Republican Lawmakers Call For Tax Incentive Transparency
While New Haven leaders cheered a pharmaceutical company’s return to the city Tuesday, two suburban Republican lawmakers weren’t sold on the idea and prodded Gov. Dannel P. Malloy’s administration for more information.
In a press release, Senate Minority Leader John McKinney of Fairfield and House Minority Leader Lawrence Cafero of Norwalk said they want to know more about the state’s “First Five” tax incentive package for Alexion Pharmaceuticals.
Malloy announced Tuesday that the state planned to give the company a forgivable $20 million loan if it was able to create 200 to 300 full-time jobs over a 10 year period, a $6 million grant to build laboratories, and up to $25 million in urban and industrial site reinvestment tax credits. The total package to get the company to move back to the city is worth $51 million.
“Ultimately, I hope this is a good investment for the state of Connecticut, but the public and the legislature have a right to know more about the deal,” McKinney said. Echoing his concerns, Cafero added that “it is unclear at this time that $51 million in state incentives are necessary to keep them here.”
McKinney and Cafero called on the administration to hold a public hearing to discuss the details of the state’s investment.
Some of the questions they want answered are: “What protections are in place to secure the taxpayers’ investment? What kinds of jobs will be created and which ones will qualify the company to have its loan forgiven? Did the state work with Alexion and Cheshire officials to exhaust every idea for keeping the company in Cheshire? What is the cost to the Town of Cheshire, and what, if anything is the state doing to help the Town and its property taxpayers absorb those costs?”
The building the company will be leaving in Cheshire is owned by the same developer, Carter Winstanley, who is developing the Downtown Crossing area in New Haven where Alexion is relocating.
“It seems clear from newspaper reports that Alexion has long anticipated outgrowing its Cheshire headquarters, but nonetheless planned to stay in Connecticut,” McKinney said. “I want to know if Alexion planned to go forward with its move and expansion regardless of the First Five incentives.”
While Republicans will get answers to their questions, the good economic news left the Malloy administration scratching their heads.
“With all due respect to the Minority Leaders, sometimes you get the feeling that they look for clouds on a sunny day,” Andrew Doba, Malloy’s spokesman, said Tuesday. “Keep in mind that it was a Republican Governor that stood idly by when Alexion was looking to site their manufacturing facility. I’m sure when it was announced that those jobs were going to be created in Rhode Island and not Connecticut that their statements that day were laden with outrage.”
Doba reminded McKinney and Cafero that Alexion is a global company and could have moved their headquarters to any number of locations, but chose to stay in Connecticut.
And if the company fails to meet its job creation goals then there are provisions in the agreement to protect the state’s investment, he said.
“We have extensive safeguards in place to protect taxpayers, including collateral requirements, a 10-year residency requirement, job creation and retention targets and capital investment requirements,“ Doba said. “The department also conducts an extensive amount of financial analysis to ensure that taxpayer funds are leveraged to maximize our return on investment. If the company does not perform, financial benefits will be not realized.”
But it remains to be seen just how strict the Malloy administration will be about the clawback provisions written into these economic development contracts.
A report commissioned by the left-leaning Working Families Party back in October found that Connecticut does a poor job of monitoring their tax incentives and an even poorer job of enforcing them.
The report authored by two researchers at a nonpartisan, nonprofit organization found just over half of the companies audited in 2010 successfully met their job requirements and those that fell short haven’t been subjected to any clawback provisions. Of the 70 companies the researchers looked at 39 fulfilled their job creation obligations, while 31 have not.
All of the information used in the report dated back to 2010 before Malloy was in office.
Malloy has defended his “First Five” program in the past arguing everyone in Connecticut has an interest in retaining and growing jobs in the state.