OLR Bill Analysis
sSB 1001 (File 631, as amended by Senate “A”)*
AN ACT CREATING THE FIRST FIVE PROGRAM.
This bill authorizes “substantial financial assistance” under existing economic development programs for business development projects that can create jobs and invest funds within specified timeframes. The Department of Economic and Community Development (DECD) commissioner may provide this assistance to no more than five businesses per year in FY 12 and 13, respectively (i. e. , “First Five” Program).
The bill allows her to provide the assistance only if the governor consents. It exempts First Five projects from having to obtain the legislature's approval, which is required under current law for financial assistance and certain tax credits above specified amounts.
The bill also increases the total amount of business tax credits available under (1) the job creation tax credit program, from $ 11 million to $ 20 million, and (2) the Urban and Industrial Sites Reinvestment Program, from $ 500 million to $ 750 million.
*Senate Amendment “A” (1) limits the increase in job creation tax credits to only those authorized under CGS § 12-217ii (i. e. , Job Creation Tax Credit Program) and allows the commissioner to waive the statutory cap on the amount of tax credits insurers may claim against the insurance premium tax.
EFFECTIVE DATE: July 1, 2011.
SUBSTANTIAL FINANCIAL ASSISTANCE
The bill authorizes the DECD commissioner to provide substantial financial assistance to up to five businesses per year in FY 12 and 13, respectively, but does not explicitly specify the source, type, or maximum amount of assistance. It authorizes the commissioner to work with the Connecticut Development Authority and Connecticut Innovations, Inc. to secure financing for the project.
The bill implicitly authorizes the commissioner to fund “first five” projects with Manufacturing Assistance Act (MAA) funds, which businesses and municipalities can use to acquire and develop land and, in businesses' case, purchase machinery and equipment. It allows the commissioner to provide up to 100% funding for these projects by exempting them from MAA's funding limits. Under current law, projects in the state's 17 target investment communities qualify for up to 90% funding; those in the other municipalities generally qualify for up to 50% funding.
The bill implicitly identifies the Urban and Industrial Sites Reinvestment Program as a funding source for first five projects. The program provides tax credits to businesses that build, expand, or rehabilitate facilities in state-designated economically distressed areas or clean up and redevelop contaminated property in a municipality. Under current law, projects requesting over $ 20 million in credits require legislative approval. The bill exempts first five projects from this requirement.
The bill also implicitly identifies several other tax credit programs as potential funding sources for first five projects. The programs are those offering tax credits against insurance premium taxes. Current law limits the total value of credits insurers can claim against these taxes in any income year to 70% of their pre-credit tax liability for that year. The bill allows the commissioner to waive this limit for insurers making credit-eligible investments in first five projects.
The economic development-related tax credits include the Urban and Industrial Sites Reinvestment Act discussed above and:
1. Job Creation (CGS § 12-217ii),
2. Small Business Job Creation (CGS § 12-217nn),
3. Vocational Rehabilitation Job Creation (CGS § 12-217oo),
4. Film Production Tax Credit (CGS § 12-217j),
5. Film Production Infrastructure (CGS § 12-217kk),
6. Digital Animation Production (CGS § 12-217ll), and
7. Insurance Reinvestment Fund (CGS § 38a-88a).
Business development projects qualify for substantial financial assistance if they commit to creating jobs or investing funds within the bill's timeframes. Thus, a project qualifies if it:
1. creates at least 200 new jobs within 24 months after the commissioner approved assistance or
2. invests at least $ 25 million and creates at least 200 jobs within five years after the commissioner approved the assistance.
The bill requires the commissioner to give business development projects preference for assistance if they are also “redevelopment projects,” which the bill does not define. The commissioner must do this if she believes a project can create at least 200 jobs sooner than 24 months or, for projects investing at least $ 25 million, sooner than five years.
TERMS AND CONDITIONS FOR FINANCIAL ASSISTANCE
The bill authorizes the commissioner to take any steps she deems necessary to ensure that a business development project meets its job creation and investment goals. The steps include imposing terms and conditions on repaying state assistance.
The commissioner must certify to the governor that a project meets the bill's criteria. She may award the assistance only if the governor consents.
The bill exempts first five projects from laws requiring legislative approval for financial assistance or tax credits above specified amounts. Under current law, the legislature must approve proposed projects requesting over:
1. $ 10 million ($ 20 million for biotechnology projects) in grants, loans, loan guarantees, and other forms of financing during a two-year period or
2. $ 20 million in urban and industrial sites tax credits.
The commissioner must report to the Commerce and Finance, Revenue and Bonding committees on the projects receiving assistance under the bill. The reports must indicate the number of jobs created and how they affect the economy. They are due on January 1, 2012,
Joint Favorable Change of Reference
Finance, Revenue and Bonding Committee