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OP-ED | Data on Malloy’s First Five is Long Overdue

by | Aug 12, 2016 7:00am () Comments | Commenting has expired | Share
Posted to: Analysis, Business, Economic Development, The Economy, Opinion, State Budget

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At the end of May the state offered a controversial economic package to Westport-based Bridgewater Associates, the world’s largest hedge fund. Based on this new addition to the governor’s First Five program, it was time to scrutinize our state’s economic incentive policies.

In particular, we urged Gov. Dannel P.  Malloy to sign Comptroller Kevin Lembo’s bill, passed by the General Assembly, which in the interest of transparency and good governance called for streamlined reporting requirements, transferring some of the reporting responsibilities to the Legislative Program Review and Investigations Committee (PRI), and also would have required legislative committees to hold hearings to discuss the results of the evaluations and receive input from stakeholders.

Lembo’s bill would have given PRI the primary responsibility for “authoring the report, including evaluating the efficiency and effectiveness with which the programs are being administered, recommending whether each tax credit and abatement should be continued or expanded, and providing recommendations on improving the effectiveness or efficiency of administration.”

Despite passage by both chambers of the legislature, the governor vetoed the bill.

This sounds bad, but it sounds worse in conjunction with the idea that the Department of Economic and Community Development (DECD) has been dragging its feet on releasing requested data on the governor’s First Five economic incentive program — a significant piece of his administration’s efforts to maintain and grow jobs in Connecticut.

Over the last several months I’ve been crunching as much data on the state’s economic incentive programs as I could get from DECD. They have provided some data, but they haven’t included anything from the First Five program, financial incentives from which have since been extended to a total of 13 companies, including Bridgewater.

ctnewsjunkie file photo Back in May DECD Commissioner Catherine Smith objected to my analysis of the Bridgewater incentives, calling it misleading. During that discussion, I asked why the First Five program wasn’t included in the quarterly report to the legislature.

“We put out a very brief report to the legislature every quarter and they didn’t ask us to include it in the annual report,” Smith said. “We should probably put it in there.”

Smith went on to say, “We’re actually about to issue — I’m going to say within the next two to three weeks — a very comprehensive report just on the First Five companies. It looks at progress that they’ve made to date and the expectations we have for the future; it’s got an upside and a downside analysis to it — if they don’t go any further than they’ve already done versus if they grow to the maximum number of jobs they have in their contracts. I think when you see that it’s a phenomenal return to the state.

“These companies are going above and beyond in many cases, and even though some of these companies are only just getting going in their job creation, all the companies in total now are just below or right at the minimum number of jobs that all the companies said they would create. So I’m actually really pleased with the performance and it’s one of the reasons we think the program has been successful. And frankly, it is a competitive world we live in, and . . . we could have lost these companies to other states if we hadn’t had something in place to make it worth their while to consider Connecticut and grow here.

“It’s doing exactly what we want our programs to be doing. In the grand scheme of things it’s a relatively small investment, and the returns that will come back to the state — and importantly, that return mostly comes through the General Fund — will be very, very helpful to the state in the long run.”

Based on those comments, this analysis sounded like something worth reading.

Smith continued: “We’re not really able to speak about specific companies because of the proprietary nature of the dollars associated with those deals, but we’re going to lump all of these 13 First Five companies so far together and show the results; what the expected income tax returns will be, what the expected sales and use tax will be, etc., so that people will see line by line exactly how the dollars are going to work.”

That’s was just the kind of concrete data we are looking for as taxpayers, right? We confirmed again when it was supposed to be out. “So that’s coming out in 2-3 weeks, you said?”

“We’re just putting the final touches on it,” Smith said. “We’re asking all the companies to give us the latest numbers, as of their June numbers on the employment. We may even do some kind of event around it, we’ll see if the governor wants to participate or not, but we’ll definitely put something out so people have access to it.”

That was May. We’ve been chasing this report ever since.

On July 12, DECD spokesman Jim Watson responded to our query: “We are working on it. Don’t know release date yet.”

On July 28, Watson replied: “We are reviewing a final draft of the report and expect it will be released sometime in August. We decided to update the numbers through the end of May, so it has taken some time to collect the new data (and subsequently perform our analysis).”

On Tuesday, we asked again about the availability of the report. Watson’s reply: “Still this month.” Asked if he could be more specific, the reply was: “Don’t have a specific date yet.”

Now, you may be thinking that May wasn’t that long ago and maybe a few months is too short a time to really hold a state agency’s feet to the fire for a detailed report. But bear in mind that the First Five program was part of a jobs bill that was passed in October 2011 and has been running ever since.

Certainly DECD’s people have been conciliatory in our conversations. But let’s look at this — the state has been borrowing to fund this program. The First Five data wasn’t included in the last triennial report on economic incentives, although the commissioner said it probably should have been. We’ve waited long enough for a public assessment of its progress.

Connecticut taxpayers are being told to accept on faith that these incentives are providing us with a great return on our investment. Isn’t it odd that Commissioner Smith already knew the outcome of a report that was supposedly almost ready, and two months later it still isn’t out?

It’s long past time that our legislators start asking harder questions (Seriously, Legislature? You never asked for the data?) and taxpayers deserve more timely answers. Our faith in politicians is short in the state of Connecticut, and not without reason.

As Lembo states: “Direct assistance to Connecticut businesses has become a focal point of the state’s economic development plan. Whether you agree with that strategy or not, it is imperative that a similar commitment exist to analyze and evaluate the effectiveness of that assistance . . . The state owes it to businesses and all taxpayers to fully analyze the return on investment that these sizable and important programs deliver and determine if these resources are being put to their highest and best use.”

The governor’s office declined to comment.

Sarah Darer Littman is an award-winning columnist and novelist of books for teens. A former securities analyst, she’s now an adjunct in the MFA program at WCSU (and as such is an AAUP member), and enjoys helping young people discover the power of finding their voice as an instructor at the Writopia Lab.

DISCLAIMER: The views, opinions, positions, or strategies expressed by the author are theirs alone, and do not necessarily reflect the views, opinions, or positions of CTNewsJunkie.com.

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