Selling state’s strengths
UTC headquarters departure illustrates Connecticut’s attempt to compete with big cities such as Boston
The impending relocation of United Technologies Corp.’s headquarters from Farmington to Greater Boston is raising questions about Connecticut’s place in a technologydriven economy, where cities rich with talent such as Boston, San Francisco and New York gobble up an increasing share of the jobs.
“What we have been seeing in the last 30 years is a reorientation of the U.S. economy to favor bigger, denser and more highly educated superstar places that offer large pools of top talent,” said Mark Muro, a senior fellow who studies metropolitan areas at the Brookings Institution, a Washington, D.C. think tank. “The biggest, best-educated places are pulling away from the others … scale really does matter.”
Small cities across the nation are at risk of being left behind by an evolving economy that favors large metros. “It’s not just Hartford. Medium-size city after mediumsize city is becoming concerned about this,” Muro said.
Boston, with its network of high-tech firms along Route 128, array of world-class universities and strong research-and-development culture, has proven an alluring draw for Connecticut-based companies seeking to relocate.
How can Connecticut compete with that?
It can’t, says Mary Donegan, a professor of urban and community studies at UConn. “We will never be New York, we will never be Boston nor should we try to be,” she said. “Connecticut cities need to look inward and look at the strengths we have, rather than thinking of jobs as a zero-sum
game between states.”
Donegan likened Connecticut to the under-theradar middle child sandwiched between two flashier siblings. “We have that middle-child mentality that there’s nothing special about us,” she said.
Instead of trying to compete on Boston’s terms, policymakers and civic advocates say Connecticut ought to play up its strengths. Ramping up investments in education while addressing problems such as the state’s unfunded pension liabilities are good places to start, they say.
“The idea you’re going compete against Boston or New York, well, you’re not,” said Oz Griebel, the former head of the MetroHartford Alliance, the region’s chamber of commerce, and an independent candidate for governor in 2018. “You’ve got to offer something different.”
Griebel says there’s “no particular magic” to the equation. “It’s education, it’s a high quality of living … it’s low cost of housing and it’s dealing with the unfunded pension liabilities.”
One model that doesn’t work, according to Donegan: offering tax breaks and other sweeteners to lure companies. “Giving incentives is often more about politics than the jobs themselves,” she said.
Instead of throwing incentives at companies, Connecticut would do better to build an infrastructure that encourages growth, said Fred Carstensen, professor of finance and economics and director of the Connecticut Center for Economic Analysis at UConn. But he criticized state policymakers for a lack of urgency, saying questions about the state’s inability to remain competitive in the modern economy have been building for years.
“Connecticut is way way behind the curve on what it should have been doing to keep the state competitive as the economy evolved,” Carstensen said. “Connecticut has been doing very very little to make itself more competitive in the critical growth sectors. Perhaps most revealing, the most rapidly growing sector in Connecticut — information — is also the most rapidly growing nationally. But in Connecticut it is growing slower than the national pattern and it is a smaller share of the economy. So Connecticut is falling behind even in its best performing sector.”
Some Republicans blame the departure of UTC’s csuite on policies such as paid family and medical leave and a $15 hourly minimum wage, both recently approved by the legislature, or electronic tolls, which Gov. Ned Lamont supports. But Democrats point out that Massachusetts is also poised to offer a paid leave program and a $15 minimum wage and has long collected tolls on the Massachusetts Turnpike.
Both states have a highly educated workforce and fairly high costs, from taxes to utilities. But despite their similarities, Connecticut and its neighbor to the north differ in crucial ways. Massachusetts has led the region in post-recession job growth, far outpacing the national average. Connecticut, meanwhile, is one of just a handful of states that has yet to recover all the jobs lost in 2008-2010 economic downturn.
“The common theme of businesses that are moving is that they are shifting their top talent to places that aren’t cheaper but have better infrastructure and deeper talent pools,” said Rep. Josh Elliott, a liberal Democrat from Hamden who serves as vice chair of the legislature’s commerce committee. “While the bulk of UTC’s jobs will remain in Connecticut, we need to remain mindful of what makes a state attractive — above and beyond the taxes we pay.”
Unlike General Electric Co., which cited Connecticut’s business climate and its suburban culture as reasons for its move, UTC isn’t blaming the state.
UTC CEO Greg Hayes recently told Fox Business
Network suggestions the company was moving its headquarters to Massachusetts because of high taxes in Connecticut are “patently false.” He said the headquarters location was part of negotiations as UTC merges with Waltham, Mass.-based defense manufacturer Raytheon Co. UTC will continue to employ more than 19,000 people in Connecticut long after 100 top managers who work in the corporate office depart for Massachusetts.
“Moving from Connecticut to Massachusetts, it’s not like you’re going from highcost to low-cost,” Hayes said. “The fact is we think there’s a huge talent base up in [Massachusetts], in the Boston area that will help us in the long term in terms of recruiting talent but this is not about Connecticut being a bad place to invest or a bad place to be.”
But that doesn’t mean the state can’t entice companies with business-friendly policies that could undercut some of Boston’s other huge advantages, said House Republican leader Themis Klarides of Derby.
“When a company tells us it wasn’t Connecticut’s taxes that led to their departure, well it also wasn’t our tax structure that kept them here,” she said.
“We need to compete. We can’t change our weather. Our urban centers are uniquely Connecticut — Hartford will never be Boston or Houston but we like it that way. So we have to offer something else … if you’re not a good hitter, you better have a good eye or be quick on your feet or have a good arm or you’ll be warming the bench. And right now, Connecticut’s warming the bench.”
Carol Platt Liebau, president of the Yankee Institute for Public Policy, a smallgovernment think tank, said the state has given up its edge over the big metro areas.
“Our mistake has been trying to tax like New York and Boston without having cities like New York and Boston,” she said. “Connecticut’s advantage has always been being a businessfriendly, suburban alternative. If you give away the advantage of lower regulations and taxes but don’t have the advantages that cities have to offer, you’ll be left behind.”
Officials in the Lamont administration dispute that. David Lehman, the state’s chief economic development officer, said the state is investing in its cities as a way to draw high-paying jobs in several key sectors: bioscience, digital media, advanced manufacturing and financial services.
“We’re going to focus on very specific industries where there is a competitive advantage to being in the state of Connecticut,” said Lehman, a former partner at Goldman Sachs. “Are there going to be examples where some companies chose not to be here? There are … [but] our goal is to win a lot more than we lose.”
Senate President Pro Tem Martin Looney said he is confident Connecticut can change the dynamic. Several of the state’s cities enjoy advantages that other “left behind places” don’t, such as world class universities and a location that’s close to Boston and New York.
“Connecticut really has a challenge in that none of our cities are really large enough to be considered … the kind of magnet that Boston is,” Looney said. “And it’s a challenge but we have the capacity … each of our major cities is developing niches of its own. I think New Haven with the research being spun off from Yale University, Hartford with its resources, Bridgeport being close to New York. We have ways to compete.”
“We will never be New York, we will never be Boston nor should we try to be. Connecticut cities need to look inward and look at the strengths we have, rather than thinking of jobs as a zero-sum game between states.” Mary Donegan, a professor of urban and community studies at UConn