Archive for the ‘Economy’ Category

3Connecticut taxpayers fund shorter CEO commutes

CEO Commute Bridgewater Cigna-01

The First Five, Connecticut’s signature economic development program under Gov. Dannel Malloy, prompted five CEOs to move their companies. In return, they got taxpayer funding – and a shorter commute to work.

Last month, a plan to move the hedge fund Bridgewater Associates, one of the world’s largest, from Westport to Stamford at a cost of $115 million in taxpayer money fell through.

Charter

The move would have reduced the commute for its billionaire founder Ray Dalio by two thirds. Instead of driving about 45 minutes from Greenwich to Westport, Dalio would drive only 15 minutes to Stamford, according to estimates based on Google Maps.

In some cases, the move was drastic. Charter Communications moved its headquarters from Town & Country, Four other First Five/Next Five deals still in place will move the company headquarters and keep the same CEO. In each case, the office moved closer to the CEO.

Missouri, to Stamford. For CEO Thomas Rutledge, who already lived in New Canaan, the new location is 990 miles closer to his home.

Alexion

Charter will receive $6.5 million in taxpayer support.

“Our CEO has had an office here and in Philadelphia for years, and still does,” said company spokesman Joe Mondy. “Cigna has offices in 30 nations and jurisdictions around the globe. Our decision to designate our flagship Connecticut offices as our corporate headquarters is all about the opportunity to leverage the highly educated, experienced and talented labor pool our state offers, so that our businesses may grow and flourish here and around the world.”Cigna CEO David Cordani saved himself some travel time by moving the company’s headquarters from Philadelphia to Bloomfield. Cordani’s Simsbury home is about 210 miles closer to the Connecticut site.

Cigna could receive up to $71 million from taxpayers.

Navigators

Spokesmen for Malloy’s office and the Department of Economic and Community Development, which coordinates First Five incentives, did not respond to a request for comment.

The pharmaceutical company Alexion plans to move from Cheshire to New Haven next year in return for $51 million in state assistance. CEO Leonard Bell will cut his commute from Woodbridge in half, from about 30 minutes to 15.

The insurer Navigators Group will receive $11.5 million to move from Rye Brook, N.Y., to Stamford. CEO Stanley Galanski will reduce his commute by a third, shaving about 15 minutes off his commute from Ridgefield.

CEOs in the First Five/Next Five program aren’t the only ones shortening their commutes. Fifth Street Finance received a $5 million forgivable loan from DECD to move from White Plains, N.Y., to Greenwich.

CEO Leonard Tannenbaum cut his commute from Greenwich in half, from about 30 minutes to 15. Fifth Street spokesman James Velgot said the shorter commute was unrelated to Fifth Street’s move.

“Len believes in the state, and wants to help it succeed in the long run,” Velgot said.

Another company, Sustainable Building Systems, was planned as a new joint venture so it did not have a previous location. In any case, the company has had trouble getting started. TicketNetwork withdrew from the First Five program after its CEO was arrested.Some companies in the First Five/Next Five program, like ESPN and Pitney Bowes, did not relocate, instead expanding in an existing location. Other companies changed CEOs around the time of the move, including NBC Sports and CareCentrix. The accounting firm Deloitte did not move its headquarters to Connecticut, but did expand its presence.

FifthStreet-06-06

The Bridgewater move fell apart because of a land use dispute between the project developer, Building and Land Technology, and city officials. Even though the deal fell through, BLT still gets at least $16 million from the state – as much as $2.50 for each $1 invested – to complete the environmental remediation of the property.

Graphics by Colby Pastre.

4NBC Sports gets more taxpayer money after exec appears in state ads

NBC Sports is set to receive another $6 million in taxpayer funds – beyond the $20 million the company already received – in return for creating 150 new full-time jobs within five years.

The State Bond Commission will consider the funding proposal from the Department of Economic and Community Development Friday. The $6 million loan is forgivable, with payments deferred for five years and a 1 percent interest rate.

