real estate to tax, the future tax burdens on residents will need to go up by a lot.  The last time that happened there was a taxpayer revolt. If you want to read the history of that, I suggest you hop over to the archives of The Seventh State for some of the great work that Adam Pagnucco did on that topic.
  • From a real estate standpoint, it is important to understand that most office buildings can’t actually just be “converted to other uses” like residential or institutional. 
  • From a neighborhood health standpoint, we need eyes and feet on the street in our commercial districts during the day. The absence of office workers, who spend thousands of dollars each every year at stores and restaurants near their work, is a death sentence for some commercial districts where the restaurants and retail uses rely heavily on daytime revenue from office workers and can lead to business commercial districts that feel less safe to the people who are doing the shopping.  

Secondly, Montgomery County’s incentive programs have, for many years, operated with a lot of controls. The County is “state of the practice” in terms of the negotiated incentive agreements and clawbacks for when projects fail to meet their targets. Historically, the sort of incentives that Montgomery County engages in are not the large incentives for capital-intensive manufacturing facilities that become boondoggles or political lightning rods elsewhere. When the County uses its authority to enter into incentive agreements, it generally does so with companies that pay high wages and salaries and in a manner that is consistent with the County’s long-standing strategic objectives. 

Thirdly, it took us many years to slouch ourselves into this position and it will take many years to climb out as well. No one would seriously suggest appropriating $275 million for incentives in next year’s budget as the solution here.  There aren’t enough high-value companies on the move (regionally or nationally) to spend that kind of money in less than a decade, and if I’m wrong on that then the good news is that we will have a lot of new high-paying jobs and new commercial real estate to tax.  There also are a lot of ways to designate portions of the County’s already substantial reserves as a Job Creation Fund or Employment Opportunity Fund and tell the world (loudly!) that the County is open for business (which is what Prince George’s County did a decade ago). The real estate investment community – which is not just a bunch of local rich guys but is actually global capital (sovereign wealth, pension funds, etc.) seeking returns from all across the country and the world – needs to hear a message from Montgomery County that we are open for business.

Fourth, the County exists in a complex multi-jurisdictional region in which both County and State officials are eager to bring home the bacon. The incentives are happening, the competition is real, and you don’t get any points for not playing the game. 

During the pre-pandemic period, the County’s performance in the industries that create the most economic value-add was really poor. Furthermore, performance was poor in Mo Co while it was not in other nearby jurisdictions. It is fair to say that the economic performance of the County has now diverged from the performance of the Washington, D.C. metro area. Given that bedrooms aren’t an economy, and that the long-term upside potential of government and manufacturing are limited, I think there needs to be a serious reckoning (and plan) for Montgomery County’s knowledge economy.  How do we grow it and attract it? How do we signal to it? And how do we tax it if we can’t get companies to establish a physical presence?  



I tend to agree with folks who say that “the key to jobs is jabs,” as Catherine Rampell has pointed out in reference to both the July and August jobs reports (and hey, how lucky are we as WaPo readers over the past couple of decades to have been reading the economic policy observations of Steven Pearlstein, Ezra Klein, and Catherine Rampell? I guess that’s our karmic reward for living with the mid-Atlantic humidity!).  And while I don’t think there is anything in the numbers that indicates that Mo Co is outperforming its Maryland neighbors, it is performing more or less in line with Maryland generally and that is good news.

Labor force participation went up, with about 8,700 workers re-entering the labor force in July. While this fell somewhat short of the progress that Prince George’s County made, the basic fact is that half of Maryland’s gains in the labor force came from the two counties – I think that is a sign of strength for the metro-area economy generally and suburban Maryland specifically. We’ll keep our eye on upcoming releases to see if they confirm the thesis or support the existence of a trend.

Montgomery County also gained nearly 12,000 jobs in July, which was more than any other County in Maryland.  About 1/3 of Maryland’s employment gains were in Montgomery and Prince George’s County, so again it seems like the metro area economy represents a healthy share of Maryland’s good news. Similarly, the number of unemployed fell by about 3,300 back down to roughly where the unemployment numbers had been most of this year but for what turn out to be a brief spike or blip.

Again, we need more data to confirm which parts of these releases are signal and which ones are noise, and a lot of the helpful information won’t be available for a while – we’ll better understand this summer when we have quarterly data at the industry level. But for now, we have some good news – the capital area employment situation was on the upswing during the summer.



