HARTFORD, CT — The days of luring companies to the state with lucrative packages and incentives is over, according to Gov. Ned Lamont and his Economic and Community Development Commissioner, David Lehman.
Connecticut had been borrowing an estimated $200 million a year under previous administrations to fund things like the Manufacturing Assistance Act, which offered generous incentive packages to businesses looking to expand in the state. Under Lamont, the amount of borrowing for these types of incentives has dropped to around $70 million in 2019.
Under a program Lehman has dubbed “Earn As You Grow,” businesses that create 25 jobs or more will receive a rebate of 25% of the withholding taxes from those jobs for up to seven years. Employers located in one of Connecticut’s opportunity zones or distressed municipalities are eligible to retain 50% of the withholding taxes over the same time period if they create 25 jobs.
“The risk is on the company as opposed to the taxpayer,” Lehman said.
He said Connecticut is going to compete on its merits.
“Incentives are going to be part of the calculus, but we just don’t want to be competing on price—that’s a losing proposition,” Lehman said.
He said if the company is coming here because Connecticut is giving them the biggest check then, “it’s not the right fit in the first place.”
He said he’s spent the last 11 months researching this and has found 50% to 75% of the companies who receive incentives from states to create jobs would have created those jobs regardless of the incentives.
Amazon, which sought large incentives from New York City for its HQ2, ended up locating its offices there anyway, adding 1,500 jobs and 335,000 square feet of office space even after the incentives were taken off the table.
“Incentives don’t grow the economy and we need to focus on what does grow the economy,” Lehman said. “It’s our cities, it’s infrastructure, it’s workforce and it’s fiscal stability and tax certainty.”
Lt. Gov. Susan Bysiewicz said people really like that a company gets credit for the job after the job is created.
“That is a real benefit to taxpayers,” Bysiewicz said.
Lehman and Lamont need the legislature to approve the program.
They also need legislative approval to make changes to the Small Business Express program, which was created in 2011 when banks had stopped lending to small businesses following the collapse of the financial markets.
Small Business Express 2.0 looks to leverage the existing Capital Access for Business loan guarantee program and will partner with banks to take on the lending risk to small businesses. It will also create a revolving loan fund for women-owned, and minority-owned businesses to get capital to companies who may still struggle to get a bank loan.
The two programs will be included in Lamont’s address to the General Assembly on Feb. 5.
CLARIFICATION: We rewrote the story’s third paragraph to clarify that employers will only receive the rebate if they create 25 jobs.