HARTFORD – The state Senate gave final legislative approval Thursday to a bipartisan bill to allow Hartford-based United Technologies Corp. to use earned, but unused, tax credits in exchange for $500 million in improvements over the next five years in Connecticut.
The bill passed by 34 to 2 with Democrats touting the deal as a major step forward for the state’s largest private employer. Two Republicans said the deal amounted to “corporate welfare” and a giveaway to a highly profitable, multinational corporation.
The bipartisan bill applies only to large manufacturing companies that have at least 15,000 employees in Connecticut and have $400 million in accumulated research-and-development tax credits. As such, lawmakers say the bill is specifically targeted at United Technologies, even though the company is never mentioned by name in the bill.
The deal calls for Pratt & Whitney to maintain its headquarters in the state for at least 15 years and for Stratford-based Sikorsky to remain for at least five years. In exchange, UTC would be able to use up to a maximum of $400 million in research-and-development tax credits that it has already accumulated.
State Sen. John Fonfara, the co-chairman of the tax-writing finance committee, said the Pratt improvements in East Hartford will be “housing the best and brightest in the world, mostly Ph.D.’s in engineering.”
Fonfara added that Sikorsky Aircraft will be doing “game-changing research on the next generation of helicopters.”
Lawmakers said that 2,500 suppliers, including many machine shops, will benefit as the parent company prospers. More than 700 of those suppliers have dealings of $100,000 or more, lawmakers said. With thousands of employees, UTC’s economic impact works its way all the way down to dry cleaners, grocery stores, and retailers, lawmakers said.
“For me, it is a bet on the future,” Fonfara told his colleagues on the Senate floor. “Not only a bet on the best and brighest engineers” but a bet that Connecticut will benefit, too.
“We want you here, UTC,” Fonfara said on the Senate floor. “We want your family of companies here in the state. Those 600 new engineers that you hire every year, we want them here in this state. … That’s a win-win for Connecticut. Right here in the small state of Connecticut.”
But Sen. Anthony Guglielmo, a Stafford Springs Republican with 22 years at the state Capitol, said the deal was an example of “corporate welfare” and a giveaway to a huge international corporation with major profits. He criticized the “First Five” program of Democratic Gov. Dannel P. Malloy for awarding tax breaks to companies in the hopes of keeping jobs in the state.
“I do have a problem with the concept of picking winners and losers,” Guglielmo said. “It’s better than Starwood [hotels]. It’s better than Jackson Labs. It’s better than ESPN. It’s better than NBC. … But when you cut to the chase, it’s still corporate welfare. … This is a healthy company. They’ve got $6 billion in profits. That’s billion with a B. … If they do not create a single job, they’ll get 90 percent of that $400 million. That’s incredible. It’s a terrific deal for UTC.”
He added, “You’re talking about $400 million. You’re talking about a company with $6 billion in profits. That’s 7 or 8 percent of one year’s profits to build its headquarters. … This is a drop in the bucket for UTC. They could easily do this. … It makes me a little queasy to giving them $400 million to a company that said, “Any place but Connecticut.”
Guglielmo said, “This is not a sustainable course. We can’t keep throwing money at this large company and that large company.”
Senate Republican leader John McKinney, who is running for governor, said he would support the bill in order to help the workers who are “the single greatest strength of the state of Connecticut.”
Saying that Pratt & Whitney received research and development tax credits in 1993, McKinney said that the people of Connecticut cannot “subsidize the operations of multi-billion-dollar corporations” every 20 years.
“I don’t accept that we always have to be a high-tax state,” McKinney said, referring to comments by Malloy about taxes that he made during an interview in March. “There’s no guarantee that Sikorsky will be at full employment in five years. … I’m frustrated that Pratt & Whitney can lay off jobs and still get the accelerated tax credits that they have earned. … We can’t leave here today and pat ourselves on the back and say, ‘We’re done.’ ”
Malloy made his comments about taxes to the editorial board of The Day of New London in March. Malloy was quoted as saying, “We’re never going to be a low-tax state, but we could be a lower-tax state.”
After Thursday’s vote on United Technologies, Malloy said, “This agreement will bolster the state’s aerospace sector, encourage business growth and investment and, most importantly, foster the retention and creation of thousands of good-paying jobs with good benefits for Connecticut residents.
“UTC is the catalyst of this initiative, but the investments called for in this bill go well beyond one company,” Malloy said. “The agreement will have a direct impact on employment in almost every city and town in Connecticut, not just at the UTC companies, but also in the hundreds of aerospace supply chain companies throughout the state and the region.
“UTC shares our faith in Connecticut’s talented workforce, commitment to innovation, and determination to build a world-class business climate. We could not ask for a better partner and look forward to working together to send the message that Connecticut is committed to continuing its role as a world leader in the aerospace industry.”
Senate President Pro Tem Donald Williams, the highest-ranking senator, thanked Malloy and Lt. Gov. Nancy Wyman for their work on crafting the deal with UTC.
