🔒As state pivots economic development strategy, focus shifts from corporate handouts to public-private partnerships

1 of 2

On the sweltering morning of July 13, Gov. Ned Lamont stood outside an abandoned and boarded-up apartment building off the northern tip of downtown Hartford to tout a $6.3 million state grant for a 43-unit, mixed-use apartment development.

A private developer and local nonprofit have partnered to cover the remaining $17.5 million cost. Lamont used the occasion to juxtapose this approach from past state efforts.

“I just thought too much of state government was a lot of one-off projects, a lot of earmarks, a lot of something special for somebody in the Bond Commission,” Lamont said. “One reason this is a winner is because it’s part of a strategy, it’s part of a vision. It’s a public-private partnership. It’s not just the state putting up the money.”

The Hartford grant is one of a dozen issued from the state’s $100 million CT Communities Challenge program, which provides up to $10 million for transit-oriented and downtown development projects. About $45 million has been allocated so far, with a second round of award winners expected to be announced later this year.

The program is a major component of the Lamont administration’s $1.7 billion, five-year economic development plan that began rolling out last year. The aim is to create 83,000 jobs through new programs that take a more collaborative approach to economic development, leveraging partnerships with local municipalities and private capital. The focus is on creating more attractive living environments that can woo residents and businesses.

The plan is part of an overall policy shift by the Lamont administration to spend fewer public dollars on incentives to individual businesses that promise to grow jobs, and more on community development.

David Lehman, commissioner of the Department of Economic and Community Development, said the policy change has reduced the reliance on state bonding for economic development.

During the Lamont administration’s first three years, the state borrowed $150 million for job creation incentives, Lehman said. The last three years of the Malloy administration saw $800 million borrowed for that purpose.

“We felt we needed to significantly reduce the amount of money the state spent on corporate job creation incentives,” Lehman said. “A lot of studies said we were paying for something that would happen anyway. We were giving money to well-to-do companies. It’s arguably regressive.”

To be clear, Lamont isn’t shredding the state’s credit card. His five-year economic development plan calls for $315 million in state borrowing, $164 million in tax credits and state grants, and $345 million from federal COVID-relief funds.

That is expected to be matched by $936 million in private sector and other non-state sources.

Alexandra Daum, deputy commissioner of DECD, said the state’s plan focuses heavily on creating vibrant places to live, seeing community development as an important component of economic development.

Creation of housing and “vibrant” communities is a big piece of the $100 million CT Communities Challenge grant program and the $136 million Innovation Corridor program, which will grant up to $50 million for transformative projects mingling community development and job creation in urban centers.

Waterbury Mayor Neil O’Leary said his city’s efforts to transform the abandoned 17.4-acre Anamet industrial complex off South Main Street is a good example of the state’s new premium on local buy-in.

The city has spent more than $5 million in state grants on Anamet, beginning with the purchase of the property in 2017. The city subsequently paid contractors to knock down several buildings. Officials recently signed off on another $2.5 million contract — paid for by state grant dollars — to complete demolition of crumbling buildings on the site.

City taxpayers, however, picked up the $2.7 million cost of putting a new roof on a 220,000-square-foot industrial building on-site. It is the only structure being preserved for reuse. The Lamont administration wanted to see direct city investment as well, O’Leary said.

“The difference is they really want the cities and towns to put some skin in the game before they invest heavily in these economic development projects,” O’Leary said. “Under Malloy, you presented your project, and they would say if they supported it or not.”

Announcement of the first awards from the Innovation Corridor program are anticipated in late summer or early fall.

New plan, new approach

Only three “eligible” applications — from Stamford, New Haven and Hartford — were received, according to DECD.

In Hartford, local officials requested $48.4 million, claiming the money will leverage another $242 million in investment to create housing and advanced manufacturing research and training centers in the city’s Parkville neighborhood.

“They are spending a lot of dollars on quality of place, helping communities to create more vibrant downtowns,” said David Griggs, president and CEO of the MetroHartford Alliance.

Griggs said the state’s drive for vibrant communities as an economic development driver is all the more important after COVID-19 prompted a move to remote work.

“It matters even more today than it did two years ago,” Griggs said. “Remote workers have an opportunity to live wherever they want to. Quality of place and our ability to keep the talent we have is important.”

While the overarching strategies have changed, so have the relationships between DECD and municipalities, Griggs said. He said Lehman and AdvanceCT CEO Peter Denious are “just a text away.”

“It’s a complete 180 from where it was when I arrived just four years ago,” Griggs said. “It’s a true partnership. We need them and they need us. That wasn’t recognized prior but it is today and it’s creating opportunities for everyone.”

Fred Carstensen, director of the Connecticut Center for Economic Analysis at UConn, has no shortage of criticism for state economic policies, but he also recognizes positives in the evolving strategy. He credits the Lamont administration with having a stronger emphasis on cooperative efforts and new business creation as well as improving workforce development.

“It costs much less to grow companies here than to try and recruit new ones,” Carstensen said. “I think they have been more alert to that.”

Carstensen also praised a shift toward policies that are open to companies universally, and away from one-off deals.

Individually, incentives like the $22 million given to hedge fund giant Bridgewater Associates in 2018 made financial sense, Carstensen said. But they also bred bitterness among similar companies that didn’t benefit from such sweeteners.

“Why wasn’t any hedge fund in Connecticut or who wanted to be located in Connecticut given the same deal?” Carstensen asked.

In June, state lawmakers codified the Lamont administration’s new earn-as-you-grow tax incentive strategy, which replaces up-front grant payments to growing businesses with more targeted longer-term tax breaks.

Under the JobsCT program, companies may earn rebates against their insurance premiums and/or corporation business and pass-through entity taxes if they create and maintain at least 25 new positions over a certain number of years. All companies in the finance, insurance, manufacturing, clean energy, bioscience, technology and digital media industries are eligible for the incentives if they meet program eligibility requirements.

Chris DiPentima, president of the Connecticut Business & Industry Association, said the move away from individual corporate incentives to broadly available policies has been “a welcome change for our membership.”

“Many board members were discouraged by the recruiting from out-of-state, giving lots of money to come here and not paying attention to companies in the state, not giving them the resources to grow,” DiPentima said.