General Electric will relocate its global headquarters from Fairfield to Boston, the company said Wednesday, setting off a scramble to frame the decision as either a political failure by Connecticut or simply a hard-nosed business move by one of the world’s largest conglomerates.
“Boston was selected after a careful evaluation of the business ecosystem, talent, long-term costs, quality of life for employees, connections with the world and proximity to other important company assets,” Jeff Immelt, the company’s chief executive, said Wednesday afternoon in a statement about the move.
GE has about 800 employees in Fairfield. The Boston Globe, which reported the story first Wednesday morning, wrote that, while some executives are expected to relocate this summer, the “full move” from Fairfield will take place over the next few years.
Gov. Dannel P. Malloy, who returned to the state late Wednesday morning after attending the State of the Union address, met with reporters at 2 p.m. at Pegasus Manufacturing, a growing company in Middletown undoubtedly chosen as a favorable place to begin damage control.
“We win some, we lose some,” the governor said. “This hurts.”
Malloy said despite this setback, Connecticut’s economy is making progress, adding that three companies recently committed to move here, creating about 700 jobs.
The governor also said he would continue to work on stabilizing Connecticut’s long-term pension obligations, calling it a broader issue both for all businesses and for the state’s overall fiscal health.
The reaction from elsewhere was fast and largely negative.
“I think GE leaving is cataclysmic, really,” said Rep. John H. Frey, R-Ridgefield, who has emerged as an informal voice of GE since June, when the company first broached leaving. “I do think it is a defining moment for Gov. Malloy, and it’s not a good one.”
“It is terribly disappointing,” said Joseph F. Brennan, president and CEO of the Connecticut Business and Industry Association. “They are great corporate citizens. They add a lot to the fabric of Connecticut.”
One of the key questions for the state will be the extent to which GE elaborates on its rationale for a move to a state without an obvious advantage in taxes or overall cost of business. GE has been rebranding itself as a tech company, making Boston a more attractive headquarters location.
“My understanding is what they found in Massachusetts is a supportive state and local government, which they didn’t find here, going back to the call I got from GE in late May or June,” said Frey, who is friends with Jeffrey S. Bornstein, the company’s chief financial officer.
Massachusetts has its own fiscal issues, but business leaders — including officials with the Connecticut Business and Industry Association — insisted GE’s primary concern about the Nutmeg State lay with broader questions about the long-term fiscal stability of Connecticut.
Connecticut already has one of the largest bonded debt burdens, per capita, of any state, owing more than $22 billion. But an even larger threat looms in the area of “soft debt,” specifically, more than $47 billion in unfunded retirement benefit obligations.
Connecticut was rated the third-worst state last year on unfunded pension liability by Bloomberg. Massachusetts was 11th.
Connecticut’s annual required contribution to its pension fund for state employees, which stands at $1.5 billion now, could spike by 2032 to $3.8 billion, according to Treasurer Denise L. Nappier, or $6.65 billion according to Malloy.
“It was the lack of predictability, the uncertainty when we’re going from deficit to tax increase to deficit to tax increase,” Brennan said. “It makes it more difficult to plan. These are all things we’ve been talking about for a long time.”
“GE leaving is a shocker for the state of Connecticut,” Senate Minority Leader Len Fasano, R-North Haven, said. “… It certainly is not a surprise, unfortunately.”
“It’s a very sad day for the state of Connecticut, but not a surprise to any of us who have been involved in government, or — quite frankly — to anyone who has been in business in the state of Connecticut,” said House Minority Leader Themis Klarides, R-Derby.
Brennan did note that “Boston has been growing by leaps and bounds” and that recent economic development centered on its colleges and universities has gotten the attention of many corporations.
“That’s where the game is right now,” he added. “It’s about attracting talent.”
The Massachusetts governor’s office also disclosed some of the incentives Massachusetts and Boston offered the company to move, including:
- Up to $120 million in state grants and programs.
- Up to $25 million in municipal property tax relief.
- Up to $5 million for an innovation center to forge connections between GE, innovators from Massachusetts research institutions and the higher education community.
- A commitment to existing local transportation infrastructure improvements in the Seaport District to which GE would locate.
- And appointment of a relocation team and other assistance to aid GE employees looking to buy homes in Boston.
Leaders of the Democratic majorities in Connecticut’s legislature insisted GE’s departure was not a response to budget decisions here while trying to put the best possible face on the local economy.
