Hartford Business Journal

20 Hartford Business Journal • December 19, 2016 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL 2016: A year of state, city financial crises T his is our last regular issue in 2016, which has been another roller-coaster year for Greater Hartford and the state of Connecticut. While we saw some progress in parts of the state's economy, it proved to be another tough year dominated by fiscal stress and uncertainty. Here is the good, bad and ugly of 2016. Good Connecticut started off the year relatively strong with job gains in the first four months of 2016, adding just over 9,500 jobs from January through April. That forward momentum, however, didn't last and the state lost jobs in five out of the last six months. Meantime, the state's unemployment rate started at 5.5 percent in January and stood at 5.1 percent in October. The housing sector fared better this year, with home sales up 8.4 percent through the first 10 months of 2016, according to The Warren Group. Home prices, however, have remained sluggish, down 0.6 percent from 2015 to $248,000. Another bright spot is that state lawmakers, despite facing another billion-dollar deficit, didn't raise taxes this year, instead choosing to cut expenses and the state workforce. While the cuts were painful, affecting social services for some of the state's neediest residents and causing some government employees to lose their jobs, they were needed to prevent a third wave of tax hikes in the last six years. Bad While tax increases were avoided in 2016, it remains to be seen if the same can hap- pen in the year ahead. Nonpartisan budget analysts have forecasted a deficit as high $1.5 billion in fiscal 2018. That comes despite the state slashing more than $800 million in spending this fiscal year and laying off over 1,000 state workers. Connecticut's lack of economic growth and spiraling long-term debt costs have created a vicious cycle of fiscal instability with no end in sight. Further tax increases would continue to scare off business investment while more bud- get cuts will begin to eat into vital state services. Gov. Dannel P. Malloy recently reached a deal with state labor unions to prevent long-term pension costs from overwhelming future state budgets, but more state-employee concessions (on wages, healthcare and pension benefits) must be achieved, if Connecticut wants to establish any form of stability. Ugly The year started off with much hope and optimism for the city of Hartford, with a young, energetic, bright new mayor taking office, but Luke Bronin's honeymoon period was largely nonexistent as he was forced to deal with multiple crises left by the prior administration. First, Bronin inherited a deficit-laden budget that he said has Hartford headed toward insolvency unless drastic measures are taken by the state legislature to support the city. Poor financial stewardship by past administrations, a poverty-stricken popu- lation, huge swaths of untaxable land, and a high commercial property tax rate have sapped the city's ability to grow economically or keep up with rising municipal costs. Then there was the disastrous Dunkin' Donuts Park project, which fell behind sched- ule and was over budget, forcing the Hartford Yard Goats to embarrassingly play its inaugural season entirely on the road. Bronin bravely fired the original developers, Centerplan Construction, but myriad costly lawsuits have ensued over the project. As we look forward into 2017, it will likely be a make or break year for Hartford. If the city and state legislature can come up with a fair plan to save Hartford from bank- ruptcy, and the ballpark is ready for April 2017 opening day, the city can begin to repair its tattered image. If both problems go unfixed, Hartford's outlook is cloudy at best. n OTHER VOICES 2016 crises offer key lessons for businesses By Andrea Obston T he year 2016 was a head-scratcher. Nothing went as expected. Elections in the U.S. and Britain left pundits with open mouths. A product that took the social media world by storm — Vine — is headed for the scrap heap. And the Cubs won the World Series. Is there nothing we can count on? Yes — crisis. Poli- ticians may come and go. Products may catch fire and flame out, and loveable los- ers may make it to the top of the heap. But crisis — those "What were you thinking?" moments — will always be with us. You can depend on that. Here are some of the crisis highlights (low-lights) that remind me why I love being a crisis watcher: New Balance's firestorm Talk about a remark catching fire. A mere 24 hours after the election, a remark by Matt LeBretton, New Balance's vice president of public affairs, inspired people to post pic- tures of them setting the company's shoes on fire and tossing them into toilets. And, what caused this firestorm? Here's LeBretton's quote: "The Obama administration turned a deaf ear to us and frankly, with Pres- ident-elect Trump, we feel things are going to move in the