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February 20, 2023 LEGO 'Postmortem'

LEGO’s departure draws attention to Lamont administration’s new incentives strategy

HBJ PHOTO | STEVE LASCHEVER Alexandra Daum is the commissioner of the state Department of Economic and Community Development.

While the state never offered LEGO an incentives package to maintain its Enfield headquarters, the Danish toymaker’s pending move to Boston draws at least some attention to the Lamont administration’s new business retention and growth playbook.

Former Department of Economic and Community Development (DECD) Commissioner David Lehman spearheaded efforts to shift Connecticut away from offering upfront loans and grants to companies, especially businesses not interested in adding new in-state jobs.

Instead the state’s JobsCT incentives program, which was approved by lawmakers last year, is predominantly designed to reward companies that relocate or add jobs in Connecticut, not maintain existing ones, said Peter Denious, CEO of AdvanceCT, the state’s nonprofit business recruitment and development arm.

Under the program, employers adding 25 or more staff in Connecticut can earn a tax rebate worth 25% of the withholding taxes from net new employees — or 50% in distressed municipalities — for five to seven years.

Those tax rebates run from years three through seven of the added hires, and can potentially carry into years eight and nine.

The jobs created must pay at least $37,500 annually and be at least 85% of median household income for the municipality in which they are located.

“That is the basic incentive for companies that grow and stay in the state,” Denious said. “The state has gotten out of the business of picking winners and losers by creating customized programs.”

That doesn’t mean exceptions can’t be made. The Lamont administration last year negotiated a deal with Stratford-based Sikorsky Aircraft Corp., making the company eligible for up to $75 million in tax credits, contingent on the helicopter maker winning major U.S. Army contracts.

In exchange, Sikorsky parent Lockheed Martin promised to keep the company’s headquarters in Stratford for two decades and maintain more than 7,000 direct jobs at its Connecticut facilities.

Lawmakers approved that deal last year, although it now faces some uncertainty after it was announced in December that Sikorsky lost out on a $1.3-billion U.S. Army contract to replace the Black Hawk helicopter.

“That was a very specific situation,” Denious said of the Sikorsky deal. “That sort of speaks for itself, given the number of jobs, given the presence of the company. Exceptions are made but the vast majority of incentives are structured by the JobsCT incentive.”

Current DECD Commissioner Alexandra Daum also described the JobsCT tax rebate as “the main tool in the toolkit” for business retention and recruitment.

“It does not give a credit for retention of existing jobs,” Daum said. “We don’t think we should be paying a lot of taxpayer money to retain jobs. This is not the way this administration is doing economic development.” 

See related stories: CT economic development officials search for answers following Danish toymaker’s pending exit

What’s next for LEGO’s Enfield headquarters property?

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