ANNAPOLIS — Maryland’s legislature is poised to gut a fund that has helped create or keep more than 3,000 jobs in Washington County since 2002.

To help balance the state’s budget, lawmakers have agreed to cut $10 million this year and at least $9.5 million next year from the Maryland Economic Development Assistance Authority and Fund (MEDAAF).

If the cuts win final approval, “there is no question, there’d be a dramatic cutback” in such economic development efforts statewide, said Jim Henry, managing director of finance programs for the state Department of Business and Economic Development (DBED).

Low-interest loans and grants from the fund have helped Washington County government attract several companies, said Rob Ferree, deputy director of the local Economic Development Commission.

“Without them, a lot of these announcements would not have happened,” Ferree said. “Probably the best program they’ve got, they’re about to kill.”

The fund is among several programs under attack as the nation’s economy worsens and state tax revenues slump. The state is projecting hundreds of millions of dollars of deficits in future years.

MEDAAF is a pot of money that allows the state to compete against others in luring companies here and to help expand businesses already here.

To some extent, as low-interest loans are repaid, the fund recharges itself. Other monies also help replenish it.

Some of the loans to businesses become grants if companies reach job and investment goals within two years and maintain those employment levels for three or more years.

Since mid-2000, the fund has been tapped for nearly $160 million, according to the state’s latest report. In all, it said, this money has helped retain 16,171 jobs, create 13,609 and spark private investment totaling $1.6 billion in buildings and equipment.

As of Wednesday, Maryland’s House and Senate approved different cuts in the fund. Both chambers would take $10 million from the fund this budget year.

But they disagree as to how much would be taken out for other needs in the fiscal 2010 budget year. The House wants $10 million more; the Senate wants $9.5 million.

So a small group of lawmakers, representing each chamber, will try to reach a compromise soon so the entire budget can be approved by April 13, when the General Assembly session is to end.

With Maryland’s unemployment rate at 6.7 percent in January, it doesn’t make sense to some lawmakers to take so much money away from a fund designed to create and stabilize jobs, said Tricia Hinchliffe, a legislative assistant to Sen. Donald F. Munson, R-Washington.

Munson voted with the majority in the Senate on Wednesday on an amendment for “a lighter cut” of $9.5 million next year, instead of the $10 million proposed.

“I do think it helps create jobs,” Munson said of the fund.

Henry said that with the tight economy, Maryland is in tough battles with other states to compete for the few new economic development deals out there.

“We’ve been whomped on a couple deals recently,” Henry said. “We lost the Hilton Hotels headquarters, which is to be moved from California. It was considering Montgomery County (Md.) or Fairfax County (Va.)

“Our assistance with helping them reduce the cost was roughly $2 million less than Virginia’s,” he said.

The Hilton project is expected to create more than 300 full-time jobs within three years, according to the Fairfax County Economic Development Authority.

And now, Henry said, Maryland might be on the brink of losing a biotech company that, with state aid, has been growing gradually here for about 10 years.

The company, which has “dozens” of workers, is about ready “to push over into manufacturing a real product,” creating many more jobs, he said. The company “desperately needs $5 (million) to $10 million to move into the next phase,” he said.

Maryland’s economic development arm doesn’t have enough money for that, but now, “Texas has offered them that money to move from Maryland to Texas,” he said.

So while the company hasn’t said what it will do, Henry said he expects it will move.

“I don’t see how the business model could support any other decision,” he said.

Henry said it’s hard to determine how much uncommitted money is in Maryland’s economic development fund at any given time because deals are always being negotiated even as loans are being repaid.

“There’s at least $10 million cash in the fund right now, and that’s what the legislature is looking at now ... all that money,” he said.

If the cuts are approved, “we’ll adjust. We’ll still be able to do some activity. We’ll do more selectively. There will be things we won’t be able to do,” he said.

“In spring of next year, is a company going to come to us that we’d like to get? ...Hopefully, there’s a lot of projects we don’t know about,” he said.

“We could easily use up all of our available (money), and that’s without the ones I don’t know about,” he said.

Fund helped Washington Co. employers

Tractor Supply Co.’s giant distribution center near Hagerstown has met job goals set five years ago — and “won” $250,000.

Home Depot Direct’s distribution center here has only barely missed its job goals. So it had to repay about $14,500, a small percentage of what it received.

In an economy such as this, both companies and their employees would seem to be winners.

