Hartford Business Journal

14 Hartford Business Journal • January 12, 2015 www.HartfordBusiness.com the point where they are considering moth- balling or closing stations," said Christopher Herb, president of the Connecticut Energy Marketers Association, which is made up of gasoline wholesalers also known as "jobbers.'' Since Connecticut first hiked its gasoline tax at the time it implemented a state income tax in 1991, the state's gasoline retailers have gotten pummeled with shrinkage sales, according to the Gasoline & Automotive Ser- vices Dealers of America (GASDA), a Green- wich trade group for gas retailers. Connecticut's 49 cents per gallon taxes on gasoline and 54.9 cents per gallon lev- ies on diesel fuel rank among the highest in the nation. Those taxes are earmarked to build and maintain the state's roads, bridges and other transportation infrastructure, although policymakers have made it a habit over the years to divert those funds to plug shortfalls in the general budget. According to GASDA President Michael Fox, the number of Connecticut gasoline retailers has shrunk to 1,100 from 2,700 a decade ago. Survivors, Fox said, still must cope with state law requiring stations to peri- odically replace underground tanks, coupled with the troubling economics of operating in such a high-cost-of-living state. Gasoline sales have steadily fallen the last few years, partly due to the economy and overall higher fuel costs that have pushed more motorists behind the wheel of more fuel-effi- cient vehicles, including electrics and hybrids. The decline also has meant a drop in the state's collection of gasoline taxes at the whole- sale and retail level. From 2004 to 2013, for example, gasoline tax collections decreased 10.4 percent to $359 million, according to the state Office of Policy and Management. "It's a 100 percent 'I-told-you-so','' Fox said of station operators' repeated warn- ings to past and present policymakers of the perils of hiking state levies on the per-gallon price of gasoline. The most recent increase occurred in 2013, when the gross receipts tax was bumped up from 7.53 percent to over 8 percent, causing unleaded gasoline and die- sel prices to rise 4 cents per gallon. "I predict we're going to lose,'' said Fox, who once owned a high-volume gas station along the Connecticut-New York border, "15 percent of the stations [left] in Connecticut. We're going to reduce competition, and that's not a good thing.'' Moreover, Fox and Herb say the state's motor-fuels tax receipts hasn't fared much bet- ter of late. In particular, the state taxes each gal- lon that wholesalers sell at about 8.1 percent, a level that marketers say thwarts their operating profitability. Through the first five months of the current fiscal year, which runs through June 30, the state's petroleum gross tax collections are down 4.2 percent to $106 million. Herb says several of his member wholesalers are vowing to shut their border stations because of what they consider an onerous petroleum gross earnings tax, plus the state's mandate that stations' in-ground fuel tanks be dug up and replaced every 30 years — a huge expense. In the upcoming legislative session, fuel marketers say they will press to change the petroleum gross earnings tax from a percent- age tied to the wholesale prices to a fixed, cents-per-gallon levy that would benefit consumers and the state tax collector. "It would provide revenue stability to the state,'' Herb said, "and more predictable pric- es to consumers.'' State Sen. Toni Boucher (R-Wilton) says she is aware of fuel deliverers' concerns. Boucher, a ranking member of the legisla- ture's Transportation Committee, says the petroleum gross earnings tax originally was meant as an interim revenue generator for the state's sagging coffers that has not been eliminated "because the state grew addicted to the tax.'' Falling gasoline prices aside, Boucher says she would favor eliminating the petroleum gross earnings tax altogether, ultimately to benefit fuel sellers and consumers. "When you reduce the cost of something, you tend to sell more of it,'' she said. Meantime, during the legislative session, Gov. Dannel P. Malloy "intends to start a detailed discussion" about how to invest in and sustain the state's transportation infrastruc- ture for decades to come, said Devon Puglia, the governor's spokesman. Malloy has already said he would be open to reinstating tolls to help pay for transpor- tation infrastructure projects. It's not clear what, if any, changes would be considered for the state's gas taxes. n from page 1 Falling gasoline prices reignite fuel-tax debate CT Petroleum Gross Tax receipts Nov. 2014 Nov. 2013 Difference % Change Total YTD FY 14-15 Total YTD FY 13-14 Difference % Change $4,408,771.78 $7,833,946.14 $(3,425,174.36) -43.7% $106,063,882.32 $110,728,786.40 $(4,664,904.08) -4.2% s O u R c e : s T a T e d e P T . O F R e v e n u e s e R v i c e s CT Total Motor Fuel Tax Nov. 2014 Nov. 2013 Difference % Change Total YTD FY 14-15 Total YTD FY 13-14 Difference % Change $43,274,847.09 $43,539,612.74 $(264,765.65) -0.6% $174,944,899.10 $174,137,676.58 $807,222.52 0.5% s O u R c e : s T a T e d e P T . O F R e v e n u e s e R v i c e s P H O T O | H B J F i l e Gov. Dannel P. Malloy "intends to start a detailed discussion" about how to invest in and sustain the state's transportation infrastructure for decades to come, a spokesman says. Lego adding to Enfield workforce as turnaround continues T here were about five million Lego branded toys sold in the U.S. in December, a major point of pride for the Danish toymaker's President Soren Torp Laursen, who spoke to about 500 Greater Hartford business leaders at the Connecticut Business & Industry Association's economic summit last week in Hartford. Laursen, who was the event's keynote speaker, gave the audi- ence a window into the toymaker's dramatic turnaround over the last decade, which saw the company pull itself from the brink of bankruptcy in 2003 to recording record revenues in 2013. "The last 10 years have been pretty awe- some despite the recession and economy," said Laursen, whose company employs 900 of its 12,500 world- wide employees in Enfield. In 2000, Laursen said the family-owned business lost its way by diversifying too quickly into unfamiliar product lines like clothing and watches and not listening to customer's wants and desires. The results were nearly catastrophic: the company lost $300 million in 2003, was forced to sell off assets and lay- off hundreds of employees, and nearly went bankrupt. After some deep soul-searching, Lego refo- cused on its core product: building-block toys. The company also promoted innovation, includ- ing moving into the digital space and develop- ing new franchises like Lego Friends, which are blocks geared toward girls. The company also invested in cross-media storytelling, and devel- oped a TV series on Cartoon Network and "The Lego Movie," to help grow the brand. Those efforts, Laursen said, have largely been successful: The company earned a record $4.6 billion in 2013 and expects to announce even better results for 2014. Moving forward, Laursen said he sees even greater opportu- nity as the company still has "70 percent of the world to sell too." China and Brazil offer huge potential growth markets, and he even thinks Lego can double its U.S. sales. In terms of Lego's Connecticut presence, Laursen said the company has added about 100 jobs in each of the last few years in Enfield rebuilding its workforce to around 900 peo- ple. They are mainly professional, corporate office workers. The company, however, has no plans to re-establish manufacturing/distribu- tion operations in Enfield, which were shut- tered in 2006 and moved to Mexico. n Soren Torp Laursen, President, Lego

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