Hartford Business Journal

16 Hartford Business Journal • December 9, 2019 • www.HartfordBusiness.com By Greg Bordonaro gbordonaro@hartfordbusiness.com I t's no secret that the Lamont administration plans to reform the way state govern- ment doles out incentives to private companies looking to add jobs or make significant capi- tal investments in Connecticut. Now, the strategy is finally taking shape. In a recent interview with Hartford Busi- ness Journal, Department of Economic and Community Development (DECD) Com- missioner David Lehman bared the state's new economic-incen- tives playbook, which will focus on four key programs, including two new concepts. The overall goal is to move toward a performance-based, "earn-as-you- go" system, meaning employers won't reap state incentives until they create a certain number of jobs or make a certain level of investment. That will prevent the cash- strapped state from having to clawback funds from companies that fail to live up to their deals. It also reverses a policy direc- tion set decades ago and put into overdrive by the Malloy adminis- tration, which aggressively ramped up corporate incentives — to the tune of more than $650 million in loans and grants and hundreds of millions more in tax credits — that companies benefited from up front, before they created jobs. The new strategy will not require the state to borrow money up front to incentivize job growth, Lehman said, although the programs' annual costs, or what caps might be insti- tuted, haven't been fully fleshed out. Gov. Ned Lamont has already significantly scaled back economic aid to private companies, having reduced DECD's bond funding by 60 percent this year compared 2018, Lehman said. The agency has done around $60 million in incentive deals so far this year compared to previous years when the average was around $200 million, he said. "I don't think we need to have or should have the best or most aggres- sive job-creation incentives," Lehman said. "I think we need to have a competitive strategy that works for taxpayers and grows the economy." The four major programs the state will now focus on include: • A modified Small Business Ex- press program that will no longer offer state loans or grants, but in- stead morph into a loan guaran- tee program run by private banks. • The Grow CT Rebate, which is provided to companies in certain major industries that create at least 25 well-paying jobs. • And a greater focus on two ex- isting incentive programs: the Urban and Industrial Site Re- investment Tax Credit and the Sales & Use Tax Relief Program. Lehman said the new incentive strategy will be as transparent and formulaic as possible and focus more on a specific subset of indus- tries key to the state's future. There will be some flexibility if a major deal comes around — like if Amazon is looking for a city or state to add 500 jobs — but don't expect to see a bunch of one-off incentive pack- ages outside the state's new toolkit. The goal is to also incentivize growth, he added, so companies that try to hold the state hostage by threatening to move elsewhere may have less of a chance of win- ning a tax deal or incentives. "My personal view on this is that we should not be incentivizing retention," Lehman said. The incentives-strategy over- haul comes as states across the country have ramped up economic assistance to businesses in recent years, hoping to woo new jobs and investment. However, incentives are controversial, as their overall value and costs to states remain a point of contention and debate. Tim Bartik, a senior economist for the W.E. Upjohn Institute for Employment Research in Michigan, said paying out incentives only af- ter jobs are created or investments made is a strategy used by many other states, especially those that Largest Urban and Industrial Site Reinvestment Tax Credits program deals since 2013 Company Town Total tax credits awarded Total project cost Bridgewater Associates LP Westport $30M $527.5M FedEx Middletown $20M $220M Starwood Hotel & Resorts Stamford $20M $30M Praxair Inc. Danbury $16M $16M HomeServe USA Corp. Norwalk $15M $33.1M Conair Corp. Stamford $15M $30.1M Indeed Inc. Stamford $15M $26.5M Source: Department of Economic and Community Development Earn As You Go DECD Commissioner David Lehman bares CT's new economic-incentives playbook Department of Economic and Community Development Commissioner David Lehman (center) was appointed by Gov. Ned Lamont to redo the state's economic-incentives toolkit. He now has a new strategy in place. HBJ PHOTO | GREG BORDONARO

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