Archive for the ‘Taxes & Spending’ Category

0Jackson 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.

1UConn faces deficit and raises tuition while subsidizing sports by $18.9 million

With UConn facing a $42.6 million budget deficit and raising tuition by 6.5 percent next year, here is a look at the money behind UConn athletics.

Source: ESPN and author calculations comparing 101 NCAA Division 1-A public colleges and universities with available date for 2013. View data here.

UConn revenue: $63.3 million, rank 48

UConn Athletics revenue sources

1. NCAA and conference: $13.6 million
2. Licensing: $10.5 million
3. Student fees: $9.7 million
4. University subsidy: $9.1 million
5. Ticket sales: $8.9 million
6. Donations: $7.2 million
7. Media rights: $1.7 million
8. Away game payments: $1 million

Total subsidy (student fees plus university subsidy): $18.9 million, rank 12

Unsubsidized revenue: $44.5 million, rank 50

Coaching expenses: $15.2 million, rank 25

Return on coaching (unsubsidized revenue divided by coaching expenses): 2.9, rank 70

See also:

Raising Hale UConn ranks fifth nationally for head coach pay

Raising Hale The Final Fortune: Who would win the NCAA tournament if sports were all about money?

Raising Hale Final Fortune: Women’s Edition

Courant UConn Athletics Subsidy Ranks Second Among Bowl Championship Schools

Wait, What? Should Taxpayers Have To Subsidize UConn’s Athletic Program?

4$2.6 million IT bonding package includes funding for ‘weapons registration system’

The State Bond Commission is scheduled to vote Friday on $2.6 million in information technology upgrades at three state agencies, including a “special licensing and weapons registration system.”

The Department of Emergency Services and Public Protection, which includes the State Police and other public safety functions, will receive a share of the money to ”upgrade current information systems which provide background checks for firearm permits and gun sale authorizations. The new system will incorporate e-government (online self-service) capabilities and will allow DESPP to properly manage increased volume of applications.”

The Day recently reported that DESPP, which enforces the new laws passed after the Newtown school shooting to ban the sale and purchase of certain guns, “received about 50,000 applications for certificates for the rifles and 38,000 for ammunition magazine declarations.”

The commission’s agenda did not specify how much of the $2.6 million would go to DESPP.

Funds will also go to the Department of Administrative Services and the Department of Developmental Services. DAS will purchase “enterprise content management services.” DDS will invest in two projects, a case management system and an upgrade to the quality of services review application.

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.

3Top teacher pension goes to double-dipping CREC chief for total pay of $328,000

CREC Executive Director Bruce Douglas. Photo courtesy of CREC.

CREC Executive Director Bruce Douglas. Photo courtesy of CREC.

The largest teacher pension in the state of Connecticut goes to the head of the Capitol Region Education Council where he makes $130,000 in salary on top of his $198,000 pension.

Bruce Douglas has headed CREC since 2001. CREC runs 18 magnet schools, administers certain state programs and offers professional development and other services for 35 Hartford-area school districts.

Douglas, 66, started collecting his pension in November 2011. He said it was to his disadvantage that he waited so long to begin collecting his pension. “I probably should have done it sooner,” he said, explaining he was too busy to get around to it.

He said having four daughters in college is one reason why he started collecting his pension.

Douglas said he felt bad for people who don’t have a pension like his. “I wish they could have had the good fortune of going to school, getting a doctorate, working really hard,” he said. “I followed that path scrupulously.”

State law allowed Douglas to continue working after beginning to collect his pension as long as his salary was cut to 45 percent “of the maximum salary level for the assigned position.”

Prior to collecting his pension, CREC paid Douglas a little less than $250,000 per year.

Douglas said the reduction in his CREC salary of about $70,000 effectively paid for 1 percent raises for all CREC administrators. He said CREC has very low indirect costs – costs unrelated to the classroom – possibly the lowest in the country. He said those administrative costs fell from 10 percent when he started at CREC to below 2.5 percent.

During the 2010-11 school year, when he began collecting his pension, Douglas earned about $339,000 because of one-time payment for “deferred salary increases”.

Douglas said he had planned to retire and stop working in 2011, but the CREC Council offered to allow him to continue as executive director. He said “most people” don’t think you should stop working before collecting your pension.

