(Updated 6:10 p.m.) BLOOMFIELD—Gov. Dannel P. Malloy announced Tuesday that the state will be giving CIGNA Corp. between $50 million to $71 million in tax incentives over the next few years to help it create between 200 and 800 new jobs, making it the first company to participate in his “First Five” program.
Under the terms of the agreement with the state Department of Economic and Community CIGNA Corp. will receive a combination of incentives, which CIGNA Corp. CEO David Cordani called “unique.”
According to Jim Watson, DECD spokesman the company will receive a $15 million loan which it will have to pay back at 0 percent interest over 10 years if it creates anywhere between 200 to 800 jobs. If it creates 200 jobs it will have access to $30 million in Urban and Industrial Reinvestment Tax Credits and if it creates 800 that number jumps to $50 million. However, it can only access 10 percent of the credits starting in the fourth year of the 10 year deal and 20 percent in the 8th, 9th and 10th year of the deal. Also it will receive a job training grant of $2 million if it creates 200 jobs, and $6 million if it creates 800 jobs.
Watson said in order to get the tax credits, the company must prove they’re revenue neutral to the state.
“It was very unique and caused us to think very differently about the opportunity in the marketplace,“ Cordani said of the governor’s “First Five” initiative.
A global corporation, Cordani said there are opportunities for job growth throughout the market.
“This is a wonderful example of an effective public private partnership,” Cordani, a Simsbury resident, said.
“I would describe this program as unique in the marketplace today because it is multi-pronged. Very importantly it’s performance based, so it only performs for the benefit of the community, if we do our part,” Cordani said.
In exchange for the credits, Cordani said the insurance company will also be making more than a $100 million, multi-year investment in technology and real-estate infrastructure.
Malloy said he’s looking forward to the creation of between 200 and 800 jobs, but was also excited to be retaining the approximately 3,900 employees already working in Connecticut.
The amount of incentive the company receives depends on its investment and the number of jobs created over a defined period of time. Malloy said Connecticut was in competition with other states and countries to keep the company and its 3,900 jobs.
Department of Economic and Community Development Commissioner Catherine Smith said the deal will be revenue positive for the state over a period of time, but was unable to give any more details on her way back into CIGNA Corp. headquarters for a meeting.
“No one person has all the answers,” Cordani said. “He [Malloy] created an environment of openness, of interest, and of understanding.”
Cordani said his primary office is in Bloomfield, but he also maintains an office in Philadelphia, which was considered the location of the company’s headquarters until Tuesday’s announcement. Connecticut and the Bloomfield campus will now be considered the company’s headquarters.
No employees will be moved from Philadelphia to Connecticut.
“This is not about picking up all the jobs in Philadelphia and moving them to Connecticut,” Cordani said. “This is about CIGNA growing our presence in Connecticut.”
CIGNA Corp. has between 3,800 and 3,900 employees in Connecticut. About 3,250 of those employees work at the Bloomfield campus. The company also employs about 3,700 in Pennsylvania, including about 1,100 in Philadelphia.
CIGNA was headquartered in Bloomfield until 1983. It moved its headquarters shortly after it merged with Pennsylvania-based Insurance Company of North America and moved its corporate offices to Philadelphia.
Cordani took over the top job in January 2010, replacing H. Edward Hanway, who lived in Pennsylvania.
According to Greg LeRoy’s 2005 book “The Great American Jobs Scam” there are often personal factors that figure into the location of corporate headquarters.
“Executives especially like to create a short commute for themselves. They also locate for amenities such as golf courses, or good schools for their children,” LeRoy writes. “For example, a study of 38 companies that left New York City found that 31 moved closer to their chief executive’s home reducing the average CEO commute to eight miles.”
Sen. President Donald Williams, D-Brooklyn, said moving CIGNA’s headquarters back to the state was a wise decision.
“As far as I’m concerned, in Connecticut we have the workforce. We have the location. We have the quality of life all going for us here,” Williams said. “We have a tremendous deep workforce of experienced people and a legacy that goes back decades, and decades, and decades. This is the place to be.”
Tommy Cafcas, a research analyst at Good Jobs First, a D.C.-based government watchdog group, said the First Five initiative may not do much for Connecticut’s economy.
“Lots of research shows tax subsidies aren’t the best bang for the buck for taxpayers,” he said.
Typically taxes make up only about 1 percent of a company’s total expense structure and subsidies have relatively little impact on the entire operation, he said.
Cordani estimated that CIGNA’s Connecticut operation already generates about $500 million in income tax revenue for the state and returns about $250 million to the surrounding community in economic activity.
Other methods have been shown more effective in creating jobs, Cafcas said. Education policies like universal prekindergarten education have been known to attract businesses, he said.
“A more educated work force in the long run will be an attractor,” he said.
Investments in infrastructure can also make a state standout since the national transportation infrastructure is in terrible disrepair, he said.
One thing the initiative might accomplish is fueling the economic war between states, Cafcas said. Historically Connecticut is known for trying to poach jobs from its neighboring states, he said.
Even when it is successful, the tactic is usually not effective in improving the state’s economy, he said. When a job only moves five or ten miles down the road employees are unlikely to relocate to Connecticut, he said. The result is more traffic and more wear on the infrastructure, he said.
Cafcas said the strings attached to the CIGNA deal will be a good fallback for the state if things don’t work out. In the past the state has generally done a decent job of drafting similar contingencies into its tax incentive offerings to companies, he said. But today’s public announcement highlights a potential flaw in the fallback.
“Enforcement can be spotty. It’s awkward for a politician to one day offer subsidies to a company and the next day have to call them back and say they didn’t uphold their end,” he said.
Hugh McQuaid contributed to this report.