The subsidy amounts to $40,000 per job created. The first $20 million loan supported the creation of 450 jobs.

Earlier this month, an NBC Sports executive appeared in a state-funded economic development ad.

“We consolidated our operations right here,” Princell Hair, senior vice president of NBC Sports Group, says in the commercial.

“For the last several years, we have worked to create a business climate in this state that grows jobs,” Gov. Dannel Malloy said when he announced the ad campaign. “And everywhere from small businesses on Main Street to major companies, we are seeing results. This new phase of our effort to encourage economic growth makes it clear that Connecticut can be a destination for and home to innovative companies.”

Danbury Mayor Mark Boughton, a Republican candidate for governor, criticized the ads as “purely political.”

Employees of NBC Universal and NBC Sports contributed $4,600 to the Connecticut Democratic Party’s federal account in January. State contractors and recipients of state aid can donate to political parties through their federal accounts, despite the ban on direct contributions to candidates.

The owner of the property occupied by NBC Sports gave the party $2,500 in November.

0Two companies in job-creator ads gave to Dems

Two of the companies highlighted in state job-creator advertisements recently contributed to the Connecticut Democratic Party’s federal account, one using its political action committee and another through top-level employees.

The ads feature leaders of Jackson Laboratory, Microboard Processing, NBC Sports Group, Datto, CIGNA and Evay Cosmetics. All of the companies received some form of state assistance.

CIGNA’s PAC gave $5,000 to the party in January.

Three NBC Sports and six NBC Universal executives gave a total of $4,600, also in January.

One of the two ads features Princell Hair, senior vice president of NBC Sports Group. Two fellow senior vice presidents, Robert Landau and Gregory Hughes, donated $500 each. NBC Sports Chairman Mark Lazarus donated $1,000.

The owner of the property occupied by NBC Sports gave the party $2,500 in November.

Although both CIGNA and NBC Sports are First Five companies receiving state support, they can legally give to the Democratic Party’s federal account.

William Cabral, an executive at Microboard Procession who didn’t appear in an ad, is a regular contributor to the Connecticut Republican Party’s federal account.

0UTC extra-credit deal equivalent to reducing corporate tax rate from 7.5 to 7.25 percent

The $400 million deal between Gov. Dannel Malloy and United Technologies Corp. will reduce state revenues over the next 15 years by at least as much as a quarter-point reduction in the corporate tax rate.

The deal allows UTC to use otherwise unusable tax credits in return for a making capital investments in Connecticut.

In 2016, the first year of the UTC deal, state officials expect the corporate tax to bring in $631.2 million. Under current law, the corporate tax rate in 2016 will be 7.5 percent after the expiration of a surcharge bringing the rate to 9 percent.

The $20 million in potential extra credit for UTC amounts to 3.1 percent of corporate tax revenue.

If the General Assembly had instead reduced the corporate tax rate by 3.1 percent it would fall from 7.5 percent to 7.27 percent. For the first five years of the deal, with the extra credit capped at $20 million per year, the effect of the deal hovers between a 7.25 and 7.3 tax rate.

After the initial five years, the cap increases to $33.3 million annually, and the effective tax rate falls below 7.25.

These projects assume no dynamic effects of reducing the corporate tax. A reduction in the corporate tax rate could increase corporate taxes and revenue from other sources, mitigating the projected loss of revenue.

0Carla’s Pasta founder gets return on political donations

Carla Squatrito, founder of Carla’s Pasta in South Windsor, gave $1,000 to the Connecticut Democratic Party last month, following up on another $1,000 donation in November.

Squatrito is a regular contributor to Democratic candidates and political action committees, giving $48,150 since 1999, according to the Federal Elections Commission. She made state-level contributions as recently as 2011, but as a recipient of state funds can no longer do so. Her recent donations to the state party went to its federal account.

The federal account allows state contractors and recipients of state funds to avoid the ban on their political donations.

