Commerce Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-942

Title:

AN ACT CONCERNING CAPS ON STATE FINANCIAL ASSISTANCE FOR BUSINESS PROJECTS AND THE URBAN AND INDUSTRIAL SITE TAX CREDIT.

Vote Date:

3/14/13

Vote Action:

JFS to GA&E

PH Date:

2/28/2013

File No.:

SPONSORS OF BILL:

Commerce

REASONS FOR BILL:

The bill raises the statutory limits for the amount of economic development assistance that can be granted without the General Assembly's approval

● Current law imposes limits on the amount of bond-funded grants, loans, and other financing without the legislature's approval

The bill raises, from $20.0 million to $26.010 million the amount of funding the agencies can provide during a two-year period for biotechnology business projects (lines 33-39)

It also raises, from $10.0 million to $15.540 million the amount of funding they can provide during a two-year period for other types of business projects (lines 24-32)

(See notes below for definitions of biotechnology business and business projects)

● Current law also limits the amount of Urban and Industrial Sites Tax Credits the economic and community development commissioner can approve without the legislature's approval.

The bill raises this limit from $20.0 million to $26.750 million (lines 43-58)

See Notes for summary of the Urban and Industrial Sites Tax Credit Program

Substitute (LCO 4695)

The substitute also raises the limits, but at a lower level than the underlying bill.

Project

Current Law

Raised Bill

Substitute

Biotechnology Business Project

$20 million

$40 million

$26.010 million

Business Project

10 million

20 million

15.540 million

Urban and Industrial Sites Tax Credits

20 million

40 million

26.750 million

Notes

DEFINITIONS

Biotechnology Business Project

These are commercial projects for conducting laboratory research, development, and manufacturing of biologically active molecules or devices involved in biological processes.

Business Projects

These include a wide range of projects, but not those involving only housing uses.

URBAN AND INDUSTRIAL SITES TAX CREDIT PROGRAM

Description

The Program provides business tax credits to taxpayers that invest in eligible urban reinvestment projects. Under the program, the state may provide up to $100 million in tax credits over a ten-year period to support projects in urban or economically distressed areas (CGS 32-9t(b)).

General Assembly Approval

By law, the economic and community development commissioner must obtain legislative approval for any single urban or industrial site tax credit award above a statutorily specified amount. She must submit the proposed award to the Finance, Revenue and Bonding Committee, which 30 days from the date the commissioner submits the project to act on it. The committee must to recommend whether to approve or disapprove the award. The commissioner must resubmit the project if it is altered in any way, or withdrawn, after she first submits it, and gives the committee another 30 days from the resubmission date to act. If the committee fails to act within the required time, it is considered to have approved the credits.

The House or Senate has 30 days after the Finance Committee makes its recommendation to meet and disapprove the credits.

Applicable Taxes

The credits can be claimed against the following taxes:

Insurance Premium

Corporation Business

Air Carriers

Railroad Companies

Telecommunications

Community Antenna

Hospitals

Dry Cleaning

Utility Companies

Public Service Companies

RESPONSE FROM ADMINISTRATION/AGENCY:

Catherine Smith, Commissioner, DECD

Commissioner Smith is in full support of bill 942 stating it “will improve the agency's ability to effectively and efficiently negotiate business assistance deals, strengthening our efforts to attract and retain businesses and create good paying jobs here in Connecticut.” The Manufacturers Assistance Act (MAA), created in 1990, and the Urban and Industrial Sites Reinvestment Act Tax Credit program (URA), established in 2000, have projects that have increased dramatically in size and scope in the intervening years since their inception. The current trigger of $10 million for legislative approval on MAA projects and $20 million for URA projects is outdated and not in line with financial assistance packages that are currently being negotiated. “The limits currently set only constrain the agency's ability to negotiate agreements in a timely and effective manner.” Increasing the legislative approval trigger to $20 million for the MAA and to $40 million for the URA tax credit will ensure that Connecticut maintains its competitive advantage relative to other states. To place the current thresholds into perspective, if increased by the rate of inflation alone, the MAA trigger and URA trigger would currently be $17,566,488 and $26,655,969, respectively. As the economy changes, we must also adapt our programs to the challenges that come our way and provide the agency with the tools necessary to compete for the businesses and jobs that our state needs.

NATURE AND SOURCES OF SUPPORT:

None

NATURE AND SOURCES OF OPPOSITION:

Matt O'Conner, Connecticut District Political Director for Local 32BJ, SEIU

Matt O'Conner is opposed to this bill, stating his primary concern in the interest of improving the use of taxpayer dollars in Connecticut. The state invests a substantial amount of public funds in businesses, including $260 million in economic development expenditures in fiscal year 2011. SB 942 would undermine the transparency, accountability and oversight needed when investing taxpayer dollars. This bill “would remove high performance work practice requirements and reduce legislative oversight of state financial assistance disbursal.” “Companies receiving state subsidies should be accountable to their investors – the taxpayers. State economic development funds should be administered through a transparent, state-led process that holds recipients to a high, but fair, standard.” Too often, the public's tax dollars are used to subsidize poverty-level jobs. Companies receiving state economic development funds often hire contractors that pay poverty-level wages not high enough to support further spending throughout the local economy. This bill recedes governance measures that the state should rather promote to ensure accountable and responsible use of taxpayer dollars.

Lindsay Farrell, Executive Director, Connecticut Working Families

Lindsay Farrell is opposed to this bill. “Working Families strongly opposes these two bills because we need to do more to strengthen transparency and accountability measures on our corporate welfare dollars, not weaken them.” The state of Connecticut has been incredibly generous to corporations in the past few years with their programs and giveaways resulting in anemic performance among the recipients of our corporate welfare dollars. A 2005 study done by this legislature's Finance Committee found that 14 of the state's 24 tax credit programs actually resulted in job losses. Our state does not have a record of economic development performance that justifies a relaxation of the standards for doling out these funds.

Reported by: Christopher Catsam

Date: March 14, 2013