“It is clear that GE’s decision has nothing to do with taxes, or even business costs, and cannot fairly be viewed as a referendum on Connecticut’s growing economy,” Senate President Pro Tem Martin M. Looney, D-New Haven, said. “Connecticut’s unemployment rates have dropped to the lowest level since March 2008. In 2015, Connecticut saw the sixth-largest unemployment drop in the country. In fact, GE just increased its workforce in Connecticut after purchasing Alstom Energy, adding 1,200 jobs in Windsor and Bloomfield.”
“While I am disappointed that GE is moving approximately 200 jobs to Boston, it is, however, an undeniable fact that Connecticut’s economy is growing and creating jobs and we are training our workforce to compete in a global economy,” added Senate Minority Leader Bob Duff, D-Norwalk.
“GE’s decision to relocate across the border to downtown Boston is certainly disappointing, yet we remain a favored location for companies to thrive,” said House Speaker J. Brendan Sharkey, D-Hamden. “It appears, particularly from GE’s advertising, that their decision is not about taxes but more about rebranding into a high-tech company, and Boston is well known as a high-tech industry hub.”
Democratic U.S. Sens. Richard Blumenthal and Chris Murphy and U.S. Rep. Jim Himes, whose 4th District includes Fairfield, issued a joint statement calling GE’s announcement “disappointing news” but saying that “General Electric is committed to keeping thousands of manufacturing jobs and other high-paying positions in our state. That is important to Connecticut families and our economy.”
Malloy made pitches to GE both last summer and in December to keep the company headquarters here. And though he didn’t release details, the Connecticut governor did confirm previously that some package of financial incentives was offered.
“What we have indicated is a willingness to work with them on – if you want to call it a package, you can call it a package – in general, and in some cases, specific terms of what we thought we could do,” the governor said back on Aug. 24. “… They had us in. We made a presentation.”
GE was one of several major corporations that complained loudly this past June when legislators and Malloy agreed on a new two-year budget that increased state taxes by more than $1.3 billion over the biennium.
Despite warnings from nonpartisan analysts throughout much of 2014 that state government faced a major deficit after the November elections, Malloy insisted there wasn’t a shortfall and had pledged not to increase taxes.
After negotiating a tentative budget deal in early June 2015 that included a $1.5 billion tax hike – and also canceled previously approved tax cuts worth close to $500 million over the biennium – the Malloy administration reversed itself after the Democrat-controlled legislature narrowly approved the budget.
In a June special session, the governor and legislature peeled back about $178 million of those tax hikes, focusing largely on hikes aimed at businesses.
And while another special session was held in December to close a relatively small hole in the current fiscal year, more than $300 million in red ink looms in 2016-17, while a shortfall topping $1.5 billion still is forecast for 2017-18.
The December deficit-mitigation effort, which GOP lawmakers opposed for not cutting spending more deeply, lacked “the structural changes that the I think the state of Connecticut needed to show businesses like GE,” Fasano said. Republicans particularly pressed harder for labor concessions and other changes to tighten personnel costs.
Rep. Bob Godfrey, D-Danbury, said Wednesday that he was sorry, but unsurprised, to see the company leave, and said the decision to move was probably made “before they started gnashing their teeth.”
While he expects the company to blame Connecticut, Godfrey said doing so was “kind of childish, in my opinion.”
“Interestingly enough, they’re now moving to a place where taxes are higher,” he said. “It’s not called ‘Taxachusetts’ for nothing.”
While some have suggested the company’s decision would probably take into account the state’s long-term liabilities and fiscal stability, Godfrey said he didn’t buy it. “It just doesn’t make any sense to me,” he said. “The state, aside from GE, is taking a good hard look at our pension system.”
Will the move bring repercussions during the next legislative session, which begins Feb. 3?
“There’ll be a lot of noise,” Godfrey said. “But it’ll be more sound and fury than it is, I think, actual changes.”
The Yankee Institute for Public Policy suggested more needed to be done.
“The people of Connecticut have three options,” President Carol Platt Liebau said in a statement. “We can continue to pretend nothing is wrong. We can wallow in despair. Or we can transform our policies so that they welcome employers and increase opportunity for everyone.”
And while Brennan said he hoped that GE’s move would serve as a “wake-up call” at the Capitol to reform state spending, Klarides and Fasano said they aren’t optimistic things will change when the regular 2016 legislative session begins in three weeks.
“I can’t believe the wake-call didn’t happen several years ago,” Klarides said, adding that Malloy and his fellow Democrats in the legislature’s majority “have their heads in the sand.”
Washington Correspondent Ana Radelat contributed to this story.