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December 14, 2020 5 We Watched in 2020

Lehman helped CT biz survive the coronavirus pandemic

HBJ Photo | Steve Laschever Department of Economic and Community Development Commissioner David Lehman
By Greg Bordonaro

Department of Economic and Community Development Commissioner David Lehman came into 2020 hoping to reform the state’s business incentive programs and unveil a new jobs-growth strategy.

Instead, he spent the year simply trying to save the Connecticut economy from being overwhelmed by a once-in-a century pandemic.

Lehman is no health expert but he’s been a top advisor to Gov. Ned Lamont throughout the pandemic, providing key advice on which businesses should remain open or closed as the pandemic spiked during the spring and early winter months.

For example, as Connecticut went into lockdown in the spring amid the virus’ outbreak, Lehman helped convince the governor to keep manufacturing and construction open as essential industries. That prevented Connecticut’s economy, which shed hundreds of thousands of jobs in April, from slipping into an even deeper downturn.

Lehman also helped develop business reopening guidelines and oversaw several state grant and loan programs that provided much-needed capital to small businesses desperate for a financial lifeline.

“It’s been an interesting year for everyone to say the least,” Lehman said. “It’s been crazy.”

Check out our other 2020 5 We Watched Profiles.

Legislative priorities

2020 represented Lehman’s first full year as DECD commissioner and he needed, to some degree, to prove his economic-development bona fides.

When Lehman was named to his role in early 2019, the former Goldman Sachs banker drew skepticism and criticism from some state lawmakers who lamented his lack of experience and time on Wall Street, especially during the 2008 financial crisis.

He was prepared to make a splash this year with a legislative agenda that was going to reform the state’s economic-incentives strategy and programs.

The overall goal was to move the state toward a performance-based, “earn-as-you-go” system, meaning employers won’t reap state incentives until they create a certain number of jobs or make a certain level of investment.

The reforms never made it through the General Assembly, which saw its 2020 legislative session cut short due to the pandemic. However, Lehman said the Lamont administration isn’t wavering from its reform efforts and will push for the same changes in 2021.

“I’m very optimistic these changes will pass,” Lehman said.

The reforms included:

• Modifying the Small Business Express program so that it no longer offers state loans or grants, but instead morphs into a loan-guarantee program run by private banks.

• Establishing a new incentive program that provides tax rebates to companies in certain major industries (finance and insurance, advanced manufacturing, health care, bioscience, technology, and digital media) that create at least 25 jobs paying above-average wages.

• Placing a greater focus on two existing incentive programs: the Urban and Industrial Site Reinvestment Tax Credit and the Sales & Use Tax Relief Program.

The state may consider other economic stimulus programs in response to the COVID-19 pandemic, Lehman said, depending what further actions are taken by Congress.

Meantime, a new economic development plan for the state — being developed by AdvanceCT, in conjunction with DECD — was nearly finalized coming into 2020, but had to be shelved once coronavirus hit the state, Lehman said. It’s on hold until after the pandemic passes and could see major changes depending on the state of Connecticut’s post-COVID economy.

“It’s on hold until we get through COVID,” Lehman said. “There is too much uncertainty right now. I think we are going to dust that off and there will probably be some narrowing or refocusing on the efforts once we get to the tail end of the crisis.”

One legislative victory in 2020 was the unexpected reforms to the state’s Transfer Act, which has long been criticized by the commercial real estate industry as creating overly onerous restrictions on the sale of older and formerly polluted industrial properties. The change includes moving the program to a “released-based” system that streamlines contaminated property clean ups, Lehman said.

Financial lifelines

While Lehman’s legislative agenda was largely put on hold, his overall job certainly wasn’t. DECD oversaw three separate loan/grant programs, while also working with the Small Business Administration and local banks and employers on the rollout of the federal Paycheck Protection Program.

DECD’s first $50 million bridge loan program debuted in late March and got off to a rocky start because the agency wasn’t equipped to handle or process the thousands of loan request applications. It eventually partnered with third-party vendors and provided close to 2,200 small businesses with approximately $20,000 loans.

More than 18,000 small employers recently applied for the state's $50 million CT CARES Small Business Grant Program, which is providing one-time $5,000 grants to about 10,000 companies.

DECD also recently administered $9 million in grants to 154 arts organizations, many of which were forced to close in mid-March and haven’t been able to reopen.

Lehman said the funding has been an important source of help for struggling small businesses but he doesn’t envision another state-based lending or grant program for the remainder of the pandemic. Instead, he said the federal government should pass another stimulus bill that allows certain businesses hardest-hit by the pandemic — like restaurants and retailers — to receive another round of PPP funding.

Executive powers

Aside from the capital programs, DECD was given considerable power to help make decisions on how Connecticut’s economy would operate during the pandemic.

For example, in mid-March, DECD was given the power under executive order to designate essential businesses that could remain open during the spring spike in COVID cases.

Later, the agency was given the power to come up with reopening guidelines.

Some major decisions included banning indoor dining early in the spring but allowing restaurants to offer takeout services. Connecticut also left open the manufacturing and construction industries, which Lehman said was crucial to helping stave off further economic pain.

A stunning 266,300 jobs were lost in Connecticut during the month of April, which will likely take a year or longer to recover. Connecticut has slowly regained jobs since then and is down about 89,800 jobs for the year; the unemployment rate is around 11%.

The one bright spot is that Connecticut’s economy has held up better than at least half the country. Connecticut’s economy shrank by 31.1% during the second quarter, outperforming both the national and New England economies, which contracted 31.4% and 32.3%, respectively.

Looking ahead to 2021, Connecticut’s economic recovery will depend on how quickly an effective COVID vaccine is rolled out, Lehman said.

“It’s going to be a bumpy ride until then,” Lehman said. “What’s challenging is we don’t know how the virus behaves during the winter and now you have the entirety of the country with meaningful levels of infection.”

Check out our other 2020 5 We Watched Profiles.

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