As Fairfield County has enjoyed recent success in convincing companies to relocate within its borders, a battle is raging in Hartford over the effectiveness of tax credits to lure businesses.
In the space of a few weeks, policymakers got several visceral reminders of the state”™s close rivalry with New York for jobs, most prominently in Blue Sky Studios Inc. opening its new animation studio and headquarters in Greenwich; relocating more than 300 jobs from White Plains.
Wusthof Trident of America Inc. received a $750,000 state loan to move a distribution warehouse from Briarcliff Manor, N.Y., to Norwalk, adding 40 jobs. Connecticut put up $2 million to clean up a Bridgeport industrial site for the relocation of Columbia Elevator from Port Chester, which promises to employ 100 people. And the state agreed to loan financial firm Weeden & Co. $2.5 million for new furniture, fixtures and other amenities, forgiving $1.5 million of that amount if Weeden meets its intent to retain 150 jobs and create 15 more by 2011.
After Altria Group Inc. announced it would shut down the Stamford headquarters of UST Inc., the state promptly flipped $3 million in loans UST had taken to induce DRS Technologies to upgrade its DRS Fremont facility in Bridgeport, with the company agreeing to add nearly 100 more jobs to the 400 people it currently employs there. If DRS hits the jobs target, it will only have to repay half of the loan amount; if it adds another 60 jobs on top of the 500 job target, the state has agreed to forgive up to the full amount of the loan.
In 2006, the Connecticut General Assembly enacted tax credits that reward companies for creating jobs or hiring workers who have been displaced in layoffs. The legislative body is considering bills to suspend those tax credits until 2011; or cap them at $100 million for any single project.
The administration of Gov. M. Jodi Rell is opposing both measures on grounds it would reduce the ability of Connecticut to attract companies like Blue Sky.
“We never put anything on the table unless there is a positive return on investment,” said Joan McDonald, commissioner of the Connecticut Department of Economic and Community Development, addressing a legislative committee last month. “For a company that is currently in Connecticut, if they are talking to other states we do what we call a counterfactual analysis ”“ what the impact would be if that company left Connecticut from a revenue standpoint ”¦ If they are looking to go someplace else, sometimes they will come to us and they will say, ”˜Okay, this is what five other states have put on the table.”™ And they can be very competitive.
“UTC uses the R&D tax credits; Pfizer uses the R&D tax credits,” McDonald continued. “Pfizer specifically made location decisions based on those R&D tax credits. Now with (Wyeth and Pfizer merging), they will be making location decisions and we need to make sure that Connecticut is as competitive as any of the other 50 states and that (Pfizer) doesn”™t go someplace else.”
One senator said the very mention of eliminating tax credits can chill the site selection process for companies considering the Constitution State, on fears their investment could be staked to incentives that will not stand the test of time.
“I”™m aware of at least two companies that potentially employ close to 2,000 people who are thinking of coming to Connecticut and who have made major investments already in terms of their research,” said East Hartford Sen. Gary LeBeau, a Democrat who chairs the commerce committee in the Connecticut General Assembly. “At this point (they) are thinking of not coming to Connecticut as a result of this proposal.
“Those are 2,000 jobs that pay an average of $65,000 a year,” LeBeau said. “I”™m concerned that we could lose them.”
