Region by region, economy affects Maryland and its CPAs

By Bill Sheridan
MACPA Electronic Communications Manager

Fred Hershenfeld has felt it. So have Salli Hartman and Keith Huebel. And they're not alone.

CPAs throughout Maryland are feeling the effects of a recession that is touching all regions of the state to varying degrees.

"The market is so far off and a lot of people have lost a lot of money," said Huebel, of Horan & Associates Financial Advisors, Ltd., in Towson. "They just don't have the resources to do what they want to do anymore."

"The obvious concern in this falling economy is a loss of jobs," added Hershenfeld, of Hershenfeld & Stein, P.C., CPAs in Laurel. "When people are out of work, they're hurting. That causes a ripple effect on my clients, who are trying to sell their products and services to a lot of people. For myself, it's just been a lot of belt-tightening."

There's a lot of that going on in Laurel and throughout the Baltimore-Washington corridor. Anirban Basu, director of applied economics at Towson University's Regional Economic Studies Institute (RESI), said job losses and office vacancies in the information technology and air travel industries have hit the Baltimore-Washington region particularly hard.

"It's the part of the state that's most vulnerable to global and national economic downturns," he said, "so they've felt the pain there."

Eastern Shore

So has the Eastern Shore, where unemployment rates have soared above those of the rest of the state. In December, Worcester, Dorchester and Somerset counties posted jobless rates of 15.2 percent, 9.3 percent and 7.4 percent, respectively — well above the state average of 4.1 percent. Much of that is due to the seasonal and temporary nature of many jobs there.

"During any economic downturn, temporary or seasonal workers are usually the first to be laid off and the last to be rehired," Basu said. "The lower Eastern Shore has a lot of those types of workers."

Unlike the rest of the state, Basu said the Eastern Shore also has a substantial manufacturing presence — bad news in a recession that has hit manufacturers particularly hard.

His firm might have dodged the worst of the shore's downturn, but Ed Rommel has felt an impact nonetheless. A partner with Twilley, Rommel & Moore, P.A., in Salisbury, Rommel said an estimated 40 percent of his firm's business comes from construction-related clients, thanks to its proximity to Ocean City. And when the economy slows down, Rommel said contractors are quick to cut back on the services they seek.

"I did fewer quarterly financial statements this year than I've done in a long time, and less semi-annual work," he said.

But the future looks bright, thanks in part to the minimal impact last year's terrorist attacks had on the local economy.

"As the beach goes, so goes my practice," Rommel said. "Sept. 11 impacted Ocean City for maybe two weeks. Sales have been strong, and as long as sales down there continue to be strong, my practice will be strong."

Western Maryland

Like Ocean City, the recreation destinations of western Maryland also escaped Sept. 11 largely unscathed, thanks to the fact that most visitors can drive there. According to Basu, "flight" destinations like Orlando and Las Vegas have suffered greatly from the falloff in air travel, but if you're within driving distance, chances are you've weathered the economic storm.

Outside of hospitality and recreation, though, there isn't much industry to spur growth in western Maryland, and Clay Garland says that's a problem.

"We're constantly looking for ways to entice people to come to the area," said Garland, an Oakland sole practitioner and member of the Garrett County Community Action Committee. "We're also very selective in that we don't want our streams polluted, we don't want our air polluted. It's a delicate balance of trying to get the right type of industry and the right type of employer for the area."

Like Ocean City, though, Garland said western Maryland is being buoyed by strong growth in construction. The next economic hurdle, he said, will come when Maryland legislators decide how much money to allocate to an area that is heavily dependent on state and federal funds.

Central and southern Maryland

Perhaps the state's most interesting contrast is found in central and southern Maryland, where the threat of terrorism produced radically different economic results.

A substantial drop in air travel following Sept. 11 and related losses in the tourism and hospitality sectors contributed heavily to the economic pain felt in the Baltimore-Washington corridor.

Salli Hartman's employer is no exception. Hartman is chief financial officer for Air Cargo, Inc., in Annapolis, an air cargo ground services provider owned by 17 domestic flight carriers. Sept. 11's impact on the airlines trickled down to "put a thump" in Air Cargo's revenues late last year.

The company has responded with a plan and a search for new equity, and Hartman is optimistic that better days lie ahead.

"We've done our work and we're moving forward, so for us it's a very exciting time," she said. "My sense is that it's probably going to be the third quarter before we see the effects of an improving economy. I think we'll see segments recover quicker than others. In our industry, there are still a lot of issues out there. (Air) traffic is picking up, but there are still isssues to be resolved, so who knows what will happen?

"I think if you look at each industry segment, probably the same types of things are going on. Things are improving but there are still going to be some bumps, probably through all of 2002."

Southern Maryland, meanwhile has been virtually unaffected by the terrorist attacks. Why?

"So much of their labor force works for the federal government, either in the District of Columbia or Montgomery County, or maybe at one of the military installations in the region," Basu said. "Federal spending is rising, particularly on defense, so their economy has almost been untouched by the downturn."

Opportunities for CPAs

Amid Maryland's varied economic climate lie opportunities for the state's CPAs. According to Basu, the services a CPA provides become even more valuable during an economic downturn. "Nowadays, when a bad business decision can be fatal, you really need to look to the resources around you — your accountant, for instance — for good, solid advice," he said. "Many businesses, especially small businesses, are having very difficult cash flow situations right now. To the extent that an accountant can help bulk up that cash flow, it's going to mean that more businesses are going to survive in Maryland."

Even when business is slow, forward-thinking CPAs can create opportunities for growth and turn their responses to a recession into positive adjustments.

"In a good economy, often you're so busy that you miss opportunities for services you could provide to your clients," Rommel said. "When things slow down, though, you might say, 'Maybe I should get this person in and do some success planning' — things that typically aren't high priorities but could be good for everybody.

"For the majority of (CPAs), we are our own best clients, and because of that, we're not going to let our income drop that much. We can continue to grow despite the economy."

Contact this Author: < William Sheridan > bill@macpa.org

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