Earlier this week, the Department of Economic and Community Development announced that Irish airline Aer Lingus would receive $4.5 million taxpayer dollars because the airline did not meet its revenue goal for flights out of Bradley International Airport to Ireland.
That subsidy is part of a $13 million package the state of Connecticut offered to lure the airline to Bradley.
It’s easy to see the rationale behind the deal. How could offering pasty-faced Connecticut residents direct flights to Ireland fail to rake in the cash?
But things didn’t quite take off as expected so now, along with buses and trains, Connecticut is subsidizing airline travel — a sort of public transportation system for the sky.
DECD Commissioner Catherine Smith said she was disappointed Connecticut would have to pay the subsidy. She shouldn’t be too disappointed, though. At least this state subsidy got something off the ground — namely a Boeing 737.
The same can’t be said for Connecticut’s economy, which has been grounded for the last ten years. It seems no amount of tax incentives and state “investments” can get Connecticut flying again.
The DECD gives out loans, grants and tax credits supposedly in order to lure companies to Connecticut. That happens sometimes, but most of the time its to keep companies in Connecticut.
In exchange for the state’s generous financial consideration, a company agrees to retain employees and create a certain number of new jobs over the course of several years. DECD then measures its success based on whether or not those goals were met and how much private investment was “leveraged” by taxpayers’ dollars.
But there is no real oversight of those state “investments.” The DECD is left to police itself and measure its own success. Frankly, the idea that a company didn’t lay off workers en masse and thus “retained” them does not seem to be a legitimate measure of investment success. Jobs created? Sure. Private investment leveraged? That seems a bit tricky and easily subject to manipulation.
So far, DECD has dished out a little over $1 billion to 1,849 companies through its various programs — $99 million in direct assistance was given out in 2017, according to their annual report.
Of course, Connecticut doesn’t just have this money laying around, so the state issues bonds. Connecticut is literally borrowing money so it can lend it or give it away to companies which are already here and, in many cases, have been for some time.
And, of course, there are those instances when the deal goes bad and a company closes or relocates or doesn’t actually exist.
Alexion received $28 million, but is leaving the state; CliniFlow received $400,000 while under investigation for fraud; ESPN received $30 million and started laying off employees; Windsor Marketing Group received $3.5 million and declared bankruptcy; the Amoun Pita Company received $400,000, but was a complete fraud.
The media gets hold of the story and it’s front and center on CT Capitol Report. The reporters are toasting themselves on a job well done, the poor guy or gal handling DECD’s media relations is probably crying into their Guinness.
Such instances have led State Comptroller Kevin Lembo to call for legislation requiring a yearly audit of the DECD’s investments. In a rare instance of agreement (albeit for entirely different reasons) Lembo’s policy proposal was supported by both state union leaders and the Yankee Institute. Who knows? Maybe pigs will be flying to Ireland next.
So the news that Aer Lingus didn’t meet its projections and thus triggered the state subsidy probably stung a little bit, namely because it likely wasn’t the best investment for an agency which sees itself as a developer of economy and community.
It doesn’t appear the Aer Lingus deal offered much economic or community development potential. Hotels aren’t popping up to house people traveling to Ireland because Bradley, Kennedy and JFK are all just a couple hours’ drive, and Pub’s with names like “O’Malley’s” or “O’Shaughnessy’s” aren’t popping up around Windsor Locks to serve all the Irish lads and lassies who were eager to escape the Emerald Isle for the joys of the Nutmeg State.
Really, all the Aer Lingus deal did was offer Connecticut residents yet another way of escaping high-tax Connecticut for a low-tax alternative — in this case an island across the Atlantic.
Since taxpayers are footing the bill, perhaps Gov. Malloy, some state legislators and Commissioner Smith should take a party-plane to Ireland to learn a thing or two about taxes and business.
Ireland — with a population about the same as Massachusetts — has one of the lowest corporate tax rates in the world. This has led to an explosion of corporate relocation to Ireland. Since 1990, 700 U.S. companies moved their headquarters to the island-nation, creating over 130,000 jobs.
It seems that corporations actually do move based on taxes. America just lowered its federal corporate tax rate in order to compete with countries like Ireland, which will hopefully help, but Connecticut still has its corporate income tax of 9 percent — one of the highest in the country. Plus, all those other wonderful taxes.
There was a time, of course, when Connecticut was the Ireland of the Northeast with low taxes and lush, rolling green hills. Naturally companies and investors flocked to the state, making Connecticut a little economic powerhouse.
Connecticut’s history of the income tax and tax increases thereafter shouldn’t need repeating, but there are many who still don’t get it. Suffice to say some lawmakers and union leaders are still stumbling around the Capitol like they’ve just come off a bender mumbling, “Dude, where’s my economy?”
Connecticut needs to imitate the success its sees in other states — and certain countries now being served by Bradley International Airport. Revenue neutral tax reform would be a good start but ultimately, the state should move to start lowering its taxes. Doing so would actually create jobs with the added bonus that Connecticut wouldn’t have to bribe companies to retain jobs or expand.
But because Connecticut has a balanced budget amendment, taxes can’t be lowered until the state government is able to cut spending and that will take a little love and Irish cheer from labor leaders.
Until then, Connecticut may have to keep paying out millions every year to retain jobs and keep companies from hopping the border to another state, or even hopping a flight to another country.
Adam ( Senior Airline Director and economist)
September 12, 2018 @ 4:34 pm
The Aer Lingus Deal is a truly awful deal for Connecticut, where Aer Lingus have sold an economic development illusion. The sad thing is Aer Lingus know that. From the fact the service operates is merely a disguise to mask the real fraud which what has been pulled. Aer Lingus have got mugs in Connecticut to pay for an asset that if not flying would have cost them money. This deal is also bad for Aer Lingus because when it goes sour…. and it will… no other state in the US will make the same mistake… so for Aer Lingus some short term gain but long term its huge reputation damage…it’s all just an illusion…. a deal crafted by incompetent idiots at both ends, airport , region and airline alike and the problem is….. they all know it to be true…..