Proposed Chicken Tax Caught Bond Company’s Attention

BERLIN — It appears a bill calling for a five-cent tax on every chicken raised in Maryland by farmers for the poultry industry does not have legs, so to speak, but its mere introduction could be having far-reaching impacts including the bond rating for Worcester County.

Last week, Senator Richard Madaleno (D-Montgomery County) and Delegate Shane Robinson (D-Montgomery) cross-filed bills in the General Assembly under the banner of the Poultry Fair Share Act of 2014. The bill, if approved, would force the major poultry integrators on the Eastern Shore, for example, to pay a five-cent tax for every single bird they provide to chicken farmers across the Eastern Shore and all over the state.

The intent of the legislation is to provide a mechanism for the large poultry companies to pay their fair share of the cost to clean up nutrient pollution in the Chesapeake Bay. Large poultry companies provide hatchlings to independent contract chicken farmers all Eastern Shore and across Maryland, and the contract growers raise the birds until they are ready to head to market in a variety of different ways.

The bills introduced last week would, if approved, charge the large poultry integrators five cents for every chicken they place with the contract growers. The proceeds of the “chicken tax” would be used help fund the Maryland Department of Agriculture’s Water Quality Cost Share Program. More specifically, the funds raised through the five-cent tax per chicken would force large poultry companies to help foot the bill for the MDA’s Cover Crop Program, a $20 million per year initiative designed to address the large amounts of chicken waste produced on the Eastern Shore where a large percentage of the contract farmers operate.

Following the bill’s introduction, lawmakers across the state, as well as the big poultry companies on the Eastern Shore, decried the legislation as another unfair attempt to hold one of the state’s largest industries solely accountable for the pollution of the Chesapeake Bay. For example, late last week, Gov. Martin O’Malley promised to veto the bill if it passed.

In the days since, the bills sponsored have back off the legislation somewhat, informally saying it was largely introduced not on the hopes of passage, but merely to start the conversation and open a dialogue about expanded pressures on poultry to pay its share for the bay’s cleanup. However, the mere introduction of the bill has caused a ripple effect its sponsors might not have considered, including a potential impact on a major bond sale for Worcester County.

Senator Jim Mathias said this week he received a call from Worcester County Commissioner and poultry farmer Virgil Shockley from New York City on Tuesday asking him to intercede on the defeat of the so-called chicken tax. Shockley and other County Commissioners were in New York City this week to negotiate a bond sale with several large bond ratings companies for big projects including school construction, for example, and the representatives of the bond rating agencies wanted to know what the impact of the chicken tax bill might be on the county’s economic health.

“Here, the county commissioners are in New York City to present the prospectus on a bond sale, which is critically important for Worcester County, and all of the bond rating companies want to know what this proposed bill will have on the county’s economy,” he said. “The commissioners are meeting with the big rating agencies like Standard and Poor’s and Moody’s, and the first question they ask is about this proposed chicken tax bill. You can see where things like this that happen in Annapolis can have major implications elsewhere.”

Mathias stopped short of calling the introduction of the chicken tax bill and other pieces of legislation “just to start the conversation” reckless, but said state lawmakers need to think of the larger ramifications when floating bills that have little chance of passing. He referenced the impact of the proposed chicken tax on the family farmers across the shore just struggling to make ends meet.

“What about the family farmer that has a loan application in to the bank or Farm Credit for a new tractor or chicken house?” he said. “If the loan officers read about this chicken tax bill, they might be less inclined to approve loans for farmers. So a bill that has little or no chance of passage, a bill that was introduced just to start a conversation, could impact a family farmer and prevent them from getting a loan.”

Mathias said he was just finishing his conversation with Shockley on the proposed chicken tax and the bond rating agencies’ concerns when he was walking onto the Senate floor to start the day’s session and related the conversation to his colleagues.

“Timing is everything. I told them about this conversation that had just happened and asked respectfully that they consider withdrawing this bill,” he said. “I asked my colleagues to be considerate of the unintended effects of introducing bills just to start a conversation.”

Mathias said Madaleno had not yet withdrawn the bill on the Senate side although he said he had heard the wishes of his colleagues.