The Register Citizen (Torrington, CT)
A heartfelt protest as state manufacturing aid shrinks
Lance A. Scott doesn’t want to leave Connecticut. In the state’s heartland industry of precision manufacturing, he has toiled as an entrepreneur, distributor, executive, consultant, investor, electrical engineer and booster for foreign companies looking toward the United States.
“I love my adopted state — home to my two beautiful children — and I have been a tremendous advocate of Connecticut’s virtues for over 30 years ... often in the face of extremely challenging conditions,” the Weston resident said in an email, citing an issue he says will spell the demise of factory work in the state.
The concern he’s raising — paltry incentives for manufacturers under Gov. Ned Lamont — could lead him to move a growing medical components firm with 81 jobs in Bridgewater and New Milford over the state line to more generous New York. It’s not a threat, he says, it’s a financial reality.
And Scott is not, he insists, worried about his own wealth or only the health of the company where he’s CEO, Parker Medical Inc. The new incentives for adding jobs are so lean, he warns, that the state’s uptick in manufacturing will fade into a painful decline like we saw for two generations.
“Connecticut will kill an already suffering small manufacturer supply chain, and then the big guys like Electric Boat, Sikorsky, Pratt & Whitney will die a slow death, too,” Scott said.
Whoa, the three most important companies in Connecticut dying a slow death as their supply chains wither? Scary stuff
in a state that lost 145,000 manufacturing jobs in 27 years before the bleeding stopped four years ago.
We all should hope Scott overstates the threat. But when it comes to measuring direct aid to businesses, he raises a valid point.
Much less per job
Until now, a machine shop with, say, 50 employees making aerospace parts might have received hundreds of thousands of dollars in direct aid to add a dozen positions. We’re talking outright grants and forgivable loans in an individually tailored deal under two state programs.
That was under previous governors, especially in 2011 through 2018 under former Gov. Dannel P. Malloy.
Today, under Lamont, there’s a chance that company would see no aid at all, or perhaps just a small loan. The main incentive program created by David Lehman,
Gov. Ned Lamont’s commissioner of economic and community development, is just getting underway under the name Earn as You Grow.
The new plan will pay far less than Malloy’s largesse, typically $4,000 to $6,000 per job created, compared with some past deals of $20,000 per job, sometimes much more. And almost as importantly, Earn as You Grow will deliver cash years after a company hires new people, instead of up-front.
It’s available to companies in several targeted industries including precision manufacturing — not just companies that cut special deals. But it pays only those that add at least 25 jobs over three years, something few family-owned manufacturers can do.
Fiscally responsible
Instead of picking a few winners, Lehman, a former partner at Goldman Sachs, is looking to raise up the whole environment for manufacturers. He’s retooling a different state program
to help with training and other baseline concerns factory owners have.
“The goal is not to have one-offs,” Lehman said. “We need to be consistent in how we treat these companies.”
The state handed out more than $600 million in grants and loans to manufacturers under two main programs between 2008 and early 2019, according to data Scott compiled from state reports. More than $650 million went to non-manufacturers under the same programs.
That’s in addition to a $400 million tax credit benefit that United Technologies Corp. negotiated in 2014, mostly for UTC’s Pratt & Whitney division to invest heavily in East Hartford.
Some of those deals kept factory lights on but cost taxpayers money, Lehman said, even accounting for the added tax dollars from a few new jobs. “We need to be fiscally responsible, and it’s a balance,” he said.
This new approach is part of Lamont’s so-called debt diet, designed to bring the state’s annual bond payments back in line from more than $2 billion a year. Despite all that taxpayer support, Connecticut created jobs at about one-quarter of the national pace over the last decade.
Crisscrossing Connecticut
Scott argues it’s fine and good to improve the overall climate, but sometimes the state needs to step up and help pay for a company to expand — or another state
will win the battle.
“As an individual entrepreneur, I’m willing to take on a multimillion dollar risk,” he said. But he added, “a little bit of grant money for job creation is not the answer.”
As for Lehman, Scott said, “He declared war on manufacturing.”
That’s a harsh assessment. Lehman and Lamont hired a manufacturing czar for the state, Colin Cooper, a former aerospace engineer who rose to CEO of Whitcraft Group, one of the largest aerospace contractors in the state.
Lehman, Lamont and especially Cooper have crisscrossed Connecticut, talking with manufacturers. Over and over, they hear about the shortage of readyto-hire workers, and they’re working on that problem.
“I’ve probably talked to scores of companies,” Cooper said, “trying to understand what the headwinds that people are facing in the state were, to see if we could address those.”
‘A much tougher road’
One reason for the silence: Company executives rarely ask the state for a big package, and many don’t know what is and is not available.
Take Michael Polo, for example. He’s CEO of ACMT Inc., a Manchesterbased fabricator of parts for commercial and military aircraft and a former board member of the state’s Aerospace Components Manufacturers industry group. In 2017, ACMT expanded from 46 to more than 150 people, with lots of capital investment
in equipment.
The package from the state: A $1 million forgivable loan; a $2 million belowmarket-rate loan with an 18-month delay before the first payment was due, and, in a separate state program, perhaps $50,000 a year in matching grants for a few years, for training and other upgrades.
That could be worth nearly $2 million to ACMT over five years. When I asked Polo what he thought of Lehman’s programs — using scarce money to lift up whole industries and less for individual companies — he showed support for it, with some trepidation about how small companies might lose out.
Then we worked through the numbers. To add 105 jobs, Polo might have gotten $350,000 to $400,000, perhaps more, depending on how much his new employees earned. And that would come in payouts in years three through seven rather than up-front.
“It would have definitely been more of a struggle,” said Polo, “if we didn’t have that funding.”
Where to expand?
That’s what Scott is looking at now as Parker embarks on a massive expansion and modernization, millions of dollars for new space, machinery and workers. For lack of substantial aid, Scott and the Holland family that owns Parker, which hired him as CEO last year, might move the company to New York state.
Parker, a maker of high voltage X-ray imaging components, happens to have
many employees in Danbury, who could just as well drive west to a new plant. As we sat in his office with Timothy Holland, vice president of engineering and son of the founder, we gazed out the window to some wooded acreage, then to an easel with a drawing of a new building for that parcel.
Scott approached the state to work out an incentive package last year, only to hear about the change.
“I was shocked, stunned and incredibly disappointed because I know that it will not work,” he said.
New York has incentives similar to Connecticut’s old system, and Scott said he’s talking with the Empire State, where he grew up before attending the University of Bridgeport from 1982-86.
Advanced manufacturing and especially aerospace remain a pillar of Connecticut economic development, as factory jobs spin off between three and eight jobs for every new position.
Lehman and Lamont are skeptical that the gravy train was worth what taxpayers paid.
“No one is disagreeing about where we want to go. I think there’s tactical disagreements about what we need to do to get there,” Lehman said.
My prediction: an upward adjustment in the program in 2020 as voices rise.
“There’s probably a quasi-in-between there that can work,” said Polo, the Manchester company CEO.