The Connecticut General Assembly
OFFICE OF LEGISLATIVE RESEARCH
January 28, 1994 94-R-0229
FROM: Saul Spigel, Chief Analyst
RE: Connecticut Development Authority
You asked for a description of the Connecticut Development Authority's (CDA) structure, its links to the Department of Economic Development (DED), and its criteria for funding projects.
CDA is a quasi-public agency governed by a board composed of state agency heads, the state treasurer, and gubernatorial and legislative appointees. The board makes policies and decisions within a framework established by state statutes and development strategies designed by DED, the state's lead economic development agency.
The DED commissioner is the current chairman of CDA's board. There is also regular interaction between the commissioner and DED senior staff and the CDA executive director and staff. The agencies cooperate in other ways. Each cross refers potential clients to the other agency if it is the more appropriate funding source, and in some circumstances both will fund the same project.
CDA generally looks at whether an applicant's project is eligible for funding under the law and whether it is credit worthy, that is whether it is likely to repay a loan. It also has a rough $20,000 per job assistance limit. For larger projects, the agency will also try to determine whether the project's potential economic benefits to the state and locality justify the funding requested.
CDA is a quasi-public agency. It operates under statutory directives established by the General Assembly, but the legislature does not have the same kinds of oversight mechanisms (e.g., budget and regulations review) that it typically applies to executive branch agencies. As a semi-independent authority, CDA is governed by an 11-member board of directors. The board is composed of the DED commissioner, the secretary of the Office of Policy and Management, the state treasurer, four members appointed by the governor, and, as of July 1, 1993, four members appointed by legislative leaders. The governor's appointees must have financial lending or business development experience. The governor appoints the board's chairman, with the advice and consent of both houses of the legislature.
Six members of the board constitute a quorum. The board may delegate any of its powers and duties to a committee of three or more members, so long as one committee member is not a state employee.
The board appoints an executive director who may be DED's deputy commissioner. The current executive director, John Herndon, does not have this dual role. The director and other CDA staff are not classified state employees.
LINKS TO DED
CDA's current chairman is Joseph McGee, the DED commissioner. He is the direct link between CDA and DED. DED is the state's lead agency for developing economic development policy; CDA operates within the general policy directions set by DED.
Other linkages, formal and informal, occur in respect to specific development projects. Both agencies are authorized to lend money directly to similar businesses. A loan applicant can go to either agency for financing. This possibility necessitates administrative and staff communication over the issue of which agency will provide funds in particular situations. Application intake and review teams in each agency determine which one is the most appropriate lender for a specific proposal.
There is also a financial link between the two agencies. In some cases both provide assistance to the same company. The Program Review and Investigations Committee's recent review of economic development agencies found that about one-third all firms involved with DED also had assistance agreements with CDA. A typical scenario might see a company receiving a CDA loan and a DED grant.
CDA applies the following uniform lending criteria to all applications for assistance: (1) the applicant must be eligible for the program as determined by the statutory qualifications, (2) the assistance requested should be less than $20,000 per job created or retained, (3) the applicant must not be able to obtain conventional financing elsewhere, and (4) the applicant must be able to repay the loan.
Projects for which substantial sums (over $500,000 to $1 million) are requested are subjected to an economic analysis by DED or, in some instances, an outside firm. The analysis projects the potential economic benefit to the state in terms of jobs created or retained, taxes generated, and effects on the local economy.