Griebel on the business climate: ‘Confidence must be restored’
R. Nelson “Oz” Griebel, longtime chief executive officer of the MetroHartford Alliance, has been active in state, regional and city public policy for nearly two decades.
A former CEO at BankBoston Connecticut, Griebel, 67, first assumed the top post at the alliance in 2001, leading economic development efforts in the Greater Hartford area.
He chaired the state Transportation Strategy Board in the early 2000s and has remained a leading advocate for increased state investment in Connecticut’s airports and highway and rail infrastructure.
Griebel took a leave from his alliance post in 2010 to run for governor, losing the Republican gubernatorial primary to Greenwich businessman Tom Foley.
As Gov. Dannel P. Malloy and the General Assembly resume debate on the state budget, massively under-funded retirement benefit programs that threaten Connecticut’s fiscal future, a stalled transportation enhancement program and a capital city at risk of bankruptcy, Griebel sat down to talk with The Mirror.
GRIEBEL: I assume everyone has their own definition of what the business climate is. You clearly have to talk about what the assets are, in the city, in the region, and in the state. Our assets are significant: our higher education system; our highly productive, highly educated workforce; the amount of quality healthcare institutions that we have; the proximity between Boston and New York, which many of us see as an asset; the fact that we’ve got an airport that is increasing its nonstop service.
There are a number of things here that we need to make sure private-sector employers know about. We do a lot of promotion about that.
On the other side of the balance sheet if you will, what we’re concerned about is private-sector confidence. How does the private sector view this state, this region, in terms of retaining the jobs they already have here, and is this going to be the place they put the next job? Similarly with their desire to invest in facilities, in equipment and in research?
I don’t think it’s an exaggeration to say private-sector confidence clearly has taken a hit over the last several years. I don’t want to beat up on the GE example, but certainly that was the most prominent one.
[General Electric announced last year that it was moving its global headquarters from Fairfield to Boston.]
It’s a big issue, and that confidence is something we’ve got to find ways to restore in what will continue to be, at least for the near term, a very challenging fiscal environment.
THE MIRROR: Generally people think of major corporations when they hear business needs greater predictability and stability when it comes to state finances. But is the average Connecticut small business swayed by what happens at the Capitol?
GRIEBEL: We tend to use the phrase privately-held businesses. “Small business” may mean different things.
Those private-sector employers who are maybe employing 50 (to) 100 people here in the state, who are paying wages and benefits that are above the median area — that are attracting and retaining talent of all ages — they are as concerned about this as any publicly traded company or any hospital for that matter.
And if their customer base is not here, if your revenue stream is not coming primarily from Connecticut, your flexibility to locate or relocate is much greater. … Cost of doing business matters to everybody, and how that impacts into your decision to stay or leave or not is going to vary by each entity. It affects everybody, even start-ups.
THE MIRROR: After many years of relative silence, state officials finally are acknowledging publicly that Connecticut faces a crushing burden in the tens of billions of dollars in the form of retirement benefits and other debt payments — all due in the next two decades. Before we get into how we deal with that, could we talk about the business community’s reaction to this huge bill?
GRIEBEL: There’s no question that the commentary — two years ago in June — by GE, Aetna and a number of others about the proposal to close the (state) budget with an increase in the tax on data processing equipment and other tax increases, began to send a broader signal.
I think GE’s decision, saying not only did we complain about this, but we factored this into our decision to relocate, it clearly just raised the profile of the issue to the broader voting public.
I think you saw in the ’16 (state) election some of that playing out in the legislative elections, where people who may have been supportive of some of those programs weren’t re-elected, or those who were new to office and were elected ran on what I will refer to as a more fiscally prudent platform.
THE MIRROR: The legislature just ratified a deal to mitigate the spike in state employee pension costs over the next 15 years. But that means we are passing $14 billion to $21 billion in costs onto a future generation of taxpayers after 2032. Was that the right move?
GRIEBEL: First of all, we applaud what Gov. Malloy has done by putting a focus on this, getting people to understand this unfunded liability issue. The action the legislature took to restructure the payment process is a step in the right direction. But I think we all understand, including the governor, that the fundamental, unfunded liability problem still does not go away. We’ve restructured it, and I understand why the governor and those in the legislature who supported it went down this road, but none of us want to kid ourselves about the fact that there is still a significant unfunded liability problem that has to be addressed as we go forward.