Last year, the Department of Economic and Community Development awarded Carla’s Pasta a $4 million forgivable loan to fund an expansion project.

In 2012, Carla’s Pasta received a $2.2 million loan and $750,000 grant from the state to install a fuel cell.

“In Connecticut, the government works,” company vice president Sergio Squatrito told CT News Junkie when Gov. Dannel Malloy visited the new fuel cell. “Too many times businesses don’t step up and say ‘without the government this would not be happening.’”

2Jackson Labs avoids local approvals as a ‘state project’

Construction on the Jackson Laboratory facility in Farmington is well on its way to completion thanks in part to unique treatment of the project: the lab didn’t need any local approvals.

The Jackson Laboratory for Genomic Medicine will receive a $297 million subsidy from the state. Gov. Dannel Malloy has touted the project for its economic-development potential.

If all goes according to plan, the time between legislative approval and grand opening will be almost exactly three years.

In addition to the monetary benefits from the state, treating the lab as a “state project” allowed to it to avoid the time-consuming and costly land-use process faced by other developers. Instead, the project received state approvals.

Mike Hyde, the nonprofit lab’s vice president of external affairs and strategic partnerships, said another developer “would follow the exact same process that we are” – if it was building on state property and had state financial support.

“I don’t know if one is more stringent than the other,” Hyde said. “I couldn’t say it was a privilege because I don’t know what the other experience is like.”

According to a March 2014 update on the project, JGM received about $9 million in state money for research, training and other reimbursable expenses.

By the end of 2013, JGM spent $64 million on construction out of $135 million budgeted. The state gave JGM a $192 million forgivable construction loan.

According to hiring projections, the subsidy amounts to about $42,000 per job per year.

The General Assembly approved Malloy’s incentives for JGM in October 2011. The new law designated Connecticut Innovations, the state’s venture capital fund, to manage the state’s relationship with JGM.

Connecticut Innovations signed an agreement with JGM in January 2012.

JGM awarded the contract to manage construction of the 183,500 square foot lab in January 2013.

Hyde said the lab plans an Oct. 7 grand opening.

In order to maintain its incentives JGM needs to reach 300 employees within 10 years. Hyde said the building could fit up to 320 people. “We’ll hit the 300 employee mark sooner than we had imagined,” Hyde said.

Hyde said JGM has 79 employees in about 11,000 square feet of temporary space and is looking for about 35 new employees. “We’re adding people at a lively clip,” he said.

Some University of Connecticut employees count toward JGM’s hiring goals.

The legal principles that allow JGM to avoid local land-use regulations are the same that allow a contractor for the Department of Transportation to build a road for the state without local approval. These principles have expanded greatly. In 1959, Attorney General Albert Coles wrote an opinion giving the state the ability to give an airport hotel on state property a liquor license instead of following local regulations.

“Therefore, it is my opinion that the airport operation constitutes a governmental function serving the public need and by virtue of its nature is immune to the zoning power of the Town of Windsor Locks,” Coles wrote a half-century ago. “The hotel with a liquor permit would be in furtherance of, rather than a deviation from, the essential airport use and, therefore, exempt from the zoning regulations of the Town of Windsor Locks.”

Update: This  post was updated to clarify that JGM did obtain state-level approvals for construction in place of local approvals.

2Jepsen’s ebook win averages 86 cents per resident

Connecticut residents are beginning to receive settlement payments from ebook publishers thanks to the efforts of Attorney General George Jepsen and his peers across the country.

Nationally the settlement amounts to $166 million, with $3 million intended for Connecticut residents, or an average of 86 cents per person.

Five publishers that settled a price-fixing lawsuit will make the payments.

Apple, another defendant in the suit, did not settle. The company is appealing a Federal District Court ruling and awaits another trial to set the amount of damages.

