CT Loses GE to Boston; Fasano: This is a tremendous loss at all sorts of levels [WSJ]

January 15, 2016

Wall Street Journal

Conglomerate’s CEO had cited state tax increases as bad for business climate

Connecticut Gov. Dannel Malloy expressed disappointment Wednesday that General Electric Co. would depart for Boston, but defended his administration’s record on jobs.
“We’ve won a lot of these fights,” said Mr. Malloy, a Democrat, at a news conference. “We are not going to win every one.”

Jeff Immelt, GE’s chief executive, said in June that the company would look for a new headquarters after the state Legislature approved a budget plan that raised taxes by $1.17 billion over the next two fiscal years, including several increases on corporations. Those changes had “serious implications for GE, other businesses and for the business climate in Connecticut,” Mr. Immelt said at the time.

Massachusetts and Boston offered the company incentives worth up to $145 million, which included up to $25 million in property-tax relief

Mr. Malloy declined to offer details on what financial incentives the state offered GE, but said “we were highly competitive.”

In December, the state legislature also approved reductions to business taxes such as the so-called unitary corporate tax that affects companies with headquarters in the state and restructured tax exemptions for firms that have revenue losses.

“Unfortunately, in this case it wasn’t enough to keep the company,” said Joe Brennan, chief executive of the Connecticut Business and Industry Association.
New York state also reportedly made a bid to bring GE to the state, but was also rebuffed.

GE had been based in Fairfield, Conn., since 1974. About 800 people work at the headquarters. It said in a news release that it wanted to be “at the center of an ecosystem that shares our aspirations” and cited Boston’s proximity to higher-education institutions and a talented workforce.

“This is a tremendous loss at all sorts of levels,” said Republican Senate Minority Leader Len Fasano. “Losing an internationally renowned company like GE is a big hit to the state.”

Mr. Fasano said the Democratic-controlled state Legislature was at fault for GE’s departure because it couldn’t address GE’s concerns.

Brendan Sharkey, Connecticut’s Democratic Speaker of the House, said it appeared GE’s decision wasn’t about taxes but rather was driven by its desire to be in the high-tech hub of Boston.

Mr. Malloy said Connecticut remained a desirable place to do business, particularly for financial services, insurance and bioscience industries. He also pointed to the state’s improving job market, which added 26,700 private-sector positions in the 12 months that ended in November 2015, according to state the Labor Department.

Mr. Malloy acknowledged the need to address one of GE’s main concerns—the state’s rising pension costs, which are expected to increase dramatically in 2032. Connecticut’s business community has expressed concern that the state would raise taxes to solve the pension issue. It’s “something we got to have to come to grips with,” Mr. Malloy said

The governor said in October that he wanted to restructure the state’s pension system into two funds, allowing the state to save $8 billion between 2017 and 2032 by reducing what it pays annually. ecticut Gov. Dannel Malloy expressed disappointment Wednesday that General Electric Co. would depart for Boston, but defended his administration’s record on jobs

Steven Lanza, associate professor in the department of economics at the University of Connecticut, said GE’s departure would be a moderate setback to the state.
“These are high paying jobs,” Mr. Lanza said. “It’s millions of income that will cost the state in tax revenue.”
“More importantly,” he added, “it’s a blow to our pride.”

Mr. Lanza said GE’s departure was unlikely to create a big hole in Connecticut’s budget, and the state would retain the same advantages it had used to recruit companies in the past, including its proximity to both New York City and Boston, along with a well-educated workforce.

“Fairfield County is still going to remain a top destination for corporate headquarters,” Mr. Lanza said. “GE was not the only game in town, but it does put a bit of a blot on the record.”