After a little over seven months on the job, Department of Economic and Community Development Commissioner David Lehman is finding himself working long hours, traveling all over the state and working feverishly to right Connecticut”™s fiscal ship.
It”™s a considerable change from working in the private sector. Before taking his first-ever government job, Lehman spent his career on Wall Street, the last 15 years at Goldman Sachs, where most recently he was the global head of real estate finance and investment banking.
But, he said, he has no regrets.
“I love it,” the 41-year-old told the Business Journal. “It”™s an amazing challenge. I”™m a big believer in (Gov. Ned Lamont”™s) approach to the state”™s economy, and I”™m certain that we can get the state of Connecticut back in the shape it needs.”
Not that winning the job was simple. Lehman”™s tenure at Goldman, which coincided with the 2008 subprime mortgage crisis, was the subject of much debate among members of the state Senate. During his confirmation hearing, Lehman denied that he knowingly sold intentionally inflated products to customers.
BRUISING PROCESS
Despite that somewhat bruising process ”” he was confirmed by a 28-8 vote in late March after being nominated by Lamont in early February ”” the Greenwich resident said he welcomed the process.
“In government, just like the private sector, you need a lot of collaboration,” he said. “I met with probably over 90% of the Senate on a one-on-one basis. There were a lot of questions asked on both sides to make sure we were comfortable with each other.
“They wanted to make sure that I would be effective in the role and I was pleased and happy to answer those questions.”
Lehman said he had never met Lamont before hearing the new governor”™s Jan. 9 speech to the General Assembly, but was suitably inspired by the governor”™s call to public service to “reach out and say, ”˜I could be useful to you and your administration, and I”™m happy to offer my services.”™”
Following a number of meetings with Lamont and members of his administration, “I quit my day job and started a new day job,” Lehman laughed.
Lehman ”” who is also Lamont”™s senior economic adviser ”” said he is hard at work implementing aspects of the governor”™s “debt diet” while working to attract new companies and jobs to the state, as well as retaining those already here.
“We are focusing on what money is going out and what we are getting in return,” he said. “Ultimately, it”™s about the cost to the taxpayer, and I am certainly one of those. We hope to spend less money per job created” than had been the case in the past.
COMPARE AND CONTRAST
Lamont”™s predecessor Dannel Malloy ”” and Lehman”™s DECD predecessor Catherine Smith ”” made waves (positive and negative) for doling out millions of dollars of incentives to attract companies to Connecticut. According to a DECD report in January, Malloy”™s “First Five Plus” initiative involved 19 companies receiving $360.6 million in direct state assistance, with another $120 million in tax credits, resulting in 30,164 jobs retained and 13,015 new jobs ”” which DECD calculated as costing $8,722 per job.
While the loans and grants were contingent upon recipient companies hitting specified job targets, that did not always occur. In moving its corporate headquarters from Philadelphia to Bloomfield in 2011, Cigna agreed to a deal that would allow it to earn up to $71 million in state grants, tax credits and loans. When the insurer failed to create the promised 600 new jobs, the state forgave $10 million of the $15 million loan in the incentives package. Cigna repaid the remaining $5 million in 2017.
Even with the state”™s dangling of a financial carrot, some companies have given Connecticut the stick. Alexion Pharma-ceuticals”™ First Five agreement involved up to $51 million in state incentives, but it still chose to relocate its headquarters from New Haven to Boston in 2018.
Alexion paid back a $20 million loan, plus interest, a $6 million grant and penalties ”” with the state making $2.13 million on the deal, according to the DECD ”” and announced last month that it expects to spend about $10 million to expand its R&D facility, which remains in New Haven.
Still, the exit of Alexion and, more locally, General Electric”™s move from Fairfield to Boston ”” along with Cigna and Aetna threatening to leave, the latter staying only after CVS acquired it and New York City pulled its own incentive package ”” have left nagging doubts in many corners about where the state is heading.
Lamont has frequently invoked his talks with GE after its move was a done deal ”” regularly noting how the company was essentially fed up with the state”™s inability to “get our fiscal house in order” ”” and this month Kiplinger named Connecticut the nation”™s second-least business-friendly state, giving further credence to a longstanding perception.
MILLIONS OF DOLLARS
The state has doled out tens of millions of dollars to Electric Boat for its expanding submarine-manufacturing operations, as well as $8.4 million to Charter Communications and $4 million to Cigna for headquarters expansions and/or improvements.
But, following Lamont”™s lead, Lehman said the days of front-loading agreements with money on the condition of job creation may be over. Instead, the state plans to require companies to create jobs first to receive a percentage of a “net new income tax.”
The percentage that businesses get back by creating a job will be greater in the state”™s 72 Opportunity Zones, as designated as part of the 2017 Tax Cuts and Jobs Act.
“It”™s absolutely a shift,” Lehman said. “We”™ve already given out substantially less (this year) than the preceding four years. We want to let the private sector take the lead. They”™re the experts.”
The state has bonded about $1.22 billion for capital projects year to date, compared with the $1.97 billion borrowed last year.
Lehman noted that an Oct. 30 event in New Haven, “Opportunity Zones ”” Choose Connecticut,” was designed to “show off and showcase the Opportunity Zones we have, with representatives from municipalities, developers and others attending. We want to make sure we don”™t lose those … opportunities, for lack of a better word.”
Lehman said the state is also refocusing its efforts at drawing companies from the past scattershot approach to one targeted at those business sectors where Connecticut has an advantage, including tech, financial services, manufacturing, including aerospace and defense (“very, very unique to Connecticut”), life sciences and health care.
“We can”™t focus on every type of business and industry,” he declared. “We need to be thoughtful and deliberate on where we focus our resources.”
He echoed the governor”™s determination to fix the state”™s transportation infrastructure.
THE NEW HAVEN LINE
“The New Haven Line is such an asset to the state,” he said. “The growth we want and need is dependent on figuring out our highways and building our rail and even bus service in places like Stamford and Norwalk. And we need more transit-oriented development.”
Lehman”™s efforts are receiving solid reviews from business leaders.
“He”™s off to a really good beginning,” Joe McGee, vice president, public policy and programs at The Business Council of Fairfield County, said. “He”™s very clearly reaching out to different groups, meeting a lot of people. He”™s very focused on the practical side, how you grow business, and he has a relationship with the governor that”™s very strong, which is very important.”
McGee also praised the administration”™s approach to transportation and capitalizing on the state”™s workforce, as well as the shift in how incentives are positioned.
“So far, I”™ve been impressed,” said Joe Brennan, president and CEO of the Connecticut Business and Industry Association. “It doesn”™t always work out if you”™re going from the private sector into government, but his background in finance and real estate make him perfect for the DECD role.
“Other states are very aggressive” in poaching business from each other, Brennan continued. “He realizes that there needs to be a new focus on the quality of life, the quality of the workforce and the overall cost of doing business here. Those are the things that will really create a long-lasting environment.”
