Road to economic recovery goes on
As Lamont administration takes reins, DECD head looks back at progress
Nearly nine years after the end of its last recession, Connecticut’s economic recovery remains a work in progress.
When he is sworn in Wednesday, Gov.- elect Ned Lamont will inherit a state Department of Economic and Community Development whose programs in the past eight years have helped to retain and create tens of thousands of jobs and recruit a number of large companies to Connecticut. But those gains have not yet ignit- ed a boom — or fully restored confidence — in a state still shaking off the effects of the past downturn.
“When you think back over these last eight years and what’s been accomplished in the Malloy years, a lot of people forget where we’ve started,” DECD Commissioner Catherine Smith said in a recent interview at the department’s offices in downtown Hartford.
Smith, 65, was appointed com- missioner by Gov. Dannel P. Malloy in April 2011.
The post represented her first in the public sector, after many years in financial services and insurance. She had most recently served as CEO of ING U. S. Retirement Services, one of the country’s largest defined- contribution plan managers.
When Smith took over DECD, the state was still reeling from its 2008- 2010 recession. During that period, Connecticut lost approximately 119,000 jobs. A year after the official end of the economic nosedive, the state’s unemployment rate was running at approximately 9 percent.
“The Great Recession had hit this state pretty darn hard, particularly because we have so many financial- services and insurance firms, which are tied so directly to the markets,” Smith said. “We lost a ton of jobs, we had businesses that had survived, but were struggling with access to capital, and we had a very large unemployment population.”
Cultivating a more assertive
economic- development strategy was an immediate priority for Smith. In the summer of 2011, she joined a “jobs tour” in which state officials met and solicited input from approximately 500 leaders of business and cultural organizations and municipal governments.
“I don’t think the state had particularly focused on economic development, so we didn’t really have a complete strategy,” Smith said. “From the jobs tour and other research and learning we did, we also found there was a whole lot of strength in the state that we needed to harness and invest in. The top of the list was the ( jobs) talent here.”
First Five Plus, the main corporate- jobs program run by DECD during Smith’s tenure, was launched shortly before her arrival.
In the past eight years, the state has allocated loans worth about $ 248 million, grants totaling $ 129 million and another $ 141 million in tax credits to the 19 participating companies, according to DECD data.
The funds are contingent upon those firms meeting targets for keeping and creating jobs.
At the same time, the First Five Plus companies have cumulatively committed to investing about $ 2.9 billion of their own money in Connecticut operations. The program’s roster includes ASML, Amazon, AQR Capital, Bridgewater Associates, Charter Communications, Cigna, Deloitte, Henkel, Infosys, NBC Sports Group and Synchrony.
First Five Plus firms have created about 4,900 jobs and retained about 30,000 positions, according to DECD. Between 2012 and 2021, DECD expects those same businesses to generate more than $ 400 million in tax revenues.
“There’s a lot of competition for jobs across state borders, and every one of the companies that’s in the First Five program has been lured, talked to and courted by other states,” Smith said. “Other states are offering financial assistance to pick up and move, or, in some cases, not move, but grow in their own states.”
While the program has encouraged corporate growth, it has faced some setbacks.”
Biotech firm Alexion Pharmaceuticals announced in 2017 that it would move its headquarters from New Haven to Boston. It then dropped out of First Five Plus, but it repaid the state about $ 28 million to cover its loan and grant, as well as a penalty and outstanding interest.
“This is an extraordinary amount of funding to have been allocated to these companies for this number of new jobs,” outgoing state Sen. L. Scott Frantz, R- Greenwich, who served as co- chairman of the state Legislature’s Commerce Committee in the past session, said in a recent interview. “It is questionable as to how many jobs were actually saved as a result of First Five, as I believe many companies intended to stay and most likely invest in their businesses, but took advantage of a liberal investment program.”
Beyond First Five Plus, DECD has additionally allotted tens of millions of dollars in subsidies in the past few years to technology, finance and professional- services firms, including Indeed, Gartner, KPMG, PwC, Sema4 and UBS.
