November 20, 2017

Fiscal uncertainty makes growth harder, not impossible

Greg Bordonaro Editor

Connecticut got another double-dose of bad economic news last week.

First, the much-hyped bipartisan state budget has already fallen out of balance as eroding revenues have created a projected $175 million deficit this fiscal year.

Then, a new third-quarter consumer confidence survey found that 51 percent of Connecticut residents do not believe the state's economy is improving, while 37 percent said they believe overall business conditions in the state are now worse compared to six months ago.

Both news tidbits shouldn't be surprising to those who have been paying attention to the state's and city's fiscal and economic challenges, which have become national stories.

Undoubtedly, the constant wave of negative financial news coming out of Hartford in recent months and years has impacted Connecticut's and the region's ability to attract businesses and investment.

The question is by how much?

There may only be subjective answers, but Connecticut's paltry growth in jobs (we still haven't fully recovered the 119,100 jobs lost during the Great Recession) and Gross State Product combined with a declining population provide ample evidence that it's been a struggle.

However, while Connecticut's financial woes may deter some businesses from locating or investing here, it's not true for all of them.

Those were the sentiments shared by Jonathan Cohen, North American manager for the Israeli Innovation Authority, who recently stopped in Hartford with a delegation of Israeli startup executives and government officials.

The goal of the visit was to advance a relationship between a country and state that have spent years trying to forge stronger economic ties.

When asked by HBJ if Hartford's and Connecticut's well-publicized fiscal problems would deter Israeli companies from thinking about a presence in the city or state, Cohen, who heads that country's top economic development agency, said not necessarily.

"In Israel you can go and find deficits too," he said. "I think if you invest in those companies, in those stakeholders, the economy will flourish."

His insights mirror sentiments shared by other foreign companies that have found a home in Connecticut — often accompanied by state financial incentives. The truth is, Connecticut can be a good place for foreign businesses, particularly those from Europe or Asia, looking to establish an American beachhead. Connecticut, for now, is still a lower-cost destination than New York and Massachusetts. Its other positive attributes include a well-educated populace and high quality of life.

The Israeli alliance makes even more sense because of Greater Hartford's strong Jewish population.

The state and several other groups, including the MetroHartford Alliance, the Connecticut Economic Resource Center and Upward Hartford's Shana Schlossberg, deserve credit for continuing to nurture the Connecticut-Israeli connections, which have borne some fruit including the establishment of several Israeli companies in Hartford and other parts of the state.

It's a smart economic development strategy to continue to showcase Connecticut to foreign companies, though the funding available at the state level for international recruitment is limited.

Among those who greeted the Israeli delegation was Hartford Mayor Luke Bronin, who also recently sat for an editorial board meeting with HBJ.

When asked if he thought the city's fiscal crisis injured Hartford's reputation with investors and businesses, he said he didn't think so.

"I think what investors and businesses want to see is that we are determined to fix the problem that has held us back for a long time," he said. "We've had structural deficits year after year."

"The biggest enemy of investment and growth is uncertainty," he added.

Bronin said he's heard from businesses and developers who are excited about the city's recent development wave, and who have taken comfort in the city's efforts to try to seriously tackle its debt and deficits.

The city, however, still has a long way to go before it reaches fiscal stability. And even if the negative headlines don't scare away investors, the city's highest-in-the-state property tax rate is certainly a deterrent (Hartford's mill rate is 74.29).

That being said, Hartford is gaining momentum and if city and state leaders can put us on a sustainable fiscal path, greater job growth and investment will follow.

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