Road to eco­nomic re­cov­ery goes on

As La­mont ad­min­is­tra­tion takes reins, DECD head looks back at progress

Connecticut Post (Sunday) - - Sunday Business - By Paul Schott

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.

Stricken econ­omy

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.”

Flag­ship pro­grams

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

com­pet­i­tive­ness.

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.”

Hearst Connecticut Me­dia file photo

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.

Hearst Connecticut Me­dia file photo

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.

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