Hartford Business Journal

16 Hartford Business Journal • December 17, 2018 • www.HartfordBusiness.com tition for jobs from other states. Smith says incentives, now more than ever, are a necessity. That notion was cemented by the nationwide fight for Amazon's second headquarters. "If you could draw the world in a different way, you wouldn't have these competitive situations between states or cities," she said. "But that's not the world we live in." Lamont, who takes office Jan. 9, has said he doesn't intend to get rid of incentives, though his exact plans for the programs are not yet clear. The best approach, Smith said, is to be disciplined and selective about deals. She says DECD has done that to a greater extent during her tenure, and she insists most deals will ultimately pay for themselves and then some. Some lawmakers have sought greater oversight of business-incentive deals, passing a law last year that required outside audits. The first audit found DECD had misstated job totals and had reported erroneous financial estimates in the tens of millions of dollars. DECD said it's since corrected its data, and Smith says the agency has improved its internal processes. Mixed messages, pushback If Malloy's initial wave of employer in- centives in 2011, accompanied by a "jobs tour" in which state officials visited over 500 companies, was intended to send a positive message to businesses, he and the legislature sent a conflicting one that year with a $1.8 billion tax increase — one of the largest in state history. CBIA's Brennan said the initial messaging from Malloy in 2011 was promising. But the sentiment among CBIA membership was, he said, "how do you follow it up?' " "There was concern about the direc- tion, beyond those initial meetings," Brennan said. Tensions with the private sector peaked in 2015, when several major employers — Aetna, Travelers and General Electric — publicly opposed a state budget that raised business taxes. That pressured lawmakers to roll back some of the increases. Malloy said he still harbors resent- ment about how some large employers publicly portrayed the state. "I wish I had been able to make allies in the business community understand that their constant bad-mouthing the state was hurting our desire, their desire, to make the state a stronger attraction to out-of-state employers," Malloy said. Asked if the tax increases hurt the state's economic aspirations, Smith downplayed their significance. "The bigger problem that CEOs look at is the fiscal stability of the state as a whole," she said. "To me, that is the much bigger issue that needs to be addressed." Persistent deficits, coupled with the state's poor showing in a number of business-climate rankings, massive debt load, and overall lack of economic growth have reinforced a perception the state is unfriendly to businesses. For Smith, the sting of GE's headquar- ters move still lingers, and it's had what she views as an outsized impact on how people view Connecticut — with the focus on a few big companies that have left while ignoring the dozens that have moved to the state in recent years. "It's hard to overcome that one an- nouncement, and that's very frustrat- ing," she said. Malloy, who said he doesn't get enough credit for restructuring the size and cost of state government, contends that some of the big invest- ments the state has made in defense manufacturing will show up in GSP figures into the future. The state recently had its high- est quarterly GSP gains since 2014, posting 3.1 percent growth during the second quarter of this year. While that's pretty good for Connecti- cut in recent years, it was still the eighth- lowest growth rate in the country. Klepper-Smith, a former economic adviser to the Rell administration, said Connecticut has one of the worst fiscal burdens in the country, and while those problems have been long in the making, he said Malloy's economic-development initiatives haven't lived up to expecta- tions and deserve some blame. The fact that Connecticut's economy is smaller than it was in 2007 is "a clarion call for a complete review of the state's economic-development strategies, espe- cially when domestic net out-migration data shows 428 people leaving Connecti- cut each week, moving to competing states," Klepper-Smith said. Smith said there are many factors out of state government's control, including the performance of the U.S. and international economies, and that ultimately, agencies like hers can only play a supporting role. "I do wish things had gone better and faster," she said. "It's frustrating to me that we were slower than some of our neighboring states, but we don't have the assets they do. If we had a Boston, Massachusetts or New York City, I think things would be a lot different in our economy." However, Smith contends the administration's policies have made a difference, one that may not be en- tirely felt right away. "I'm a real believer that if we hadn't done a lot of the things we're doing, ... things could have been not as good as they are," she said. Hartford's helping hand By Gregory Seay gseay@hartfordbusiness.com A key part of the Malloy administration's economic- development strategy was to revive some of Connecticut's key, somewhat dormant cities. Hartford in particular was in rough shape coming out of the Great Recession. Department of Economic and Com- munity Development Commissioner Catherine Smith credits Malloy for recognizing early Hartford's dire finan- cial and economic pictures, and taking steps to resolve them. One was creat- ing the Capital Region Development Authority (CRDA) from the bones of its predecessor, the former Capital City Economic Development Authority. Since then, CRDA, whose execu- tive director, Michael Freimuth, is a former Stamford official with a knack for dealmaking and who is credited with enabling the city Mal- loy once led as mayor to undergo an economic-development revival, has converted 23 of downtown Hart- ford's oldest office buildings into 1,558 apartments/condominiums with a construction value of $490 million. Hundreds more are in the development pipeline, just as CRDA extends its redevelopment vision to Hartford's other neighborhoods and surrounding suburbs. Aside from other such CRDA- linked Hartford projects, such as the remake of the Bowles Park housing project and the former Swift factory, both in the North End, the suburban redevelopment roster includes Newington's ex- National Weld- ing site and East Hartford's Silver Lane corridor and Founders Plaza office park. "I think it's been unbelievably effective,'' Smith said of CRDA. "I give the governor full credit on this one. He said, 'our Capital City needs investment. It's beginning to falter. It doesn't look the way it should. … We took an existing entity and we re-upped it. We brought in Mike Fre- imuth. He's been a tremendous asset." CRDA's investments have been accompanied by other major down- town developments in recent years — opening of UConn's new satellite campus, construction of Dunkin' Do- nuts Park, ongoing redevelopment of Dillon Stadium, and the arrival of new employers, including Infosys, Stanley Black & Decker's new tech center and an insurtech hub — that have begun to change the percep- tion of the city, whose companies are desperately trying to attract their next-generation workforce. Last spring, state lawmakers also reluctantly approved a $500 million financial-rescue package for Hartford, which was near bankruptcy, and ap- pointed a financial oversight panel. In one of his last acts as chair of the state Bond Commission, Malloy and his fellow commissioners in Septem- ber gave thumbs-up on $52.7 million for CRDA-linked Hartford projects, including a downtown grocery; and as many as 200 new apartments near Dunkin' Donuts Park, in the city's Downtown North quadrant. Malloy, however, was not success- ful in securing from the legislature $250 million for a major overhaul of the XL Center, and now the Lamont administration will have to decide the future of the aging venue. A less-ex- pensive XL plan is now in the works. Meantime, Smith recalled a stalled legislative proposal at the state Capitol to clone CRDA into several regional agencies that could ignite similar redevelopment in other needy Connecticut cities. "We've started, but there's much more work to do, and particularly in … some of the harder hit communi- ties in our state, the Bridgeports and the Waterburys," she said. Freimuth says various iterations of "a statewide CRDA have been dis- cussed,'' but added, "the real issue is capacity to carry out projects … hav- ing the management skills, financial underwriting, fiduciary tracking and construction oversight critical to make a project work.'' Michael Freimuth, Executive Director, CRDA >> Malloy continued Gov. Malloy in the XL Center. While the arena received some upgrades during his tenure, Malloy was unable to secure a desired $250 million in renovation funds. PHOTO | CT MIRROR

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