The cost of providing services like K-12 education and public safety is substantial, and exceeds the revenue generated by most new residential growth.  Some locations (Bethesda, Chevy Chase, Cabin John, Potomac, etc.) are full of valuable homes, high incomes, and some combo of relatively few children and more children attending private schools – those locations tend to be “net positive.”  Similarly, some projects have unit sizes and mixes that are generally less likely to generate school children.  But, generally speaking, residential development generates more in terms of services and infrastructure costs than it does in terms of revenue to pay for those costs at current inclusionary zoning standards. While a lot of folks chafe at what they view as “corporate welfare”, the alternative to growing the commercial tax base is increasing pressure on households to pick up the cost of the County employees’ compensation and benefits, public service programs, and infrastructure projects.  And oh yeah, if you haven’t noticed, commercial real estate development isn’t really “a thing” right now in Mo Co in the absence of market interventions.  


There are a lot of “third rail” issues in Mo Co, especially in the run up to a primary election. I’m not going to touch most of them (sorry Ag Reserve, municipal tax duplication, community involvement in the master plan process, and development review streamlining – this just isn’t your day).  But let’s talk about inclusionary zoning for a moment.

So, to start with let me say that housing affordability is a very real problem that has very real impacts on actual people. It is also a regional problem that is difficult to address without coordination.  And it is a problem that must be addressed, at least in part, through the public sector funding and constructing affordable housing.  

The County’s inclusionary zoning program is top-notch, and it has been of significant value to many of the people who have lived in moderately priced dwelling units over the years.  The program is managed by dedicated people who really know what they are doing and care about program outcomes. It has resulted in levels of economic integration that probably could not have been achieved in the absence of the program and may have contributed to positive educational outcomes for generations of children from low-income families. But as with over-reliance on progressive tax structure, sometimes you really can require too much from the private sector and end up getting results that aren’t what anyone was hoping for.

Economically, the inclusionary zoning requirement functions as a targeted tax on the real estate development industry for the benefit of some low-income residents.  As a tax, it does seem a little too targeted (is real estate development responsible for the need for affordable housing?), but no one should argue with the public purpose.  And frankly, few do – I have been talking to real estate developers about the County’s tax and regulatory structure for years, and rarely do any complain about the 12.5% MPDU requirement (the complaints have come when other requirements get added to that – e.g., the 15% MPDU requirement in certain parts of the County, and before that, the workforce housing requirement).

From a policy direction standpoint, I do worry sometimes about the bandwagon effect that “virtue signaling” on affordable housing can have, and whether the impact of all that virtue signaling is that it has become a topic that is too difficult to discuss. What I sometimes see in Mo Co and other jurisdictions is that the big coalition that gets behind “always/ever more affordable housing” is actually a bunch of people who got there different ways and want different things – those who just want to stop development of any kind and see increasing affordable housing requirements as one way to slow growth, those who are true believers in the need for affordable housing and using every tool at their disposal to achieve that end, those who really want growth but a smarter and more equitable version of growth, and those who just don’t feel confident enough politically to vote against any effort to increase affordable housing requirements. Also, I just don’t like partisan purity tests.

Here are some facts from the 2018 Housing Needs Study:

  • Since 2010, the County captured only 5% of the household growth in the region.
  • 1 out of 2 new households in the County is making less than $50,000/year
  • In 2018, 17% of low-income households in the region live in Montgomery County (trailing only the District and Prince George’s County).
  • More incredibly, from 2010 to 2018 the County captured 20% of the net new low-income households in the region, beating out all of the competition. 

Look, I think it is great that Mo Co is doing so much for low-income households. Clearly, we are winning at being virtuous, but being virtuous is a very expensive game to win. Contrast our high-and-getting-higher share of the County’s low-income households to the low-and-getting-lower share of high wage jobs and you can understand why I am concerned. Low (and very low) income households require a lot of services that we can only afford when there is enough “net positive” economic activity in the County, whether that activity is market rate housing downcounty or non-residential development.  In case you fell asleep and scrolled down to get here, there isn’t enough non-residential development, and we shouldn’t expect much anytime soon unless someone puts forth an aggressive economic development agenda and action plan.

I think the fact that we only captured 5% of regional household growth and yet somehow managed to capture 20% of low-income households is a decent signal that we need to recalibrate our inclusionary zoning requirements. A possible explanation for this is that we are requiring projects to provide too much more affordable housing (in terms of units, income levels, and/or control period).  That said, my sense is that the prevailing winds are blowing in the direction of more affordability, deeper affordability, and a whole lot of other burdens on new residential development and landlords in the County.  And in the end, I’m not sure that Mo Co and Mo Co taxpayers will be the winners.

I am not proposing a specific solution, but I’m also not running for office. Maybe the answer is simply that the 12.5% MPDU requirement is the limit of what the private sector should be asked to provide right now, with the rest of the heavy lifting coming from public expenditures on preserving and constructing affordable units, using public funds to purchase and convert older hotels into affordable dwellings, and other strategies that don’t rely on the off-budget magic of the market to solve a regional public policy problem.



