25 taxpayer- subsidized companies didn't meet contracted job goals

 

By Don Michak   Journal Inquirer June 1, 2013

 

Just over 41 percent of the 60 companies that pledged to retain or create jobs in exchange for state subsidies failed to meet their employment targets by last summer, a new report shows.

 

The latest annual report from the state Department of Economic and Community Development also reveals that each job at the companies that didn't fulfill their requirements cost the state $26,038.

 

The cost per job at the companies that did meet their goals was less than half that figure, or $10,903.

 

The department's 135-page report for 2011-12 shows that the companies in its "business assistance portfolio" received a total of $296 million in state subsidies, including $219 million in tax credits, $73 million in loans, and $3.25 million in grants.

 

The public has had to ferret out details about those incentives from frequently dense reports like those issued by DECD. But the state Senate on Friday was poised to vote on a bill unanimously approved days before by the state House that would create an online searchable and company-specific database of such information.

 

The bill pushed by state Comptroller Kevin Lembo drew objections from bureaucrats as well as the state's business lobby. But Lembo says it would make the public and policymakers "better equipped to make informed and strategic economic decisions."

 

"The bill also puts the state on a path toward performing regular tax incidence analyses," he said, adding that such reports would help answer questions about which groups are bearing the burden of major state taxes and whether some disproportionately affect the poor.

 

The DECD report says that while 25 companies didn't meet their job obligations, they together attained 78 percent of their contracted goal. They were supposed to retain and create a total of 3,595 jobs, and audits showed they had a total of 2,816.

 

The document also says that the 35 companies which did reach their contracted goals were supposed to create or retain a total of 18,721 jobs and exceeded that target by 1,706 jobs. That meant the portfolio attained 104 percent of its requirement, it says.

 

Since each person employed as a result of the subsidies pays state income tax, the report says, the jobs created represent $43 million in annual tax revenue, assuming that each of those employed earned the median portfolio wage of $62,000 and paid 3 percent of their wages in income taxes.

 

Nevertheless, some of the larger companies that didn't meet the requirements of their contracts also had fewer employees last summer than when they had applied for state grants and loans, according to the report.

 

. Diego North America, the Norwalk subsidiary of distillery giant Diageo PLC that was to retain 700 jobs and create 300 more by the end of June 2012, had 693 jobs then, or 307 fewer than required.

 

. Similarly, Ahlstrom Windsor Locks, the operator of the former Dexter Corp. paper products plant that had 495 Connecticut jobs when it applied and was supposed to retain those and create 15 more by April 2006, had 434 full-time and three part-time jobs on June 30, 2012.

 

3 penalized

DECD officials said in the report that companies with job requirements "may have from two to five years within which to reach the agreed-upon job goals." Those that don't, they added, could be required to repay all or a portion of their subsidies, have their interest rates increase, or see incentives such as tax credits reduced.

 

David Treadwell, a DECD spokesman, said Friday that the department had reduced tax credits for two companies that failed to meet contracted job obligations and hiked the interest rate on a loan to a third.

 

He said Diageo was eligible for $8 million in tax credits but received about $6.91 million.

 

He said Lowe's Home Centers Inc., the North Carolina company with several stores in Connecticut that was contracted to create 525 jobs by January 2012 but employed 397 when audited last year, was eligible for $4 million in credits but received roughly $2.98 million.

 

Treadwell added that the Bloomfield health care products company, Hermell Products Inc., which was to retain 35 jobs and create three more by 2011 but had 35 employees when audited, was penalized by increasing its interest rate from 3 percent to 3.6 percent.

 

Not every company that gets grants or loans from the DECD is contractually required to retain or create a specific number of jobs, according to the report.

 

The document, for example, includes the results of job audits at 119 subsidized businesses as of June 30, 2012. But it lists no job targets for 27 of those firms, a group that includes a major employer based in Bloomfield, Kaman Aerospace Corp.

 

The report lists an additional 148 subsidized businesses for which job goals and target dates are identified, but for which the number of jobs at the time of review is described as "pending." A note to the report says employment numbers weren't obtained since many of those projects were part of the two-year Small Business Express

Program and were contracted to close as of June 30, 2012.

 

Treadwell, however, said eight of the participants in that program don't have job requirements, a group that includes the Bridgeport Regional Business Council, the Central Connecticut Chambers of Commerce, and the New Britain Museum of American Art.

 

Treadwell also agreed that the performance of companies in the DECD's latest report nearly matches that recorded before.

 

Last year's report showed that just over 44 percent of the subsidized companies contracted to retain or create jobs failed to meet their goals, and the previous year's report put that figure at 46 percent.