Jepsen’s office issued a statement:

“I encourage Connecticut consumers who filed claims or are otherwise eligible for credits through these settlements to check their email or mail and their retailer accounts to take advantage of the refunds that will begin arriving this week,” said Attorney General Jepsen.
Account credits and checks will be based on the number of eligible eBooks purchased during the claims period – April 1, 2010, to May 21, 2012. Whether a consumer receives a credit or a check depends on the retailer through which the eBook was purchased and, in certain circumstances, whether a claim was properly filed. Eligible consumers should check their email for communications from their eBook retailer regarding account credits. Checks will be sent by mail to eligible consumers. For more information about the settlements, please visit www.ebookagsettlements.com.
 “Consumers are entitled to a fair, open and competitive marketplace, and consumers who have suffered as a consequence of violation of antitrust laws are entitled to compensation,” the Attorney General said, “At the upcoming damages trial, Connecticut – along with Texas and New York – will be leading the effort on behalf of our partner states to obtain substantial additional compensation for consumers as well as civil penalties for the state.”
Assistant Attorneys General Joseph Nielsen, Gary Becker and Richard Porter; Paralegal Specialist Holly MacDonald; and Assistant Attorney General Michael Cole, chief of the Antitrust and Government Program Fraud Department, are assisting the Attorney General in this matter.

2Company run by son of Voices for Children co-founder on track for $3 million in state aid

The State Bond Commission will consider granting $3 million in state assistance next week to a company run by Josh Geballe, son of the co-founder of Voices for Children.

Geballe is CEO of Branford-based Core Informatics. His mother, Shelley Geballe, co-founded and ran Voices for Children for more than a decade. Voices for Children generally lobbies for increased state spending, higher taxes on businesses and a more transparent tax system.

The state aid to Core Informatics includes a loan for $2.75 million at 2 percent interest for 10 years. Principal is deferred for three years and $1 million is forgivable if the company retains 15 jobs and creates 69 more. The Department of Economic and Community Development will also grant the company $250,000 to buy office equipment.

Pittney Bowes, a First Five company, is on the bond commission agenda for $9 million in assistance. Norwalk-based Datto is on the agenda for $6 million.

Shelley Geballe is also on the board of the organization that publishes the CT Mirror.

0Do hedge funds have a future in Connecticut?

Two Fairfield County state senators made the case Thursday that hedge funds are welcome in Connecticut, despite the sometimes icy reception the industry gets from politicians and the media.

Sens. Carlo Leone, D-Stamford, and L. Scott Frantz, R-Greenwich addressed a crowd of more than 200 at the quarterly meeting of the Connecticut Hedge Fund Association at the Indian Harbor Yacht Club. David Burke, managing director at MKP Capital Management, moderated the discussion.

“We’re here to listen and to learn,” Leone said.

“We are proud to have you here,” he said. “I do believe that not everyone out there understands how you do what you do.”

Frantz thanked everyone in the audience for their contributions to the state, which pay for safety-net programs, roads and public safety for all residents. According to Frantz Greenwich sends $1.2 billion to Hartford and gets back $6 million.

“They’re just not used to getting thanked,” he said.

Both senators said their colleagues in the General Assembly underappreciate the hedge-fund industry.

“They do think money grows on trees,” Leone said.

He said he tries to make the connection between what happens in Fairfield County with what happens in the rest of the state. A “cold” downstate, he explained, is usually “more of a flu up there.”

Leone said when the light does go off “it’s more dim than bright.”

Frantz said even among Republicans “there’s not nearly enough understanding” of hedge funds. He said some in Hartford have “feelings of animosity” toward successful people.

People from other parts of the state view “that little rectangle” in the southwestern part of the state as a “$100 bill,” Frantz said. “It really boils down to envy at the end of the day.”

They both had good things to say about Gov. Dannel Malloy.

Frantz said there is a “much more business-oriented person in there now,” referring to Malloy. “You’re very well-liked up in Hartford, regardless of what you may hear.”

Leone said Malloy “struck a balance” when raising taxes three years ago. “I think he would have preferred not to raise them,” he said. “I don’t think it’s an overreach.”

Burke asked the senators why they thought Connecticut is home to so many hedge funds.

