Senator Frantz Shares Concerns About Limiting Legislative Oversight of Economic Development Assistance [Hartford Courant]

March 7, 2013

Article as it appeared in the Hartford Courant on March 7, 2013

Key Lawmaker Says Requests To Double Size Of Incentives Exempt From Oversight Unlikely To Pass

By Mara Lee

The co-chairman of the legislature’s commerce committee said Wednesday that two requests by the Department of Economic and Community Development to double the size of incentive packages that are exempt from legislative oversight are unlikely to pass.

But the co-chairman, Sen. Gary LeBeau, D-East Hartford, said he supports increasing the cap on the size of projects covered by either urban reinvestment act tax credits or the manufacturing assistance act. In the first category, DECD can independently negotiate deals of up to $20 million, and in the case of manufacturing subsidies, they can offer $10 million without legislative approval.

LeBeau said that while Commissioner Catherine Smith’s argument that these caps have not increased with inflation since the programs were introduced is a fair one, he thinks the increase should be largely limited to the effects of inflation.

He said he thinks the House and Senate leadership also supports a more limited increase to the cap.

Sen. Scott Frantz, R-Greenwich, a ranking member of the committee, agreed that the request was too much.

“These are very large amounts of money and I absolutely think there has to be legislative oversight,” Frantz said. “The legislature can act very, very quickly on items such as this.”

Speed is not the only reason why Smith has asked for more leeway to negotiate deals, however.

“Managers are always concerned that trade secrets, management practices will get out” as they go through public scrutiny for subsidies, Frantz said. “You do open up the books more than in the past,” he said. “In some cases that could be a deal killer, the commissioner is right about that.”

Frantz suggested an ad hoc committee could discreetly consider some larger deals and no one would have to know if the deal was rejected.

Frantz said he believes that some of the 10 companies that were approved for the state’s most generous state subsidy program, called the First 15, would have been rejected if the legislature had a say.

One of the 10 companies withdrew voluntarily after a scandal involving its CEO.

The Small Business Express program, which has provided about $80 million in subsidies to 598 companies, about 60 percent loans and 40 percent grants, is also on the committee’s agenda. With the other companies in final review, it is already going to spend more than $100 million originally planned. It can do so because the state gave the department authorization to apply borrowing that had been authorized for manufacturing subsidies to Small Business Express.

The department has asked for another $100 million to cover the next two years.

“I think anything that allows us to have greater job growth in Connecticut for a reasonable cost is a good idea,” Frantz said. “Provided we can supplement the economy to a certain degree, it allows us to get out of this quagmire.”

LeBeau said authorizing another $100 million will be an easy decision.

“It’s a very successful program,” he said. “This is really good economic development. It’s like throwing grass seed out there. Some of these are really going to take.”

Frantz said while he thinks the state should be in this role, he dislikes that it has to borrow the money to distribute to the companies.

And he said it’s also frustrating that a significant minority of the spending is grants.

“I’d prefer it to go loans-only,” he said. “I think it’s fundamentally wrong to borrow money in the open market and give it away.”