Hartford Business Journal

20 Hartford Business Journal • July 11, 2016 www.HartfordBusiness.com EDITORIAL So far, 2016 offers mixed results for region, state I t's the official midway point in the year, so it's a good time to break down some of 2016's low and high points. Here's our analysis of this year's good, bad and ugly. The Good Connecticut's economy has continued its slow recovery, and while many would like to see the new-jobs pace quicken, it's a positive sign the state's private sector has boosted employment levels in 2016, especially in the wake of so much uncertainty on the state, national and global levels. Through the first five months of 2016, Connecticut added 8,100 jobs, up from 5,800 jobs gained in the same time period last year. The state's unemployment rate is 5.7 percent, up slightly from a year ago even though Connecticut has added jobs in four out of five months this year through May — a sign more people are looking for work. Since May 2015, the private sector added 14,700 jobs, while the government sector shed 800 jobs. Connecticut home sales — a key economic indicator — also continue to climb. Single- family home sales rose for the seventh consecutive month in May, by 23.9 percent, with a total of 2,921 homes changing hands. Year-to-date, home sales are up 23 percent, however, the median sales price has remained stagnant, declining slightly by 1.4 percent to $235,000. The Bad While the jobs data has largely pointed to a continuing economic recovery in Con- necticut, the outlook remains cloudy at best. The biggest issue — other than larger global macroeconomic factors Connecticut has little control over, including things like market uncertainty from the presidential election and Unit- ed Kingdom's decision to leave the European Union — is the state's continuing budget crisis. State lawmakers smartly avoided tax increases this legislative session in the face of a nearly $1 billion deficit, but more billion-dollar deficits loom. Most alarming is the precipitous decline in state income-tax revenues, the main contributor to the state ending fiscal 2016 in the red by $315.8 million, despite countless attempts to slash spending throughout the year. That will force policymakers to dip into the state's rainy-day fund to balance the books, leaving only about $90 million in Connecti- cut's emergency reserve, which equals one-half of 1 percent of annual operating costs. That means the state has little to no fiscal cushion to deal with future deficits. Meantime, even with hundreds of millions of dollars in budget cuts enacted by lawmakers this session, the state faces billion-dollar-plus deficits in fiscals 2018 and 2019. Worse yet, when the legislature convenes again in January, local elections will be over, increasing the likelihood lawmakers will be more willing to enact another wave of tax increases to balance the budget. These conditions will continue to have a dampening effect on the state's economy, making businesses cautious about expanding or adding jobs here. The Ugly While Connecticut's budget woes are disheartening, the financial state of the Capital City is downright ugly, with few good options available to avoid a state intervention or potential bankruptcy. Add the black eyes Hartford has suffered from the delayed construction of Dunkin' Donuts Park and the federal indictments recently handed down to two former Dillon Stadium developers accused of swindling city hall out of hundreds of thousands of dollars, and it's been a rough year for the city. First-year Mayor Luke Bronin has been greeted with an unending wave of difficult choic- es. He's already laid off 40 city hall employees and made other significant cuts to spending, but he says it won't be nearly enough to cover the tens of millions of dollars in deficits pro- jected for the foreseeable future. Bronin says the city will need help to make ends meet, but what that means exactly remains unclear. He hasn't ruled out a potential bankruptcy or state intervention, but even those options won't cure Hartford's deep-rooted ills of poverty, income/education inequality and lack of taxable property/economic growth. There are still plenty of positive things going on in Hartford, including the addition of new apartments and some innovative small businesses beginning to sprout here, but until Bronin or any other leader articulates a long-term, implementable vision for a financially stable city that raises the fortunes of all its residents, Hartford will continue to struggle. n EXPERTS CORNER New England must invest in energy infrastructure By Carl Gustin R ecent cancellations and delays of pro- posed large-scale energy infrastruc- ture projects, and results from two regional surveys suggest energy policy and consumer and business concerns in New England are heading in opposite directions. This split may be setting the stage for significant adverse economic consequenc- es over the next