The legislature’s Finance, Revenue and Bonding Committee unanimously endorsed Gov. Dannel P. Malloy’s proposed assistance plan to United Technologies Corp. – designed to trigger a major corporate expansion in Connecticut.
In a big win for the Democratic governor, lawmakers from both parties hailed the deal as crucial toward maintaining the state’s engineering knowledge base centered on UTC operations in East Hartford and Stratford.
“This is an investment to say: ‘We want you here. We want you to stay here,’” said Sen. John Fonfara, D-Hartford, co-chairman of the committee. “It is a good bet on the part of this governor. It is a bold initiative.”
“This is everything we hoped it would be,” said Rep. Pamela Z. Sawyer, R-Bolton. “This is the answer to so many prayers.”
“The agreement, and today’s bill supporting that agreement, will help ensure that we remain a leader for years to come,” Malloy wrote in a statement released after Tuesday’s meeting. “It will make sure Connecticut keeps and creates good-paying jobs with good benefits – not just in the UTC companies, but also in hundreds of other supply chain companies throughout the state and the region.”
$400 million in tax relief for a $500 million investment
Under the deal Malloy and UTC executives announced in late February, the company would launch a major $500 million investment in its research, training and corporate facilities later this year in exchange for $400 million in tax relief over the next two decades.
The agreement also requires UTC to keep the corporate headquarters of its two main subsidiaries – East Hartford-based Pratt & Whitney and Sikorsky Aircraft of Stratford – for 15 and 5 years, respectively.
Starting later this year and running through 2018, UTC would invest a total of $500 million in four projects:
- A new, 425,000-square-foot world headquarters and engineering facility on the Pratt campus in East Hartford;
- 100,000 square feet of new and refurbished lab and office space at the United Technologies Research Center in East Hartford;
- A new, 500,000-square-foot customer training center and engineering lab at the UTC Aerospace Systems facility in Windsor Locks;
- And upgrades to the advanced engineering lab and other facilities at Sikorsky.
‘A really good defensive play’
These investments, coupled with UTC’s commitments to maintain a corporate presence in Connecticut for years to come, are crucial to keeping its aerospace knowledge base here, the governor has said. That, in turn, gives Connecticut its best chance to preserve and grow jobs in a climate of tightened federal defense spending.
“It’s a really good defensive play that Connecticut is performing here,” said Sen. L. Scott Frantz of Greenwich, ranking GOP senator on the finance panel.
“This is our sweet spot,” added Sen. Gary LeBeau, D-East Hartford, a veteran member of the finance committee and also co-chairman of the Commerce Committee. “This is where Connecticut should be.”
In exchange for that investment, the state effectively would waive no more than $400 million in corporation and sales taxes owed by UTC over the next 20 years.
The deal specifically mobilizes what are commonly referred to as “stranded tax credits.”
Like many large corporations, UTC qualifies for various credits to reduce its corporate income tax bill. But regardless of how much in total credit values it has amassed, it cannot reduce its annual tax liability by more than 70 percent.
The unused credits don’t expire, but the company qualifies for more each year. And when it cannot foresee a time in the reasonable future when it ever will be able to cash in certain credits, they are considered “stranded.”
UTC must maintain certain employment and payroll levels to claim the full value of those stranded credits. If it falls below those levels, the credits still are available, but their value is reduced.
Malloy said the deal would impact more than 75,000 jobs in Connecticut, considering both UTC workers as well as those of hundreds of subcontractors and suppliers who work in the aerospace industry.