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May 27, 2016

Controversial hedge fund aid passes with little opposition

Lembo opposes Bridgewater Associates PHOTO | HBJ File State Comptroller Kevin Lembo along with state Rep. Christopher Davis opposed $22 million in state bonding to Bridgewater Associates.

Two members of the state Bond Commission this morning opposed providing $22 million in state bond funding to Bridgewater Associates, a Connecticut hedge fund that manages more than $130 billion in global investments.

State Comptroller Kevin Lembo and state Rep. Chris Davis (R-Ellington), ranking House member of the Finance, Revenue & Bonding committee, were the two no votes of the 10-member bond commission.

Lembo said that, while he has been accepting of prior bond packages that provide state assistance to private industry, this case stands out as the state now faces a new economic reality - and Connecticut must reevaluate its approach to economic development.

"While state funding of private enterprises may sometimes be necessary - in certain cases and after careful evaluation - I believe we have an obligation as a state to focus our economic strategy and resources on investments that benefit all Connecticut businesses,” Lembo said.

Lembo highlighted reports, including one by the nonpartisan Institute on Taxation and Economic Policy that found tax incentives are "costly for states" and "a drag on national economic growth."

The comptroller said companies such as Bridgewater Associates are important to Connecticut's economy - but, rather than narrowly target state resources to such businesses, the state should focus on collaborating with these companies to identify tax policies and investments that benefit them and all state businesses.

During the meeting Friday, Davis pressed Malloy on why the state was awarding the Bridgewater funding, which was part of an overall $34 million package involving several other companies, like Bain Capital-owned Bob's Discount Furniture.

“I just have a lot of concerns about us spending this kind of money for a major corporation like Bridgewater Associates," Davis said.

Davis said he preferred to retain major employers through lower tax rates or infrastructure improvements, rather than forgivable loans and other handouts.

Malloy described the state's investment as relatively small compared to the $500 million or more Bridgewater is spending. He referred to Bridgewater's related pledge to retain 1,400 jobs and add 750 new jobs.

Malloy also characterized the investment as having a better return than the $162 million package that Massachusetts approved to lure General Electric headquarters to Boston, including 200 jobs. Indeed, he said the state's economic return on the Bridgewater investment would be higher than many of the other bonding authorizations the commission approved Friday.

The governor said he wishes that states didn't compete for companies based on financing packages, but the reality is that they do, and if Connecticut doesn't play the game, it risks losing more of its tax base, which helps fund infrastructure and government.

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