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Deal or No Deal
(New Haven Register (New Haven, CT) (KRT) Via Thomson Dialog NewsEdge) Dec. 3--WHEN WALGREEN CO. was deciding where to build a new 680,000-square-foot Northeast distribution center, company officials considered Massachusetts, Rhode Island, New York and Connecticut before ultimately choosing to build the state-of-the-art facility in Windsor.
"We looked at a number of sites," said Dan Coughlin, a divisional vice president with the Illinois-based drug store chain. "It was a very thorough search. Connecticut was competing with other states and won."
But the state does not always win. And several high-profile losses this year -- including the Winchester plant in New Haven, the Stop & Shop distribution center in North Haven and, most recently, Bayer Healthcare in West Haven -- have some questioning whether Connecticut does enough to attract and keep businesses here.
"We have increased our efforts in both attraction and retention over the years," said Joseph Brennan, senior vice president of public policy for the Connecticut Business & Industry Association. "(But) there are clearly states that are more active."
Some more aggressive states bombard companies with offers, many times via fax, attempting to lure them from Connecticut. While Connecticut takes a more subtle approach, state development officials say they constantly work to attract, keep and grow companies here.
"There are certainly as many wins as losses in this business," said state Department of Economic and Community Development Commissioner James Abromaitis. The department works with the Connecticut Development Authority, Connecticut Innovations and the legislature to offer technical assistance and incentives to entice businesses to invest in the state. The agencies don't keep track of how many companies go or stay.
IN THE "WIN" COLUMN
Walgreen Co. chose to build its facility, which will create more than 550 jobs when it opens in 2008, in Connecticut because state and local officials were cooperative and accommodating, and the state had the available land and work force that Walgreen Co. sought, Coughlin said.
Sweetening the deal was a $5 million incentive package from the DECD, including a $1.5 million loan to the company for machinery and equipment, a $2 million grant to the town of Windsor to support its business assistance program, and a $1.5 million grant to the company to create a new customized training program.
Another recent success story is Trumpf Inc., a subsidiary of Germany-based Trumpf Group, which makes sheet metal products and industrial lasers. Last month, the company broke ground on a $20 million project in Farmington that will build a 83,000-square-foot high tech building on the existing campus of the company's North American headquarters. To facilitate the deal, the Connecticut Development Authority approved a $570,000 sales and use tax exemption on equipment.
"We have a pretty aggressive approach," said Ron Angelo, deputy DECD commissioner. In addition to traveling across the country and the world to promote Connecticut to business owners, state officials work with them to assess and help meet their work force, housing and transportation needs, he said.
BIG LOSSES IN 2006
But there are some who say the state could be more aggressive in spurring development. In June 2005, for example, officials at Middletown-based Mortgage Lenders USA Inc. complained that state officials were slow to respond to their desire to build a 180,000-square-foot facility in the state that would eventually employ up to 1,200 workers.
Claiming Massachusetts officials were more receptive, the company threatened to build the facility in the Bay State -- until Connecticut offered a $4 million loan to the company to keep it here.
"Massachusetts offered the stronger incentive package to MLN," said Sue Coassin, the company's director of corporate relations. "The ultimate decision to stay in Connecticut was based on the quality of life available here and the ability to attract and retain a reliable work force."
While Connecticut ultimately won in that situation, it has been unable to stop other companies from fleeing.
Last month, Germany-based Bayer announced it will close its U.S. headquarters in West Haven -- turning down a $60 million incentive package offered by the state -- and relocate to New Jersey within the next 18 months, shifting much of its research operations to Germany.
Bayer spokeswoman Staci Gouveia said local and state officials offered the company "support and help in every form" but ultimately the decision to move to New Jersey "just makes good business sense" based on Bayer's corporate strategy.
The state was unable to deter Bayer's plan and, "in this particular case, the state's a victim of corporate restructuring," Abromaitis said.
In January, Netherlands-based Royal Ahold announced it was closing subsidiary Stop & Shop Supermarket Co.'s North Haven distribution center, which had 850 employees, consolidating its operations into a larger, newer facility in Massachusetts. Company officials cited the size and age of the North Haven facility, as well as company-wide consolidation, as reasons for the decision. State officials, including Gov. M. Jodi Rell, tried and failed to keep the company in North Haven.
Also in January, Belgium-based Herstal Group announced subsidiary U.S. Repeating Arms Co. was closing its Winchester factory in New Haven, eliminating 186 jobs and ending a 140-year presence in the city.
Though the DECD had offered Winchester various forms of economic assistance in past years, the state did not offer the manufacturer an incentives package once it announced it was closing down, said DECD spokesman James Watson.
"Frankly, that was based on the feedback that we got from the company," Watson said, adding that Winchester officials cited global factors, including a decreased demand for its products, in deciding to close and would not have been swayed by incentives.
THE COST OF HIGH COSTS
Connecticut does have several key benefits working in its favor and making it attractive to businesses, said Todd Martin, economic adviser to People's Bank. "The big advantages are the location, the quality of life, and the highly educated work force," he said.
But problems persist, including business' perception that the state has too much regulatory "red tape," requiring too many permits and approvals at both the municipal and state level, said CBIA's Brennan.
Also, the state's comparatively high cost of doing business, including energy prices and taxes, is "a huge factor," especially in an increasingly global marketplace where Connecticut's not only competing with cheaper states but also cheaper countries, Brennan said.
"We typically are quite a bit higher than the rest of the country," Martin agreed.
State development officials are aware of the hurdles, said Abromatis.
"We know we're perceived as a high-cost state," he said. "We like to say we're a high-value state: You get what you pay for."
As for the state having too much "red tape," Connecticut actually requires less regulatory compliance than some other states because there is no county level of government here for companies to deal with, said Holly Campo de la Vera, executive director of DECD's Office of Business and Industry Development.
LEGISLATIVE GIVE AND TAKE
Lawmakers are becoming increasingly aware of, and responsive to, business leaders' concerns, said Abromaitis.
The legislature "has really turned itself around and started to listen more to businesses, which was long overdue," he said.
Lawmakers recently enacted several new incentives, including the Job Creation Tax Credit, which gives tax credits to companies that move here and create at least 50 full-time jobs, and the Displaced Worker Tax Credit, which gives companies a $1,500-per-person tax credit for hiring Connecticut workers who have been laid off.
Both Abromaitis and Brennan said lawmakers also are working to address the state's transportation problems, including congestion on Interstate 95 -- another chronic complaint from the business community.
But despite some positive efforts, lawmakers have also debated several damaging bills in recent years that the corporate world sees as being "anti-business," CBIA's Brennan said.
"There's been some harm done over the past several years," he said.
Several bills -- including ones that would have limited executives' compensation, restricted communication between employers and employees, and required some businesses to offer employees health care similar to what the state offers -- did not pass but were seriously considered and debated by lawmakers, he said.
"Even though they haven't passed, they really scare businesses when making relocation decisions," Brennan said.
While there are some trends, such as globalization and consolidation, that are impossible to derail, state development officials continually seek ways to market Connecticut and foster business growth here, Abromaitis said.
"There are certain things you have no control over and certain things you can mitigate," he said.
Copyright (c) 2006, New Haven Register, Conn.
Distributed by McClatchy-Tribune Business News.
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