Economist: Executive Agencies Hurt CT Manufacturers More Than Costs
High operating and energy costs are not what’s hampering the growth of Connecticut’s manufacturers, it’s just about everything else, according to Fred Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut.
Carstensen spoke at a Manchester Community College forum Tuesday, sponsored by U.S. Rep. John Larson. The focus: spurring manufacturing jobs in the state.
He followed a presentation during which Lei Chen, a research fellow at the American Institute for Economic Research highlighted some of the state’s strong suits. The state has the eighth lowest manufacturing costs, he said.
Though Connecticut has one of the highest energy costs in the nation, its manufacturers rank number one in a data analysis on production efficiency, Chen said.
Despite those figures, Carstensen said he has been told by business experts that many companies would prefer to make investments in any of the other 49 states. He tried to reconcile how the state could appear to have a strong climate for manufacturers, but still have the worst jobs record in the company.
“We remain, as Dr. Chen just pointed out, on a cost basis very competitive. But let me tell you we are not competitive,” he said. “... It’s not costs, it’s everything else.”
Much of the problem is rooted in the state’s notoriously slow permitting process, he said.
It took a Fortune 500 company 497 days to get a permit to paint it’s headquarters, Carstensen said. He cited another example, in which a Ansonia-based company filed for a water permit in 2002. The company is still waiting on the permit, he said.
Companies avoid Connecticut because they have no idea how long it will take them to get permits. Instead they move to states more responsive to their needs, he said.
“We have the worst permitting regime in the country,” he said.
The situation creates a climate of uncertainty and nothing is more destructive to businesses than uncertainty, he said. Connecticut’s executive agencies consistently demonstrate an extraordinary inattentiveness to businesses, he said.
“It’s not the state of steady habits. It’s the state of uncertainty,” he said.
Connecticut could improve its business climate by consolidating the different aspects of the permitting process under one roof, he said. In North Carolina companies have a single government contact person to help them through all the permitting issues from each of the executive agencies, he said.
The Department of Revenue Services contributes to business uncertainty by not issuing clear standards on how taxes should be applied. As a result, the application of many taxes are up to the interpretation of individual auditors and every time an auditor changes the tax laws essentially change, he said. That may create business for tax lawyers and accountants but it hurts businesses, he said.
“It’s not about tax burdens, per se, it’s about stability, number one. And number two—what do you get back from what you pay?” he said.
Businesses need to feel confident the taxes they pay will be put to good use like investments in infrastructure, he said. Connecticut has a history of being inattentive to its transportation infrastructure, he said.
He used the state’s relationship to the Panama Canal as an example. The canal is about to increase its capacity to accommodate larger container ships. Every state on the Atlantic and Gulf coasts have bargaining agreements with the canal, he said. All but one.
“One state. And I don’t have to, you know. It’s like Baltimore, I don’t want to mention the name anymore,” he said. “It’s Connecticut.”
Larson said he will soon be visiting Panama and will try to establish a better relationship with the canal.
“It may have taken us 100 years, but we’ll get there,” he joked.
Manufacturers also favor states with effective community college systems, which is not one of Connecticut’s strong suits, Carstensen said. The state spends one-third per capita on the system of what North Carolina spends, he said.
“Connecticut has one of the weakest community college system in the country,” he said.
Companies like auto manufacturer BMW choose to do business in South Carolina because of its responsive community colleges, he said.
Carstensen and Larson said there are reasons to be optimistic going forward. Both credited Gov. Dannel P. Malloy with taking an active role in turning around the state’s business climate and reputation. He and various executive commissioners understand the issues, Carstensen said.
“I have not been shy about talking about these issues for several years but it’s the first time that I’ve talked to people whose eyes have not glazed over when I brought the issues up,” he said.