The two businesses are among a handful in Washington County that have benefited from the Maryland Economic Development Assistance Authority and Fund (MEDAAF).

The fund holds money used to lure companies to the state and to help expand ones already here.

Some of the money goes to businesses as low-interest loans. Some is in the form of what’s called “conditional loan/grants,” for which companies don’t have to pay back principal or interest, as long as they meet investment and job creation goals.

Since 2002, MEDAAF has helped create about 1,430 jobs in Washington County, according to Rob Ferree, deputy director of the local Economic Development Commission.

In addition, Ferree said, it has enabled some local companies to stay and expand, retaining a total of 2,035 jobs.

He said the county recommends which businesses get the money, but state economic development authorities must agree.

“It’s based on overall benefit to the county. The number of new jobs or retained jobs — if we feel like we’re going to lose those jobs otherwise,” he said.

“The type and wages of the jobs, the capital investment. What does it do for the county’s tax rolls? Is it a target, a desirable industry for the county? And, it’s a matter of how competitive it is. Are other states trying to get it, too?”

Because the fund, bolstered by interest payments, comes from tax revenues, “we don’t want to use it if we don’t feel that it’s needed,” Ferree said.

And, he said, state approval of use of its money often requires the county government to pitch in 10 percent or 20 percent of the overall amount.

Aiming for goals

Tractor Supply and Home Depot Direct qualified for conditional loan/grants.

Early in 2004, Nashville, Tenn.-based Tractor Supply announced that its retail ranch and farm supply chain was going to build an $18.8 million distribution center at 11935 Hopewell Road.

Maryland agreed to give the company a $250,000 conditional loan/grant in return for its promise to provide 180 jobs here within two years and to keep at least that many workers here for the next three years.

Tractor Supply, which was to open with about 100 employees by early 2005, said recently that it has 218 employees, Ferree said.

As a result, he said, Maryland recently told Tractor Supply it can keep the $250,000.

Home Depot Direct, which supplies online orders, was given a $300,000 loan/grant in return for promising to invest $12.7 million here and, within two years, to create 231 jobs, Ferree said. That was in December 2003.

The company opened a distribution center at Hunters Green Business Center off Hopewell Road and began hiring workers. But within a few years, its employment dipped just below what had been promised, Ferree said.

“In ’07, looks like they missed the job requirement number by three” workers, he said. “I’m assuming they had 231 (workers), less three.”

As a result, he said, “the state clawed back $3,900 of that loan.”

“Clawed back” is the state’s term for the penalty it imposes when any of its loan/grant conditions aren’t met. The exact amount is based on a relation between the number of employees and the amount of the loan.

“Then in ’08,” Ferree said, “the company missed by nine” employees. “The state clawed back $10,574.07.”

He is unsure how long Home Depot Direct is supposed to employ at least 231 people to meet the state’s conditions. It gets to keep whatever part of the loan/grant hasn’t been paid back as penalties.

But given the economy, its impact particularly on the building supply market Home Depot is in, and daily headlines about layoffs throughout the country, Home Depot Direct’s achievement here seems noteworthy.

Ferree said Home Depot Direct’s and Tractor Supply’s records here are no doubt due to their management, strong work force and geographic locations. But he pointed out that 2008 results are only now being released and said part of Tractor Supply’s job total might be a result of its center serving more stores than was originally planned.

Outwardly, neither Home Depot Direct nor Tractor Supply appears to be celebrating as the recession wears on.

Officials at both distribution centers declined comment, referring a reporter to their corporate offices, where other officials were almost as mum.

Home Depot Direct spokeswoman Jen King said she can’t release current employment figures because such data is being reviewed now with the state.

“There were many factors contributing to us building this facility in Hagerstown,” she wrote in an e-mail. “In general, it’s a great location that allows us to serve customers across the country. We are glad to be part of the Hagerstown community.”

Awaiting the figures

A top Maryland economic development official said last week that it’s too early to say whether many businesses helped by the state’s fund have been forced by the recession to miss job goals.

It’s about this time of year that the companies usually report what happened, goal-wise, during the previous year, said Jim Henry, managing director of finance programs for the state Department of Business and Economic Development.

“Certainly, intuitively, we think we’re going to see some strain on that,” Henry said.

“For the calendar year ’07 reporting we got, we did not see any dramatic instances of companies not meeting performance criteria,” he said. “The vast majority of the companies were in compliance.”