five years as policymakers instead focus on cli- mate change-driven options that extend well into the future. A recent survey conducted by the New England Coali- tion for Affordable Energy found that 80 per- cent of New England consumers remain con- cerned about the affordability of electricity and natural gas despite a warm winter and sharp drops in energy prices. A separate Coalition survey found New England businesses equally concerned about energy costs. Government leaders should take note that neither businesses nor consumers in the region are impressed with actions taken so far to address energy price affordability. About three out of four companies responding to the survey rated state government performance as either "poor" or "fair." Almost half of con- sumers don't think their governor and state legislature are doing enough to make energy more affordable — a somewhat better rating, but certainly no vote of confidence. These surveys follow a study last year by the Coalition cautioning that inaction on infrastructure projects — pipelines, transmis- sion, power generation, including large-scale wind — could increase energy costs through 2020 by some $5.4 billion and result in the loss of 167,000 jobs in the region. The study was conducted following reports that the region had already been hit with $7.5 billion in higher energy costs over previous winters because of natural gas pipeline constraints. The study also found that there were enough projects planned and underway at the time to avoid or at least mitigate those impacts by 2020. But this was before the announce- ment that the Pilgrim Nuclear Power Station would be shutting down. It was also before: Kinder Morgan cancelled a major natural gas pipeline project; New Hampshire state offi- cials announced a delay on a major electric transmission line to bring hydroelectric power from Canada; and before New York blocked the Constitution Pipeline that was to bring low cost natural gas to New England. And it was before ISO New England, which is responsible for regional electricity reliability, warned that "natural gas constraints have led to grid reliability challenges, emission increas- es during winter, and spikes in wholesale electricity prices" while pointing out that "By 2020, resources representing about 30 percent of regional capacity have committed to cease operation, or are at risk of retirement." Responses to both surveys leave little doubt that energy infrastructure is needed in the region. Roughly three out of four consumers polled favor construction of new electricity infrastructure. Nearly two-thirds support new natural gas infrastructure to provide fuel for power plants and to heat homes and business- es. Support for energy infrastructure among businesses surveyed was similarly strong. In both surveys, respondents voiced strong support for an "all-resource" approach that includes new natural gas power plants and pipelines — at least for the foreseeable future — as well as transmission lines, large-scale wind projects, imported hydropower from Canada and solar power. Renewable resources are essential to attaining environmental goals, but natural gas is also needed. Those who argue against natural gas, who just say no to pipelines or natural gas-fired power plants, are not look- ing out for the near-term needs of consumers. They are certainly not looking out for busi- nesses and institutions that employ millions of New Englanders and who depend on elec- tricity around-the-clock throughout the year. Even a report by the Massachusetts Attorney General's office arguing that the region could get by without natural gas pipeline additions found that such pipelines "generate signifi- cant wholesale electricity price benefits." If government leaders want to gain the confidence of consumers and business lead- ers, they will need to step forward to sup- port new energy infrastructure in all forms, including natural gas pipelines and electric transmission lines, subject to meeting safety, environmental and economic criteria. Not to do so may lead the region to the higher costs and job losses within the next five years. n Carl Gustin is a consultant to the New Eng- land Coalition for Affordable Energy whose members include major business orga- nizations and labor unions throughout New England. HARTFORDBUSINESS.COM POLL How did your company perform (financially) in the first half of 2016? ● Better than expected ● As expected ● Worse than expected To vote, go online to HartfordBusiness.com. Last week's poll results: Should Hartford, East Hartford have done more to keep the Riverfront festival? 44% Yes 56% No Carl Gustin OPINION & COMMENTARY Send Us Your Letters The Hartford Business Journal welcomes letters to the editor and guest commentaries for our opinion pages. Electronic submissions are preferred and welcome at: editor@HartfordBusiness.com.

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