You mentioned the future generation. I think one of the things we all have to do going forward is work more closely together to reduce these liabilities. This is almost a moral imperative. Leaving this to the next generation, to me, is almost a breach of our fiduciary duty. … We all have a responsibility and, as a parent, it’s irresponsible to my three kids.
THE MIRROR: The administration also wants big concessions from state workers, but has hinted that to get them, we may have to preserve the existing pension and retirement health care systems — albeit with some modifications — beyond 2022. Are there any circumstances under which you could support extending it beyond that expiration date?
GRIEBEL: Without being in the room, in the negotiations my bias would be … to put the issues on the table. Do we know how we are going to fix the problem for the longer term?
If there was an extension beyond 2022, there would have to be, I think from the private-sector’s standpoint, significant changes in the way benefits are structured, in the way they’re funded, the way you calculate things.
In a time when defined-benefit programs have essentially gone the way of all flesh for everybody in the private sector, having one segment of the population having it — that’s funded by the private sector — is one that I think is a legitimate philosophical question. It needs to get a full airing.
How can you demonstrate to every citizens that we have restructured this in a way that we have solved the unfunded liability problem for the long-term?
I think you’ve got an opportunity to have that debate that a lot of us would like to see over defined-benefit versus defined-contribution plan.
THE MIRROR: Since you raised the issue of a 401(k) plan as a potential replacement for public-sector pensions, do you think the question of whether public-sector workers should receive retirement health care also needs to be explored?
GRIEBEL: I think it has to be looked at. We’re in a very challenging time in this country where the economy has changed dramatically, both at the national level and clearly here in Connecticut.
I understand the emotion and how controversial some of this is, but when you do the straightforward math, it is very difficult to see how we can sustain plans along the same lines that they were 20 and 30 and 40 years ago.
It’s not that you want to deprive anybody of access to health care, but how do you pay for it? That’s a legitimate question, and it’s not just a policy question or a budget question, there are moral issues associated with this, not only of how are we going to be paying for it, but of treating people on an equitable basis.
THE MIRROR: Gov. Malloy just released a new two-year budget that would shift $400 million in annual costs associated with the teachers’ pension program onto local governments. Can this work, or will this trigger big property tax increases statewide?
GRIEBEL: The simplistic math is somebody has to pay for it. Again, I think the governor’s put an issue on the table that needs to really be looked at hard. If Town X has the authority and negotiates the contract with its teachers, but doesn’t have to fund a part of what it negotiates, it’s a legitimate question to say, ‘who should be paying for what’s been negotiated?’.”
Can you move this much money off the table in one fell swoop? I think the idea is worthy of serious consideration, but whether you can take $400 million and move it over quickly? It’s one of those things where there has to be continued dialogue, and not only with legislators, but also with the appropriate municipal leaders.
THE MIRROR: A new study issued in December by the Council on State Taxation concludes Connecticut actually is tied for the most favorable business climate — if one considers not just state and local taxes, but the potential for earning big profits here. What about the argument that Connecticut businesses don’t pay their fair share?
GRIEBEL: Well, there’s probably a couple of answers to this.
First of all, it depends on which company you are talking about.
Secondly, the private-sector confidence is not there in part because of the concern over taxation and regulation, and property tax is part of that discussion.
But are all of the costs of doing business across the board in there? It’s not just what a business pays in taxes and regulations. What does it have to pay its employees to be able to live here? What about transportation costs?
If somebody says, ‘Hey I want to be within 30 miles of an airport where I can get 30 nonstop flights to any place in the country, to all of the major urban areas.’ And if Bradley (International Airport in Windsor Locks) doesn’t measure up to that, their definition of ‘cost of doing business’ may be different.
The decision to relocate, stay, expand in a given area has anywhere from seven to eight to 15 different variables depending on the entity, what it does, (and) how important it is to be in proximity to your customers.
But I also want to emphasize that taxes — total taxes, not just one particular tax and not only for the employer but also for the employees — gets factored in. You have to keep your eye on that too.
THE MIRROR: You’ve been active in transportation policy debate for nearly two decades, and you chaired the former state Transportation Strategy Board. As retirement benefit and debt costs squeeze transportation spending out of the budget, does Connecticut need tolls and gasoline tax hikes to rebuild its infrastructure.
