Hartford Business Journal

16 HARTFORDBUSINESS.COM | JULY 12, 2021 By Matt Pilon mpilon@hartfordbusiness.com T he state recently made headlines announcing that four New York companies were either relocating or opening new offices in Connecticut, lured in part by incentives that will save three of those businesses millions of dollars after they create a certain number of jobs. But those deals don't represent a newfound effort to ramp up state-backed incentives to recruit companies in a post-pandemic world, where states are urgently trying to jumpstart their economies. In fact, the state is largely going in the opposite direction, trying to move away from direct and upfront incentives to businesses. For example, a relatively generous and oft-criticized incentive program launched a decade ago to help small Connecticut companies recover from the Great Recession is now officially being handed off to the private sector as the state works to heal the economic wounds inflicted by the COVID-19 pandemic. After doling out more than $333 million in financial assistance to more than 2,000 employers, Connecticut's so-called Small Business Express program (EXP for short) will see its taxpayer-funded financial firepower folded into several other existing and envisioned lending programs that instead rely on banks and other private lenders to extend loans from their own balance sheets. State-backed guarantees in those programs act as a backstop for private capital, deliberately spurring them to open the spigot wider in order to lend to minority- and women-owned companies that have historically struggled more to secure traditional loans. The change, a product of the recent legislative session, delivers — at least partly — on a 2018 campaign pledge from Gov. Ned Lamont to wean the state off up-front incentives for business investments, which he has criticized as too costly to taxpayers. Forgivable loans and matching grants, delivered up front and tied to future job-creation targets became a central element of former Gov. Dannel P. Malloy's economic playbook after he took office in 2011. While EXP has been a major investment of that sort, Malloy's First Five Plus program was more visible, producing numerous incentive packages worth tens of millions of dollars in forgivable loans and up-front grants for companies that pledged to create at least 200 jobs and make other investments and commitments. Lamont and his economic czar, Department of Economic and Community Development Commissioner David Lehman, have been urging lawmakers to extricate state government from the loan underwriting business, arguing that private lenders have more expertise and that the state shouldn't compete with banks. They've also pushed an "earn-as-you-go" model for business incentives that requires recipients to create new jobs before getting any special benefits. The recent changes to EXP, slipped into the legislature's budget implementer bill, allow the administration to check off some of those boxes, Lehman said in a recent interview. "It's verbatim what I've wanted for the past two years," Lehman said of the changes to EXP. However, the administration didn't get everything it wanted during the session. A second attempt by Lamont this year to win approval for a separate job-creation incentive program, dubbed JobsCT, died in committee without reaching a vote in the House or Senate. Lehman said he will continue to lobby next session for the broad- eligibility program that would provide income tax rebates to eligible employers for seven years, equivalent to 25% of the personal income taxes their net new hires pay the state, or 50% for jobs in lower- income areas known as opportunity zones or distressed municipalities. There did not appear to be any obvious significant opposition to the proposal, but it may have gotten lost during a session where COVID-19 response and other major issues like legalizing recreational marijuana, sports betting and online casino gaming (all of which passed into law) dominated, Lehman said. Even without JobsCT, DECD can still offer earn-as-you-go incentive deals using current statutory authority, but it's more costly to the state than JobsCT would be, he said. Rep. Caroline Simmons (D-Stamford), co-chair of the Commerce Committee, said she supported the EXP changes and the ultimately unsuccessful JobsCT Recruitment Toolkit CT takes a step toward slimmer, less risky corporate incentives model Department of Economic and Community Development Commissioner David Lehman. HBJ FILE PHOTO Applications received 3,829 Businesses funded 2,012 Jobs created 8,501 Jobs retained 22,153 Total assistance received $332,062,349 Small Business Express program stats (2012 to Dec. 2019) Small Business Express has been a popular program since Connecticut created it in 2012, with the most sought after components including matching grants as large as $100,000 and loans as high as $300,000 tied to job-creation targets. The program, which has faced criticism from state auditors, is now being overhauled. Source: Office of Legislative Research

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