“The premise that other states are not engaged with their companies and corporations is false,” Williams said, adding that Connecticut ranks number 8 in patents in the country, number 4 in productivity, number 3 in the number of residents with advanced degrees, and number 1 in quality of life.
Sen. Gary LeBeau, a longtime East Hartford resident, said, “This bill has been drastically improved from the bill we received some months ago. The kind of guarantees that we thought were in the bill. … We have the guarantees in the bill that we needed going forward.”
“I didn’t know that the Whitney was the cousin of Eli Whitney,” LeBeau said. “This is one of the great companies of the world. … There is little about technology in America that has not been touched by UTC. About 80 percent of every plane that flies overhead has UTC components.”
He noted that famed aviators Charles Lindbergh and Amelia Earhart landed at Rentschler Field in East Hartford decades ago.
“These are the kinds of jobs we want in Connecticut,” LeBeau said. “Some of the technology is so secret and so advanced that I’ve heard stories of little pieces of equipment falling off that has to be taken by an armed guard down to Washington, D.C.”
LeBeau thanked Gov. Dannel P. Malloy, who negotiated the deal with UTC.
Sen. Jason Welch, a Bristol Republican, asked, “Why? Why are we doing this? Because we have a bad environment for business. … How did we get this bad environment? … It’s us. It’s this building. It’s this government.”
Welch added, “One of the most important answers is the bad business climate that we’ve created here. … It’s that business climate that allows this building to say, ‘Whatever you want. Here you go.’ ”
Sen. Kevin Kelly of Stratford, who represents the district with Sikorsky helicopters, said, “In regards to Sikorsky, it’s only good for five years. … The problem is the economy of Connecticut is requiring us to do this. … We have to have a better tax policy.”
But Sen. Edward Meyer, a Guilford Democrat who is not seeking reelection this year, said he wants to “strongly rebut” that the state needs to offer tax incentives to keep companies in the state. In New York State, new companies can pay no taxes for 10 years as an incentive, he noted.
“New York has gone beyond us,” Meyer said. “We probably are not doing enough in the way of incentives.”
Sen. Rob Kane asked whether UTC has $1.4 billion in research-and-development tax credits that has not been used as of the 2013 fiscal year. Fonfara responded that UTC might have $800 million to $1 billion in unused credits.
“We also know that Sikorsky laid off 600 workers while these negotiations were going on,” Kane said, adding that he still did not know during the debate how he was going to vote. “I truly am torn on this bill. I really am.”
Sen. Joseph Markley, a conservative Republican from Southington, said, “We all want to see job growth. We all want to see economic vitality. … One thing we talk about here is not picking winners and losers and we incessantly pick them. … We’re going to have to make up that $400 million from somewhere else.”
Markley, who opposes the bill, said that adds up to taking away $5 million from his hometown of Southington.
Two entrepreneurs and mechanical engineers, named Pratt and Whitney, founded the company on Capitol Avenue in Hartford. Since then, it has expanded into major operations and thousands of employees in East Hartford. More than 80 years ago, the U.S. Navy placed a large order for the Pratt engines, and the company has been dealing with the military for decades since.
Sen. L. Scott Frantz, an accomplished pilot, said that Pratt engines have not had “a hiccup” in his many hours and years of flying.
“It would be my dream and my hope to not have to do deals like this,” Frantz said. “We continue to rank way too low in too many categories related to commerce, related to business. … That’s a record we need to work on.”
Concerning the UTC deal, Frantz said, “I believe it’s money well spent.” He added, “I think it’s a great bet as well. … This is a good day for the state of Connecticut.”
Sen. Kevin Witkos, a Canton Republican, said, “I don’t consider this a government bailout. I consider it a government investment.”
Sen. Joseph Crisco, a former UTC employee for 18 years, said that thanks should be given to the late Harry Gray, the former UTC chief executive officer who transformed the company and turned it into the multinational conglomerate that it is today.
The Senate debate comes after the House of Representatives voted overwhelmingly in favor of the deal to allow UTC to use the state tax credits as it seeks to build a new headquarters for the famed Pratt division in East Hartford.
The bill passed in the House by 134 to 4 with four Republicans voting against the measure. All Democrats present in the chamber voted in favor.
House Republican leader Larry Cafero expressed concern that UTC, under the bill, could lay off 1,650 workers and still get 35 percent of the state-paid tax credits that are being debated by the state legislature.
“Huh?” Cafero asked on the floor of the House at the state Capitol during the debate. “That’s the part that bothered me. My concern is, what if it goes wrong?”
The deal that was crafted by Malloy’s administration has been widely praised by both business and labor, as well as Democrats and Republicans in Cafero’s own caucus.
“Let’s be honest. It’s about UTC and UTC alone,” Cafero said. “If this bill passes, God bless them. I wish them all the luck in the world.”
In his wrap-up speech, House Majority leader Joe Aresimowicz of Berlin said, “I’ve heard many times that the bills we pass in this chamber send a message. … Well, Mr. Speaker, I think this is the kind of message we want to send. … This bill reaffirms our commitment to manufacturing.”