Frantz said Connecticut has a “critical mass” of hedge funds, which is one of the state’s key selling points. He said a concentration of hedge funds is a “wonderful thing to have, very difficult to get going.”

“A lot of corporations are here,” Leone said. “A lot of businesses are here.”

“The education level is quite higher,” he added. “You’re going to want to be where the people are.”

Frantz said the hedge fund industry is very attractive because it doesn’t pollute, brings educated people together and provides “high-value, high-paying jobs.”

“The last thing we need is more laws,” Frantz said, adding that “it never works” to pass legislation to attract businesses. He said Connecticut needs low taxes and a “dynamic, friendly, easy-to-navigate business environment.”

“That’s how you get good jobs to come to the state.”

Frantz said, although the rate has slowed recently, the state budget has grown about 7 percent annually over the past 35 years. “We all know the power of compounding.”

Burke asked about the fairness of the state giving more than $100 million to Bridgewater, one of the largest and most successful hedge funds. He said he would “stand up and salute” Ray Dalio, the company’s founder, for his success but can’t understand why the state is paying so much to save jobs “that never seemed to be at risk of leaving the state.”

Bridgewater’s future landlord is also receiving millions from the state.

“It’s funny how everyone seems to be threatening to leave,” Frantz said.

The deal doesn’t make sense, Frantz said, because Dalio’s net worth “fluctuates more in a second than the value of the entire package.” However, he said paying $150 million for a new hedge fund of that size to come to Connecticut would pay off in about nine months.

Leone said “because he’s so wealthy personally doesn’t detract” from the economic impact of having Dalio and his fund in Connecticut.

Burke said it seems that taxpayers are “paying for him to have a helipad in Shippan.”

Frantz said the state has committed $386 million to the First Five, Next Five and “yet another five” programs. “There’s a ton in the way of resources,” he said. “I would argue we’re spending too much on this.”

According to Frantz, the state is spending about $75,000 per job for its incentive programs, often in forms that don’t need to be paid back, like forgivable loans. He said economic development programs more typically offer about $12,000 per job and the money is repaid.

A member of the audience said tax rates are “appreciably less” in Connecticut.

“That delta between New York City and Connecticut has shrunk,” Frantz said, adding that “new leadership in Manhattan” might improve the situation from Connecticut’s perspective.

“I would love to see taxes go down,” Leone said.

“By the way, when you hear ‘temporary tax’ that’s government speak for permanent,” Frantz said.

“Most of us here have the misfortune of traveling” on I-95 or MetroNorth, Burke said, what about transportation?

Connecticut would have to contribute $3.7 billion to make all needed improvements to MetroNorth, Frantz said. When it comes to roads, “we’re going to be underfunded here for years to come,” he added.

Leone said officials are working to get “the federal assistance that we deserve that we don’t get.”

Burke said it is difficult for the hedge-fund industry to advocate for itself because many funds also compete to manage state pension-fund investments.

“Talking to you is a risk,” Burke said, because it could create an impression of lobbying or even corruption.

Leone said the industry could “allow the lobbyists to do that on your behalf,” while Frantz said a single representative could speak on behalf of the industry.

1First Five companies give back to Democrats

Two companies participating in Gov. Dannel Malloy’s signature economic development program contributed to the Democratic Party last month, contributing to the party’s significant financial advantage over Republicans.

Employees of NBC Universal and NBC Sports gave the Democrats federal account $4,600, while the Cigna Political Action Committee contributed $5,000.

NBC Sports and Cigna are participating in Malloy’s First Five program.

Other notable donors include:

– Marianna Kulak McCall, McCall Kulak Foundation, $10,000

– Eric M. Zachs, Bantry Bay Ventures and spam-software maker Ziplink, $2,500

– Daniel E. Kleinman, partner at Hinckley Allen and board chair and legal counsel to the Travelers Championship, $1,000

Paul Nunez Jr., lobbyist with DePino Associates, $500