At the same time, the department has sought to stimulate the growth of smaller businesses through its Small Business Express and Job Expansion Tax Credit programs.
Nearly 2,000 companies have received a total of about $ 321 million in grants, loans and tax credits through Small Business Ex-
press, according to DECD. Those firms have cumulatively created about 4,700 jobs.
Growth of smaller firms has spurred the rebound of cities such as Danbury. The Hat City posts the lowest urban unemployment rate in the state, at 2.2 percent.
“We really have concentrated on developing small- and medium- sized businesses and encouraging them to grow and expand,” Danbury Mayor Mark Boughton said. “( There are) cities and towns chasing after one big ( corporate) ‘ whale.’ We said, ‘ We’ve got a lot of smaller fish here, but if we feed them and encourage them right, they can become whales.’”
In Norwalk, HR consulting and outsourcing firm Operations Inc. received an approximately $ 250,000 loan through Small Business Express and about $ 50,000 in tax breaks through JET. The firm’s founder and CEO, David Lewis, credited the programs with helping to increase the business’ headcount to 88 from 33 in 2012.
But Lewis said he was disappointed that JET was not funded beyond 2014 and by what he saw as insufficient DECD oversight of Operations Inc.’ s progress and a general lack of disclosure about the department’s allocations.
“There just seems to have been this complete miss by the state in tracking where this money goes,” Lewis said. “My issue is that they owe the residents and business owners in the state complete and total information about the results of the investments. In my view, they have not done that.”
More work to do
Unemployment in the state has plunged in the past eight years. In November, it ran at 4.1 percent. But the state has recovered only 91 percent of its jobs lost in the past recession.
The private sector has recouped 115 percent of its positions, so the overall rate reflects reduced government employment in the state.
In comparison, Massachusetts returned to pre- recession job levels in 2013.
The Bay State looms as a competitor. GE’s 2016 relocation of its headquarters from Fairfield to Boston compounded the doubts about Connecticut’s economic
While the move transferred a limited number of jobs out of state — about 200 headquarters positions — the departure of arguably the pre- eminent American industrial company of the past century is not easily forgotten.
“It’s very hard to change a negative perception, and it’s been challenging to get the good news out,” Smith said. “I do think in the last year or maybe two years, it ( the state’s economic reputation) is starting to improve.”
A lack of a large city in Connecticut also cloud its growth prospects. Smith said she has suggested to Lamont’s incoming administration a “rebranding” of the state’s cities, to encourage the migration of more young people to those urban areas.
“Those ( large) cities have been able to attract many more millennials and young folks,” Smith said. “We actually have a lot, but we’d love to have more of them. In part, it’s because the size of our cities hasn’t been on their radar, so they don’t strike people as fantastic places to live.”
Connecticut’s transit system is critical to urban growth. Malloy’s administration has notched some milestones such as the recently launched rail line running from Hartford to Springfield, Mass., and the rollout of the CTfastrak express- bus system in the Hartford area. But roads and trains in the state’s southwestern corner remain heavily congested and saddled with aging infrastructure.
“Credit needs to be given for the new rail line and busway,” said Joe McGee, vice president of public policy for The Business Council of Fairfield County. “But there needed to be a much more aggressive investment in both improving I- 95 and Metro- North’s New Haven line.”
With Lamont set to be sworn in Wednesday, Smith has not confirmed her post- DECD plans. She said she would be willing to stay, in the interim, to help the new governor’s team.
“I feel like our track record is great,” Smith said. “If they want to keep working on it, with their tweaks and modifications, that’s great.”
Catherine Smith, director of the state Department of Economic and Community Development, speaks during the Greenwich Economic Forum at the Delamar Greenwich Harbor in November.
Chief of Staff Tim Bannon meets with Secretary of Office of Policy and Management Ben Barnes, Deputy Secretary of Office of Policy Management Mark Ojakian and Department of Economic and Community Development Commissioner Catherine Smith in 2011.