The maximum pension benefit for teachers is 75 percent of final salary and that point is reached after 37.5 years.

“I was drawing less interest off my pension after my 37th year,” Douglas said. “It wasn’t fiscally responsible” to continue paying in because he was “putting more in than I was getting out.”

According to a database compiled by The Day, Douglas contributed $638,868 to the pension fund during his career.

Douglas said he plans on joining the Peace Corps when he leaves CREC.

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.

0State auditors send General Assembly their wish lists

State auditors recently asked the General Assembly to fund five new positions for a specialized type of audit and make legislative changes to improve the integrity of state finances and operations.

Last year, the Auditors of Public Accounts conducted 43 audits and made 360 recommendations to state and quasi-public agencies, which adopted about half of the recommendations, according to their annual report.

The auditors also handled 38 whistleblower complaints. The backlog of whistleblower complaints fell from 241 in 2009 to 85 at the end of last year.

By the end of 2014, the auditors plan to bring convert all of their work papers to electronic records. “We are already noticing significant productivity improvements in our audit work, which will only increase as we eliminate the storage and handling of all paper-based work papers.”

The auditors also plan to “determine whether state systems adequately maintain the integrity of data, protect against breaches of privacy, and ensure there are proper safeguards to protect against fraud.”

The auditors recommended a number of legislative changes.

For example, the auditors recommend that human resource directors should be required to report ethics violations. “Ethics violations very often pertain to human resources or personnel-related issues. However, human resources directors are not required to report these matters when they become aware of such violations. We have identified such circumstances at an audited agency.”

The auditors also suggested improvements to the state’s policy for rehiring retired state workers, especially to make sure the policies are consistent with the Internal Revenue Code.

Retired employees can return to work for up to two 120-day stints under current state rules at 75 percent of their previous pay rate.

The auditors found at least one example of a personal services contract with a retired state employee that skirted a prohibition on such arrangements by forming a limited liability company. State contractors have hired other retirees, also circumventing the rules on reemployment.

“The Internal Revenue Code requires a bona fide severance of a retiree’s employment to allow the retiree payment of a pension allowance during reemployment if under age 62,” the auditors wrote. “This requirement is not currently reflected within the General Statutes or other regulations.”

Auditors also suggested a number of opportunities for “performance audits” in a recent report. They are seeking funding for five new positions to take on more of these projects.

“As the state endeavors to find ways to operate more efficiently, performance audits could serve as a useful tool to preserve state resources and improve state services,” the auditors wrote.

The auditors reassigned staff previously dedicated to performance audits “due to reduced resources and other demands on our office.”

They suggested looking at:

– how the state processes background checks

– whether people receiving state benefits also get them in other states

– how to maximize federal funding

– energy costs and building maintenance

– the backlog of state retirement claims

– the state’s bidding process

– overpayment of unemployment benefits

0No strong link between funding and use at Connecticut libraries

Cities and towns across Connecticut spend a wide range of taxpayer money to support local libraries, from Greenwich’s nearly $9 million to Norfolk’s $1,000.

Despite Norfolk’s small investment, it leads the state in visits per resident, according to 2012 data compiled by the Connecticut State Library. Official data for 2013 will be available on the State Library website later this month.

On average, Norfolk’s residents visit the library nearly twice a month.

(Learn more about libraries across the state here.)

Greenwich does have an engaging library with residents visiting 15 times a year on average. Since it contributes a lot more than Norfolk, Greenwich pays about $9 per visit while Norfolk pays a few pennies.

Based on taxpayer cost per visit, the most expensive libraries are Hebron ($17.57), Middlefield ($16.40), Woodbridge ($16.02), Bridgeport ($14.78) and East Hartford ($13.86).

After Greenwich, Hartford appropriates the most taxpayer money to its libraries, $7.9 million, followed by Stamford ($7 million) and Bridgeport ($6.7 million).

Fairfield, Westport, Norwalk, New Haven, Darien and West Hartford spend between $3 and $4.5 million on their libraries.

Another 10 towns spend between $2 and $3 million: Manchester, New Britain, Stratford, Middletown, Wallingford, Wilton, Newington, Waterbury, Farmington and Meriden.

