A Computer Exec’s Effort to Decode Annapolis

Facing New Tax, Novice Builds Lobby On the Fly

Washington Post – by John Wagner, Staff Writer
Wednesday, March 19, 2008

When his wife was in the hospital in December having a baby, Tom Loveland was by her side, reading transcripts of debate from the Maryland General Assembly.

For the life of him, Loveland, the founder of an information technology firm, could not understand why the legislature had just imposed a new tax on his industry’s services during a special session intended to fix the state’s finances.

It soon became apparent to him that the computer services industry was not well represented in Annapolis, something he felt he needed to change — and quickly — if there was any hope of reversing the legislature’s action before it was too late.

“I’m trying to think: How do I learn the game?” Loveland recalled. “I knew I was unwilling to sit on the sidelines and hope that the standard players would take care of this.”

The three months since then have provided a remarkable case study on how Annapolis works.

Loveland and a fellow high-tech executive founded the Maryland Computer Services Association, which has mobilized dozens of others to tell lawmakers how the tax will affect their business.

The organization retained two lobbying firms, one of which includes the former chief of staff to Senate President Thomas V. Mike Miller Jr. (D-Calvert). The group also tapped the services of two public relations firms, including one led by Gov. Martin O’Malley’s former communications director.

And now, with just three weeks left in the current legislative session, many in Annapolis are betting the tax will be repealed before it takes effect in July. Last week, O’Malley (D) added his voice to those calling for the legislature to replace the tax with other revenue, saying he had come to realize how important the information technology sector is to Maryland.

“They’ve gone from zero to 60 in three seconds,” House Majority Leader Kumar P. Barve (D-Montgomery) said of Loveland’s group. “I think they’ve succeeded in making their case.”

The remaining hurdle — and not a small one — is an agreement on how to compensate for the $200 million a year the computer services tax is projected to yield.

Loveland, who testified at a legislative hearing last week, was not a complete stranger to Annapolis. In the early 1980s, he spent a couple of years at St. John’s College before transferring. Loveland joked that his time in Maryland’s capital at least familiarized him with the historic city’s alleyways and bars.

But like most in his industry, Loveland, a Baltimore resident, has been far more focused in recent years on his business than on the machinations of Maryland government. His company, Mind Over Machines, has served several hundred clients since 1989, including Ikea and the National Institutes of Health. Besides its Owings Mills headquarters, the company operates a Bethesda office focused on federal contracts.

Loveland admits that he was not paying close attention last year when lawmakers started talking about taxing more services as part of a solution to a budget shortfall. In advance of the special session, O’Malley proposed applying the 6 percent state sales tax to several services, including property management, health clubs and tanning salons.

In a whirlwind three-week session, lawmakers rejected those ideas and floated several of their own, including taxing landscaping, auto repairs and arcade games. By the time they adjourned, only computer services remained in the legislation. The tax is to apply an array of services, including custom software design, data processing and visits from computer experts.

Other threatened industries mounted far more visible campaigns during the special session. Health clubs got clients to flood lawmakers with e-mail. Landscapers encircled the State House with their trucks. And property managers enlisted top Annapolis lobbyists to make their case.

Several business groups voiced opposition to the computer services tax. But the session’s result led Loveland to conclude that his industry needed its own voice.

His efforts began with an e-mail exchange with the delegate who represents him. Meetings with others in the industry followed. And happenstance played a role as well.

Shortly after the birth of his child, Loveland received a call from Aaron Meisner, a neighbor who heads the state’s leading group opposed to slot machine gambling. Loveland had reached out to Meisner for tips on doing battle in Annapolis, and Meisner had an immediate suggestion: Comptroller Peter Franchot (D), who opposed the computer services tax, was having a fundraiser that night.

“I told him it’s probably not a bad idea to talk to the tax collector, as well as a number of senators, delegates and lobbyists who were going to be there,” Meisner recalled.

“I had never in my life [written] a check like that,” Loveland said, but he took Meisner’s advice and got some face time with Franchot.

Franchot suggested that Loveland meet with his deputy who was overseeing drafting of regulations needed to collect the new tax — a meeting that proved memorable.

“She asks me, ‘Are there any associations that represent your industry?’ ” Loveland said. “Inside my head, sirens are going off, and steam is coming out of my ears.”

By Jan. 9, the day the legislature convened for its 90-day session, the Maryland Computer Services Association had a Web site, was raising money and had retained a lobbying team and a public relations firm.

Brad Wills, a public relations specialist, accompanied Loveland to Annapolis on opening day. That morning, Loveland attended the taping of a radio show during which O’Malley, Miller and House Speaker Michael E. Busch (D-Anne Arundel) all suggested that the tax was unlikely to be repealed, given the state’s continuing financial challenges. Loveland watched the Senate proceedings from the gallery that afternoon.

Behind the scenes, he had enlisted two lobbyists from a Baltimore law firm: D. Robert Enten, perennially one of the highest-paid lobbyists in Annapolis; and Timothy Perry, who until 2006 served as Miller’s chief of staff.

In January, the group also hired Steve Kearney, shortly after he stepped down as O’Malley’s communications director to start a public affairs firm. Loveland said he was Kearney’s first business meeting.

In February, the association retained a second lobbying team made up of Lisa Harris Jones, known in Annapolis for her work on minority contracting issues; and Kevin O’Keefe, who previously worked for Baltimore and Anne Arundel governments.

The group’s lobbying costs have not been disclosed. But Loveland said raising money from others in the industry has not been a challenge. The group’s Web site asks for contributions of $10,000, $5,000 or $1,000 but makes clear any amount will be accepted.

The site also offers advice for calling lawmakers: “Be natural. Be polite. Be concise. Be specific. Be personal.” And there are suggested talking points: “This tax stifles innovation across all industries, making ALL Maryland business less competitive and slowing job growth.”

Loveland said he also wants lawmakers to understand that some companies will have no choice but to move their business outside of Maryland if the tax is imposed. “We are not crying wolf,” he said. “This industry is the most mobile on the planet.”

While the group has grown increasingly sophisticated over the past three months, there have been some reminders of how new they are to the task. Late last month, the organization partnered with the Maryland Chamber of Commerce and the Tech Council of Maryland to sponsor “Save Maryland IT Day.” Almost 300 people assembled in Annapolis that day.

Part of the plan was to gather en masse outside the main doors to the Budget and Taxation Committee room to greet senators as they arrived for a hearing. Most senators had arrived — through a back door — before the throng had a chance to greet them.

“We didn’t know that,” Loveland acknowledged.

His crash course in the ways of Annapolis has become a nearly full-time undertaking, Loveland said, with several “all-nighters” spent crafting strategy. Friends have been asking, he said, whether he is getting enough sleep with a baby in the house.

“The kid is sleeping great, but it’s this thing,” Loveland said.

View original in The Washington Post