🔒CT economic czar: $50M ‘Greyfields Revitalization’ initiative, $150M in manufacturing funding are ‘down payments’ on growth

Some of Connecticut’s struggling retail malls and vacant office towers could find new life, or be demolished to make room for new development, under a $50 million “Greyfields Revitalization” program in Gov. Ned Lamont’s proposed two-year capital budget.

The program would fund incentives to either convert dormant or struggling retail and office properties in key locations into multifamily housing, or bulldoze them to make room for more economically relevant uses, said Daniel O’Keefe, commissioner of the state Department of Economic and Community Development.

“What Greyfields is meant to do is, first, incentivize conversion — so if we can convert, we will,” O’Keefe said. “But, if we can’t, get out your stick of dynamite and start over, rather than waiting 20 years and kicking ourselves for not starting sooner.”

The $50 million Lamont has proposed over the next two fiscal years could be absorbed quickly, given the struggles of the office market and some major mall properties, O’Keefe acknowledged. He aims to show a few early successes to convince lawmakers to pump additional funding into the program.

“I view that as a down payment,” O’Keefe said. “I don’t think it’s going to solve the problem, but I think it’s going to start to solve the problem. You have to start these programs by identifying the problem, then you start pulling together constituents who can solve the problem. And then you start showing wins.”

Setting the table

After six years of budget surpluses and deep investments in public pension obligations, the state must continue to invest in its economic future, O’Keefe said. The $50 million Greyfields program and other newly launched economic initiatives are part of the strategy.

“Connecticut really got its (fiscal) house back in order,” O’Keefe said. “Now, I’m going to start pushing us forward, and I want to see more of a balance between continuing to pay down the mistakes of the past — we still have too much per-capita debt — and also fundamentally investing in our future in projects that have tangible, definable ROI (return on investment).”

The Lamont administration will have to walk a tightrope with those investment decisions, given that pandemic-era federal aid has dried up, leaving some gaps in the state budget. In his recently proposed two-year, $55.2 billion spending plan, Lamont has proposed $348 million in corporate tax hikes over the next two fiscal years.

Meanwhile, hospitals, public colleges and other groups have complained about a lack of funding in the budget.

O’Keefe said he understands the state’s belt has tightened, but programs being established now will set the framework for future investments when more funding is available.

Some of the state’s key economic development programs include QuantumCT and Innovation Clusters.

Launched in early 2024, QuantumCT is a public-partnership between Yale University, UConn, the state and private industry to advance Connecticut as a host for quantum technology research and companies. This field, which uses physics to create innovative tools and applications, is seen as an up-and-coming industry.

The Innovation Clusters program, likewise, aims to promote growth in emerging industries by leveraging up to $100 million in state funding to advance partnerships between local governments, industry and others. The state, in January, announced that partnerships rooted in Hartford, New Haven and Stamford were invited to submit final proposals.

Hartford and Stamford are looking to build artificial intelligence innovation centers, while New Haven is looking to invest further in its quantum and bioscience clusters.

The state expects to announce awards this summer and begin releasing funds in the fall, O’Keefe said.

In January, state officials announced a $25 million “Strategic Supply Chain” initiative, which will offer companies in the state’s core industries — high-tech manufacturing, clean energy, IT, insurtech/fintech, etc. — matching grants for investments in facilities, equipment or research and development.

The supply chain program will provide grants up to $5 million, with recipients required to match part of the state funding.

Lamont’s budget plan also allocates $35 million annually for brownfield remediation projects, and recapitalizes the Manufacturing Assistance Act (MAA) fund with $150 million over the coming two years.

The MAA allows DECD to provide low-interest loans to manufacturers and companies in other growth industries that invest in equipment, facilities, relocation, training and other projects.

This will be the first time state officials have invested fresh funding into the MAA since 2018, O’Keefe said.

Action Pending

The Greyfields proposal must gain approval from lawmakers this legislative session, which ends in June. It’s likely to pass, but there are a lot of details to work out.

O’Keefe said the type of communities eligible for funding, and under what conditions, has not yet been determined. How the incentive program will work — as loans, grants, tax breaks or some combination — is also uncertain.

A nonprofit led by business leaders and government officials will be formed to refine the program, O’Keefe said. They will help determine the best way to deliver incentive dollars, and identify high-priority sites where the money might be applied, he said.

Hartford Economic Development Director Patrick Pentalow said he welcomes any help to tackle the city’s struggling office market, but he hopes the new state fund will allow for options in between demolition and conversion.

Pentalow suggested the state might consider allowing some funding to be used to defray the cost of refitting existing office space for new tenants signing long-term leases.

Waterbury Mayor Paul Pernerewski said the Greyfields fund could help determine a new future for the city’s struggling Brass Mill Center mall, or the long-vacant Sovereign Bank property in the heart of downtown, which features two buildings with a combined 106,196 square feet of space.

“I think it’s a really exciting opportunity for us to take a look at this program for some of the commercial properties,” Pernerewski said. “There is a lot of potential office conversion.”

Growth-minded

O’Keefe said he’s bullish about the state’s economic outlook.

He notes Connecticut’s compound annual growth rate — a key measure of economic progress — has gone from one of the slowest in the nation, to the top 20.

As measured by the U.S. Bureau of Economic Analysis, Connecticut’s 3.1% growth rate between 2021 and 2023 topped the rest of New England as well as the national average, O’Keefe said.

Connecticut went from the second-slowest growth in the nation just before the COVID-19 pandemic, to the 19th fastest-growing state in the U.S. between 2022 and 2024, he said.

Connecticut also added 32,046 residents in 2024, a fourth straight year of population growth.

However, Lamont’s budget predicts a slower-growing economy in the years ahead. His two-year spending plan projects Connecticut’s real gross state product will grow 1% in fiscal 2026, 1.1% in fiscal 2027, and 1.3% in fiscal 2028.

Lamont’s budget projects the U.S. economy will grow at a faster rate: 1.7% in both fiscal years 2026 and 2027, and 1.8% in fiscal 2028.

O’Keefe is frank about the state’s challenges, including a labor pool that continues to fall short of demand, inadequate housing supply and highest-in-the nation energy prices.

He said energy costs are his top concern, even though it’s not a topic over which his agency wields any direct control.

But he does use the bully pulpit to push the issue with other state officials. O’Keefe is an advocate for increasing Connecticut’s capacity to pipe in natural gas to keep prices more competitive.

O’Keefe sees a transition to clean energy as critical, but not at such a pace and manner that it scuttles the state’s economic potential for relatively little environmental gain.

“While we are working through this transition, we can’t just let price go, it has to be a determinant,” O’Keefe said. “What we are sacrificing is economic progression. And that’s billions of dollars in GDP...”