GRIEBEL: As you know, we’ve been stalwarts in supporting a constitutional amendment to protect any and all revenues that are dedicated to transportation. The governor certainly has said he is not going to propose anything for new funding until we get an amendment in place.
I go back to my comment on private-sector confidence. In a budget that’s got these significant issues that will continued to be talked about this session and beyond, there are two things that come to my mind that could make a step in the right direction and demonstrate to the private sector that we’re serious about this issue.
One of them would be passing the legislation that would allow an amendment to go on the ballot in ’18.
The second would be getting the definitions in place on the constitutional spending cap. The governor has proposed his definitions, and I applaud the fact that he’s got that out there.
Knowing we’re also going to have some significant issues around closing this $1.5 billion (projected state budget deficit next fiscal year,) those two things come immediately to mind.
The biggest issue around the spending cap, besides controlling spending, is what you do with budget surpluses when you have them. None of us would be working on this if we didn’t believe someday surpluses would be coming back.
I don’t know if I’ll be standing upright when it happens, but it will happen.
Part of our problem here is the inability, failure, was not taking $5 billion-plus in surpluses (between 2000 and 2014) and not funding our pension obligations, not paying down debt, not saving them in the Rainy Day Fund.
That’s why that amendment, to some of us, means a lot.
THE MIRROR: Some say the constitutional “lockbox” amendment debate could take place concurrently with any discussion of new revenue for transportation. Does the amendment have to come first?
GRIEBEL: The “lockbox” has got to be in place. In all honesty, it will be next to impossible, I think, to get any support by a majority of the legislature for any kind of increase in funding without that lockbox. I don’t care whether you’re talking about a gasoline tax increase, tolls or that vehicle mileage tax.
THE MIRROR: We’ve discussed GE’s announcement last year that it was moving. We recently heard that Aetna was considering a new home outside of Connecticut. Is this indicative of a larger trend, and how dangerous is it, or are these examples outliers?
GRIEBEL: Any time that one of your major employers moves or threatens to move, it is a serious issue and any of us is foolhardy not to take that seriously — not that I think anyone is being foolhardy.
And remember, these things happen over time.
A company like GE, they’re going through their own analysis about where they want to be. And I don’t mean they weren’t starting that in June of 2014, they were probably doing that back in June of 2004.
So having regular dialogues and keeping that discussion going with businesses of all sizes, but certainly your major private-sector employers, I think, is important.
Having the state be part of that dialogue as these companies are going through that analysis puts Connecticut in a more proactive position rather than reacting to a threat or a decision.
Are we concerned about the analysis Aetna is going through? Yes. This is an iconic employer; iconic in terms of its brand, iconic in terms of what it’s meant to the region for nearly 200 years and what it means today in terms of the employment levels and the compensation those people earn.
It’s also important that we’re also cognizant of what the needs are of our privately held businesses. To me the most important thing we need to focus on is how do you re-ignite that private-sector confidence, so people say, “Connecticut’s where I want to be.”
THE MIRROR: Hartford Mayor Luke Bronin says the capital city is at risk of insolvency. How damaging would a capital city in bankruptcy be to the business climate we discussed, and would that damage reach beyond the Greater Hartford area?
GRIEBEL: Mayor Bronin deserves all the credit in the world for putting together a top-notch team. I think in the 20-some-odd years I’ve been in the region, his energy, his commitment, his willingness to have transparent and candid discussions about all issues — particularly in this case the fiscal issue — have been top-notch.
It’s sent a very strong, positive signal to the private sector.
Clearly it has all of the negative connotations that people associate with bankruptcy. It has all of the public relations negativity associated with it.
No one wants to see the city go into bankruptcy.
If it’s simply ‘let’s go file and hope a bankruptcy judge is Solomon,’ you wouldn’t touch that with a 10-foot pole.
If you’re doing something that at least is akin to what they did in Detroit, putting a lot of people under the tent and trying to come up with a so-called grand plan, I think it comes across differently.
I guess the biggest thing I would say about city financing — and certainly what we hear from our investors — is similar to what we look for in state finances.
If there’s going to be an ask for more money, then it’s going to have to be accompanied with some structural reform and making sure we’re not just putting more money into the same scenario.
It can’t just be ‘give me more money and trust me.’ The private sector is going to have to see that structural change, that positive change. It may not be solved today, but we’re taking steps necessary to solve it over some acceptable period of time.
This Q & A has been edited for length and clarity.
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