To convince Hartford’s largest company to move away from the only home it’s ever known, Farmington town officials had to do exactly nothing. As it turns out, exactly nothing is what Hartford officials did to try and keep United Technologies Corp. headquartered in downtown’s Gold Building.
Once UTC signed a five-year lease in December to stay in its long-time high rise — located at One Financial Plaza on Main Street — Hartford city officials figured the company was staying, unaware that the lease included a clause that would allow the $65 billion conglomerate to leave early, said Thomas Deller, Hartford’s development director.
City officials didn’t meet with anyone from UTC for at least six months prior to the company’s March 19 relocation announcement, said Deller.
“We didn’t have regular discussions because, like I said, they signed a five-year lease,” Deller said. “We were fairly confident they were going to stay.”
At a time when Connecticut is stressing urban development and offering tens of millions in state aid for companies to relocate their headquarters to the Nutmeg State, UTC decided to move from an expensive lease in downtown Hartford to cheaper property it already owned in Farmington, where it also has stronger ties with local officials, according to a company source and Farmington town representatives.
Hartford officials, who have slowly witnessed UTC migrate its workforce to the suburbs, were caught unaware of the planned move, which happened only four months after UTC Chief Financial Officer Greg Hayes — a known number cruncher — took over as CEO.
“It is important that political leaders have that regular dialogue,” said Oz Griebel, president and CEO of the regional business advocate MetroHartford Alliance. “You really want to make sure you are making that pitch about the importance of the [UTC] brand to the Capital City. It is illustrative of how you want to go about job retention and job creation.”
UTC had fewer than 200 employees left working downtown and didn’t own property in the city, so its exit will have more of a symbolic impact on Hartford than an economic one, Griebel said.
In fact, UTC’s relocation bucks the trend of companies moving back into downtown, which has had a declining office vacancy rate in recent years. Homecare management firm CareCentrix and accounting firm CohnReznick, for example, both moved their Connecticut headquarters to Hartford. National accounting firm Grant Thornton is currently looking for space in Hartford, while the state is consolidating its office footprint into Connecticut River Plaza on Columbus Boulevard.
“There is a lot of movement into the city, much more than is leaving,” Deller said.
Still, UTC, a company with 211,500 employees worldwide and four subsidiaries each with billions of dollars in net sales, will no longer be putting Hartford on its press release datelines, and won’t have a direct tie to the city where it was founded in 1975.
“I don’t think anyone doubts the brand power of UTC,” Griebel said. “In a perfect world for the Capital City, it would be better to have the headquarters here.”
Missed opportunity
Keeping UTC headquartered in Hartford was one of the many demands state government negotiators brought to the table when Connecticut and UTC struck a deal last year for the company to cash in $400 million in research & development tax credits in exchange for investing $500 million to enhance its local presence. UTC balked at the Hartford headquarters provision, ultimately agreeing to requirements like a new East Hartford headquarters for jet-engine maker Pratt & Whitney and increased UTC employment throughout the state.
“Our bias is for companies to keep their downtown locations because we love having our downtowns filled up,” said Catherine Smith, commissioner for the state Department of Economic & Community Development. “We regret that they are leaving the downtown area.”
DECD has been active with state incentives to keep and bring other major employers to urban areas. CareCentrix received $24 million in aid to move its headquarters to Hartford; NBC Sports received $20 million to move to Stamford; Alexion Pharmaceuticals received $20 million to expand into New Haven; and insurance provider Cigna received $21 million to call Bloomfield its headquarters.
“With UTC, it is a very prudently, financially driven decision,” Smith said. “Do I like it? No, but I understand it.”
Numbers game
UTC’s move 10 miles west to Farmington is part of a larger cost-cutting initiative to eliminate $100 million in corporate expenses over the next 12-18 months, said UTC’s chief financial officer Akhil Johri on a March 19 conference call with investors. The move will be complete by the third quarter.
UTC can save significantly by leaving its leased space in Hartford because it owns the much more modest space on Farm Springs Road in Farmington, which was the former headquarters of Otis Elevator, said Johri. The corporate office now will be on the same campus as United Technologies Building & Industrial Systems, the conglomerate’s largest subsidiary with $30 billion in net sales and home to brands like Otis and Carrier Corp.
Farmington officials have regular dialogue with UTC, especially because the company occupies 600,000 square feet of office space in the town, said Rose Ponte, the town’s economic development director. UTC is a good corporate citizen in Farmington, she said, sponsoring local events and helping high school students obtain internships.
“We love the fact that they are here,” Ponte said. “The last year, there has been quite a bit of dialogue with them.”
Despite the strong relationship, Farmington officials say they never offered UTC any sort of government assistance to move its headquarters. The town tries to keep its mill rate low for all businesses; local aid like property tax breaks would impede that goal and lead to the perception of government officials picking favorites, Ponte said.
Farmington’s mill rate is 24.44; Hartford’s commercial mill rate is 74.29.
Ponte said she expects UTC’s move to attract more companies to the town, as the Fortune 50 relocation showcases why Farmington is a good place to do business.
“We want Farmington to be a leader economically in Connecticut,” Ponte said.
In Hartford, Deller said the UTC move shouldn’t be as concerning to Connecticut as published but unconfirmed reports that UTC plans to potentially move hundreds of jobs to south Florida.
UTC’s currently occupied space in the Gold Building is expected to be refilled with new tenants shortly after UTC leaves, Deller said.
“We are sorry to see them leave, but I understand corporate decisions and why they are made,” Deller said.