Taxpayers fund all of their library operating costs plus other some additional expenses – in other words more than 100 percent of the library’s operating costs – in 19 towns. Salem’s library is funded at 150 percent of operating costs, followed by Bridgeport, Mansfield, Goshen, Glastonbury, Andover, Avon and Bethlehem. The other 11 towns fund their libraries between 100 and 102 percent.

Norfolk funds the smallest percentage of library operating costs, less than 1 percent. Torrington funds about 4 percent.

Wealthier towns tend to spend more on their libraries on a per capita basis. Westport spends the most, $157 per resident, followed closely by Darien, $153. Greenwich and Wilton spend $10 and $20 less per resident, respectively.

New Canaan, Farmington, Woodbridge, Avon, Easton and Newington spend between $75 and $95 per resident.

Another 11 towns spend more than $60 but less than $75 per person: Fairfield, Bloomfield, Madison, Waterford, Hartford, Durham, Old Saybrook, Wethersfield, Woodbury, Roxbury and Middlefield.

Four Connecticut towns don’t have their own libraries, Barkhamsted, Bozrah, Colebrook, and Lisbon. Instead they contract with other towns. According to the State Library, Barkhamsted and Colebrook contract with Winsted, Bozrah contracts with Salem and Lisbon with Griswold.

0Program for unemployed veterans slow-going at first

A jobs program to support the hiring of unemployed veterans has been slow to take hold with less than 10 percent of the money borrowed for the program reaching employers since 2012.

Gov. Dannel Malloy and the General Assembly created “Step Up for Vets” nearly two years ago and borrowed $10 million to fund it. The program is modeled after the Subsidized Training and Employment Program, known as Step Up, another Department of Labor program with $20 million in funding split between wage subsidies and manufacturer training.

Malloy announced plans Tuesday to continue the traditional Step Up program with another $10 million in funding. The program has spent $16 million of the original $20 million or 80 percent of its funding.

The funding went to about 2,000 new employees at 500 small businesses who were paid an average wage of $15.72 per hour, according to department.

The program for veterans has helped about 100 unemployed veterans get hired at an average wage of nearly $17 per hour, spending less than $1 million, or 10 percent, of the money allocated.

Last year, the General Assembly expanded eligibility for the program.

“At that time, it was only open to veterans if they were a combat veteran of Operation Enduring Freedom in Afghanistan or military operations in Iraq,” said Nancy Steffens, a spokeswoman for the Labor Department.

Steffens said “many returning veterans from those wars opted to go back to school instead of work,” which led to the program’s expansion.

“Since that time, many more veterans have been eligible for the program,” she said. “It has been much easier for the agency to match employers with veterans that can take part.”

In December the Auditors of Public Accounts raised concerns with operation of the Step Up program. The auditors found recipient businesses that owed back taxes and employees who were not newly-hired, as required by the law.

The department agreed with the audit findings and plans to improve the screening process.

Auditors also found the department imposed an arbitrary $12,000 limit on the subsidies, but the department defended the practice because the limit allows the program to “serve as many eligible employees as possible.”

When the Step Up law initially passed, residents of only 39 towns were eligible for the program.

0Bridgeport Housing Authority faulted for ‘Cadillac’ employee health plan

Federal watchdogs faulted the Bridgeport Housing Authority Tuesday for improperly charging $1.7 million to Washington and for giving employees a “Cadillac” health plan.

The U.S. Department of Housing and Urban Development Office of the Inspector General raised the issues in a report.

HUD identified $895,000 of federal money used for ineligible purposes and $790,000 of improperly documented expenses. The federal agency will seek to get the money refunded.

A Cadillac health plan costs more than $10,200 each year for individuals or $27,500 for families. Starting in 2018, insurance companies will include a 40 percent excise tax on such plans as a result of the Affordable Care Act, also known as Obamacare.

“Paying the additional tax would result in fewer funds for housing,” the report said.

Investigators found the housing authority had limited itself “to one vendor and a specific plan” through its collective-bargaining agreements. Authority officials told HUD its health care plan “was generous compared with those of other authorities and private businesses.”

Authority officials are trying to remove the restriction or join the state health care plan, according to the report.

The report also found ”a prior executive director promoted all of the janitors to maintenance aides without ensuring they had the skills to perform their new duties.”