right direction." LeBretton was talk- ing about Trump's dislike of the Trans-Pacific Partnership trade agreement. As the only major company making athletic shoes in the U.S., the company believed the policy would hinder their business and help overseas competitors. Before you could say TPP, the remarks had gone viral and posts of flaming New Bal- ance shoes were all over social media. The company's first attempt to get the crisis under control (saying that it wanted to make more shoes in the U.S., not less) did nothing. In fact, the next social-media volley came from neo-Nazi blogger Andrew Anglin who dubbed New Balance the "Official Shoes of White People." Not surprisingly, the company found itself on the defensive again, putting out a state- ment that looks like what you see at the end of every employment ad: "New Balance does not tolerate bigotry or hate in any form." Then came their Instagram statement: "As a 110-year-old company with five factories in the U.S. and thousands of employees world- wide from all races, genders, cultures and sexual orientations, New Balance is a values- driven organization and culture that believes in humanity, integrity, community and mutu- al respect for people around the world." On Facebook, the post has attracted more than 5,000 reactions and hundreds of comments, some lauding the company and others from sup- porters and detractors of Mr. Trump criticizing its response. Eventually, New Balance tweeted a picture of a full statement, which included this: "We believe in community. We believe in human- ity. … From the people who make our shoes to the people who wear them, we believe in acting with the utmost integrity and we welcome all walks of life." So, first they said too little. Then they said too much. The lesson here is this: React quick- ly and directly. Telling a long-convoluted story that talks around the overriding issues leaves folks confused about where you really stand. Apple's FBI showdown In February, Apple's CEO, Tim Cook, drew a line in the sand on building a "backdoor" into the security of the company's phones. He positioned both his company and his own personal brand as the defenders of privacy in a way that hasn't been done before. Cook took himself out of the shadow of Steve Jobs with a strong stance against the FBI's demands that the company help them hack into the phone of one of the San Bernardino shooters. Apple's stance signaled a change for them. The company has been known for its secrecy. In this case, though, they went against their past culture to communicate about principles. They sent a letter explaining their stance to their customers; held conference calls with reporters whenever the government or Apple filed new court documents and did high-profile interviews. All this expanded the company's PR outreach beyond the tech reporters that cus- tomarily follow the company and its products. It might not be a popular move but I think it's worth the risk. While some newspapers ran supportive editorials of its stance, a Pew Research survey a month after the shoot- ing said the majority of Americans were on the other side of this issue. In addition, the upcoming Trump administration has sig- naled that it, too, may want to jump into the fray. But I believe the idea of Apple as a cham- pion of privacy will, in the end, be a positive for the company. Wounded Warrior inflicts its own wounds And speaking about things Americans value, an appalling crisis developed this year that involved a charity organized to benefit veterans. This was a crisis that the nonprofit will not recover from. The Wounded Warrior Project (WWP) was a fundraising giant, taking in more than $372 million in 2015 — largely through small donations from people over 65. Yet, through- out the year, media accounts and revelations by former employees exposed the group's lav- ish spending on administration and market- ing. In Jan. 2016, WWP was the target of twin exposés by the New York Times and CBS News. In March, WWP's board fired CEO, Steven Nardizzi, and COO, Al Giordano. I do not believe the charity will survive. Unlike profit-making companies — which can rebuild trust over time with acts of contrition and support of good work — nonprofits are held (legitimately) to a higher standard. Once that trust is broken, you can expect donors to go elsewhere and those who benefit from the charity to suffer. We've already seen that. Since the firings, WWP's annual contributions have withered by a projected $200 million. The year 2016 showed us just how unexpect- ed, unusual and unbelievable crises can be. Stay tuned. There's one thing I can guarantee for 2017 — there's more where that came from. n Andrea Obston is president of Bloomfield-based Andrea Obston Marketing Communications. HARTFORDBUSINESS.COM POLL Will state lawmakers raise taxes in 2017 to balance the budget? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Is your company having a holiday party? 75.8% Yes 24.2% No Andrea Obston

• Cover