Like a lot of you, I love all parts of Montgomery County…other than maybe the I-270/Beltway split…But if you look around the County with the eye of a planner and think about what is built already and what can change you reach the inescapable conclusion that most of the County is not going to change very much from its current built form. Our roads aren’t straight. Our intersections aren’t rectilinear. Our commercial nodes are along (and often straddle) state highways, which are difficult to traverse for cars and pedestrians alike and difficult to plan around because they are state roads. Our community facilities are dispersed in a way that tends to work against the development of a really strong sense of place in any specific neighborhood or community. We can lament all those facts, but it doesn’t do much good to fixate on them because those things are already built.

There aren’t a lot of locations (neighborhoods, communities, zip codes, submarkets, whatever you want to call them…) that can be transformed in a way that will accommodate dense, mixed-use development. And while we can all agree that the pandemic is causing problems for the “economics of gathering,” those places are still important to our ability to grow and do so in a way that is consistent with our shared goals and existing policies (e.g., on climate, housing, and economic development). One challenge with redevelopment/revitalization that is centered on dense development is that renters aren’t going to pay a premium for the future state of their surroundings in the same way that owners/buyers will. So, this means that the feasibility of developing in locations like White Flint (if the product is multi-family residential or multi-tenant office) is based on what people are willing to pay today based on what is on the ground today, and White Flint today is still more similar to other mid-County suburban strips in terms of the built environment/public realm than it is to the Bethesda CBD, a fact that is reflected in achievable multi-family rents. 

If the County is serious about advancing its goals on housing, sustainability/climate, and economic development then it really does need to get serious about investing in the places that can change and grow. The good news is that the development pressure in recent years in and around North Bethesda indicates that the opportunity is there – a lot of new development has occurred, and it has been highly amenitized. But to take full advantage of that opportunity pedestrians need to be able to get across Rockville Pike safely, have a Metro station and platform that can safely accommodate the ridership level, a rec center that has been needed for about a decade, a civic green for safe outdoor gathering, etc. – basically, we need a public realm that is amenitized and that effectively connects the various amenitized projects that the private sector has developed or is planning.

I sometimes meditate on a counterfactual – what if the County hadn’t invested hundreds of millions of dollars in Silver Spring?  How hard would it be to attract young talent to the County’s employers? How different (and how much older!) would the population base be without that dense and vibrant urbanized area right at the edge of the District boundary?  The County has made some investments in White Flint (or, if you prefer, the Pike District), but nothing on the scale of what the County did in Silver Spring.  And the County’s approach to White Flint has been to treat it very differently than Silver Spring (Silver Spring never had a special tax imposed to pay for infrastructure or to pay for the County staff whose job it was to serve the community and coordinate public and private development).  And yet…

  • From FY12-FY21, the growth in the County’s overall assessable base (excluding White Flint) was 2.17%, while the growth in the assessable base within White Flint was 8.72% (4x greater!). If I recall correctly, I once calculated that White Flint grew at a rate that was 14x faster than the County grew over this period.
  • From 2010 to 2020, 16.6% of the housing units added in the County were added in White Flint.
  • The general fund tax increment associated with this development over the decade is ~$40 million (the amount of money the County would not have but for new development and infrastructure in White Flint).

The reality is that the County needs to continue to invest in Silver Spring while also investing heavily and up-front in White Flint because a lot of the future growth of the County will occur in those two large-scale redevelopment areas.  Bethesda will continue to grow up and more expensive. Silver Spring will continue to grow more vibrant and diverse. But outside of the beltway and the municipalities, which locations other than White Flint in unincorporated Mo Co are likely to serve as engines for growth in the next decade? And why does the County seem more intent (from a taxing and spending standpoint) to harvest revenue from White Flint than cultivate growth? Montgomery County is one of the most educated places in America, but on economic policy we seem to consistently outsmart ourselves.

Our biggest and highest value-add industries aren’t growing very much, and in some cases are shrinking. Among the industries that are performing well are some that really can’t keep growing indefinitely (e.g., manufacturing, government). Countywide, household growth is concentrated at the low-end of the income spectrum. The real estate products (e.g., warehousing, data centers, etc.) that are being built elsewhere aren’t products that are likely to lead to a boom in Montgomery County. What does that leave us with?  Strong growth in localized areas can drive revenue increases, economic growth, and lead to increases in property values in surrounding communities. The next big investments that are needed are public sector investments – in infrastructure and community facilities – that change the character of the built environment for the benefit of current residents and workers. Making those public sector investments now will benefit not only the residents and workers of today but will make possible the transformative private sector development projects yet to come.  And while it is fair to say that I have clients in White Flint, that isn’t why I am biased – I have been advocating for more investment in White Flint for the better part of 15 years because it is the most logical location for large-scale redevelopment activity in Montgomery County.

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