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Malloy's program creates 1,000 jobs, but critics say that's not enough

By Johanna Somers

Publication: The Day

Published February 16. 2014 4:00AM   Updated February 16. 2014 7:50AM
First Five plan uses loans, grants to attract companies

Hartford - In the three years since Gov. Dannel P. Malloy introduced the "First Five" program in his first budget address, the participating companies have created more than 1,000 jobs, a number that proves success to some and failure to others.

Malloy started out his term with the First Five initiative to attract new companies to the state and keep others here. Companies that created 200 new full-time jobs in two to five years would receive millions of dollars in low-interest loans, grants and tax credits under the program.

The six companies that have signed contracts with the state have created 1,053 jobs as of June 30, 2013, the most recent data available, and received $62 million in low-interest loans and grants, according to the state Department of Economic Development. They will get another $63 million as their projects move forward and create at least another 147 jobs, according to the terms of their contracts.

DECD Commissioner Catherine Smith said the program is "solid" and has put Connecticut on the map for businesses.

First Five "delivered what it needed to, to make Connecticut viewed as a competitor again," she said. "Honestly, I think four or five years ago, no one knew Connecticut. It just wasn't on the radar."

But others, including House Republican Leader Larry Cafero, R-Norwalk, said it is time to put the money somewhere else.

"We as individuals in positions of power need to be big enough to say it didn't work or it's not working as well as it has been," said Cafero, who voted against the program initially and later for it in a bipartisan jobs bill. "Let's change direction."

First Five was passed in June 2011, and First Five Plus, which expands the availability of the program to 10 more businesses, was passed during an October 2011 special legislative session as part of the bipartisan jobs bill. Only two legislators voted against the jobs bill.

The state has selected 11 companies for the program, although not all have signed contracts, with room for four more. Those 11 companies have reported a total of 1,377 new-full time jobs.

At a minimum, the state expects 2,200 jobs from these 11 companies; in return, they will receive low-interest loans and grants that total $214 million. That works out to $97,409 per job.

If these companies were to create more than the 200-job minimum, they could get a portion of their loans forgiven. In all, the 11 companies have agreed to invest $1.4 billion in capital improvements.

Rep. Ted Moukawsher, D-Groton, is among the legislators who don't think the number of jobs warrants that amount of state investment.

"I don't think that is a real good return on investment," he said.

There could be indirect job growth from these 2,200 jobs, he added, but the state doesn't go back and find out if all of the "rosy" projections came through. Smith said, "It is almost impossible to figure out which indirect jobs are driven by a company or not because so many things go into the community."

No ESPN contract

In August 2011, Malloy announced that ESPN was joining the First Five program, the third company to do so.

"We have a desire to make ESPN as large as we can possibly make it in Connecticut," the governor said at a news conference on its Bristol campus. "The more that's here, quite frankly, the more that's likely to stay here."

The company pledged to add at least 200 and as many as 800 new, full-time jobs over the next five years. In return, ESPN would receive $18.7 million in loans and grants for the construction of a 193,000-square-foot production facility that would be the new home to "SportsCenter" and other programming.

ESPN has not, however, signed a contract with the state in the more than two years since that press conference. Without a contract, the state has not disbursed any of the funds, but ESPN has reported to the state that it has created 128 jobs. The new facility, called Digital Center 2, is being built and is expected to open in the spring.

When asked about ESPN, Smith said, "We talked to them a few times along the way. I think we are close to bringing it to finalization."

If the company isn't pushing the "pedal to the metal," the state isn't pushing it to do so, she said.

While ESPN is expanding in Connecticut, other First Five participants have moved here, or moved their headquarters here.

Health insurer CIGNA Corp., among the original First Five, has moved its headquarters to Bloomfield from Philadelphia and created 191 jobs as of June 30, 2013, with $21 million in direct assistance, low-interest loans and grants, and $50 million in future tax credits. A low-interest loan from the state is in the 2 to 4 percent range, Smith said.

The Navigators Group Inc., an insurance company, has moved its headquarters to Stamford from New York and created 118 jobs with $7.5 million in low-interest loans and grants from the state. It is scheduled to get another $4 million.

Cable provider Charter Communications, which signed its contract in December, has relocated its headquarters to Stamford from Missouri and created 147 jobs with $6.5 million in low-interest loans and grants from the state. It is scheduled to get another $2 million.

NBC Sports has consolidated its headquarters in Stamford from four former locations in northeastern states and created 362 new jobs with $20 million in low-interest loans from the state.

Two other companies relocated within the state. Alexion Pharmaceuticals Inc., which is moving to New Haven from Cheshire, has created 158 jobs with no funds yet dispersed from the state. It is scheduled to receive $26 million in low-interest loans and grants and $25 million in future tax credits.

CareCentrix, a home health care company, has moved to Hartford from East Hartford and created 77 jobs with a $6.9 million grant. It is scheduled to get another $17 million.

All job growth numbers were self-reported. The DECD is requiring the companies to submit a job audit performed by a certified public accountant at each company's specified job growth "target date."

Small business investment

Cafero said that he would rather see the state spend economic development funds on small businesses because it is more cost-effective. As of June 30, 2013, the state had spent about $115 million in the form of loans and grants to small businesses in the state's Small Business Express Program. Those businesses created about 3,043 new jobs.

David Cadden, professor of entrepreneurship and strategy at Quinnipiac University, agreed.

"For long-term growth, it is better to invest in small businesses and to create a climate that is extraordinarily friendly for small businesses and has policies that make it easy for small business to function and grow and therefore hire more people," he said.

Richard Pomp, law professor at the University of Connecticut, said it would make more sense to clean up the tax base and level the playing field instead of giving out tax credits to large corporations.

"Don't try to anticipate where tomorrow's growth will come from," Pomp said. "Simply have a level playing field and get out of the way of the tax system."

He added the state should work to lower tax rates and housing costs and energy costs.

"Throwing money at a corporation is easy, a no-brainer," he said. "The question is whether it is the best use of resources, and that is where the literature suggests, no, it is not the best use of resources."

State Sen. Andrew Maynard, D-Stonington, said he supported First Five as part of the broader jobs package and thinks it has sent a message that the state is open for business.

"I can tell you it has been night and day between the Rell administration and this administration," Maynard said. "Malloy meets with top business leaders in this state and they know he is trying."

j.somers@theday.com

Explore the interactive below for more information about the companies taking part in the First Five program.

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