Hartford Business Journal

20 Hartford Business Journal • July 23, 2018 • www.HartfordBusiness.com Opinion & Commentary EDITOR'S TAKE Economic development oversight lacking in CT D evelopers beware. If you or your projects have a track record of legal entanglements be transparent about them before you pitch an ambitious development in Connecticut. If not, your motives may seem nefarious if your checkered history is publicly aired, which it most likely will be by the media or someone else. The latest snafu arose from the $200 million multi-sport complex proposed in Windsor Locks that aims to feature two roughly 6,000-seat stadiums, turf fields, retail space and hotels. The project, which seemed ambitious, was un- veiled with much fanfare during a July 9 press conference. But a week later Windsor Locks First Selectman J. Chris- topher Kervick suspended negotiations with the developer — Long Island's Andrew Borgia — after HBJ News Editor Matt Pilon raised questions about a lawsuit Borgia faces in connection with a similar-type project in New York. In the lawsuit, four investors in a proposed sports complex in the Long Island town of Islip allege that Borgia and his companies defrauded them out of $462,000. Kervick said he was unaware of the lawsuit when asked about it by HBJ. Three hours later he suspended further negotia- tions, although the project could be revived pending a more thorough vetting and explanation of the lawsuit, which Borgia's lawyer called "utterly frivolous." Borgia, who also field for Ch. 11 bankruptcy in 2006, said he still thinks his Windsor Locks project is salvageable. Regardless, his legal history should have been fully understood before the town publicly touted the project. The episode highlights a major problem within Connecticut's economic development circles, mainly that local and state officials don't always do a good job vetting companies and developers, particularly those looking for tax breaks or government incentives. Another high-profile example is when Hartford city officials granted development rights — and more than $1 million in taxpayer funds — to the former would-be de- velopers of Dillon Stadium, both of whom are currently serving jail time on federal fraud convictions. One of those developers, James Duckett, had a history of embez- zlement and lawsuits that the city council was unaware of when they hired him. Meantime, HBJ highlighted issues with the state Department of Economic and Community Development's vetting process last year, when it revealed the agency had granted funding to a New York startup — CliniFlow Technologies — whose founder was being accused by numerous investors in the Empire State of operating a Ponzi scheme. DECD said it was unaware of CliniFlow's legal problems before granting the company $400,000 and pledging another $3.6 million. Following the story, agency officials said they would improve how they vet out-of-state companies. These examples demonstrate how state and local officials lack the ability or resources — in some cases — to thoroughly vet companies or developers seek- ing government assistance. It's particularly concerning in a day and age when corporate greenmail is as free flowing as ever. This begs for government officials to collaborate and develop a basic set of guidelines to screen developers and development projects — maybe even bor- row the playbooks of organizations that have a successful track record like the Capital Region Development Authority. Steps like legal searches in state and federal courts should be part of the routine as well as requiring certain financial disclosures. To be clear, we don't need additional layers of bureaucratic red tape to block economic development. In fact, we need to promote and make it easier for hon- est and reputable developers to do business in this state. A simple background check checklist shared among state and local economic development officials — in addition to proper training — should suffice. I'm also not saying involvement in a legal action should eliminate a developer from a project. Development can be a litigious bloodsport, but transparency should be the rule of thumb. RULE OF LAW Taxing wealthy won't shrink CT's wealth, income gap By John M. Horak T he CT Mirror recently published a series about wealth inequality in Connecticut with the first story tited: "Already Deep in Debt, Connecticut Struggles with Extremes of Wealth and Income." The story asserts that Connecti- cut's policy debate will be shaped for years to come trying to figure out "[h]ow to ad- dress economic inequality and a crushing debt at the same time." The article re- lies on data from the Washington D.C.-based Eco- nomic Policy Institute (whose govern- ing board includes the presidents of the AFL-CIO, SEIU and AFSCME), and interviews with Connecticut's public- sector employee unions, legislators from poor districts and social-service advocates, all of whom comprise an interest group that continues to advocate for "higher taxes on wealthy households" to combat the problem. The problem is serious, but the argu- ment that we need higher taxes on the wealthy to combat inequal- ity is intel- lectually lazy, socially divisive and inconsistent with economic common sense. In fact, we would do better to delete the words "equality" and "inequality" from the discussion and replace them with the terms "poverty" and "social mobility." Let's start with the title of the first article and its correlation between inequality and the ability of the state to spend — suggesting we would have less inequality if Connecticut had more to spend on the problem. Inequality is not a substance (like water) that we can increase or decrease by turning the spending faucet one way or another; and, in any event, isn't the better ques- tion why we have so much poverty even after the state has spent its way to $80 billion of indebtedness — not including the private charitable spending on the social problems underlying the issue. Next, equality and inequality are excessively vague and divisive terms. The vagueness starts early — are the advocates talking equality of op- portunity or of outcomes, and who gets to decide what's equal enough? The advocates owe us clarity on this whenever they use these terms. Another troubling aspect of the "equality" approach is its inherent social divisiveness. It is based on com- parisons of what some have that others don't have, pitting one group against the other and suggesting that the use of government power is the solution — to tax more from one and give to another. On the other hand, framing the issue as one of poverty and social mobility gives us goals around which we can unite. Poverty is a common enemy and social mobility a common friend, and everyone can agree upon the need to re- duce the former and promote the latter. The advocates also owe us a very precise statement of their mission. Is the goal to sustain a living standard for the poor that is not too distant from those at the top, or to enable people in poverty to move up the economic ladder closer to the top. Both are worthy goals in appro- priate circum- stances (and they are not mutually exclusive), but the difference is critical to the discussion if the goal is to ask taxpayers to provide more funding. Finally, the article includes this sen- tence: "Countries that had dramati- cally reduced poverty enjoyed more economic growth than those that had produced extreme inequality." This proposition is profoundly backwards. It suggests that we need to solve inequality to enable eco- nomic growth, when what we need in the first instance is more economic growth to help reduce poverty and enable mobility up the economic ladder. John M. Horak is the director of TANGO Nonprofit Education and Consulting. His opinions are his own. "... what we need ... is more economic growth to help reduce poverty and enable mobility up the economic ladder." Greg Bordonaro Editor John M. Horak

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