DRS Commissioner Keynotes CBIA Tax Conference

Says Connecticut needs a more relevant tax system

By Lesia Winiarskyj

DRS Commissioner Kevin Sullivan addresses business leaders at the CBIA 2015 Connecticut Tax Conference on June 26.

DRS Commissioner Kevin Sullivan addresses business leaders at the CBIA 2015 Connecticut Tax Conference on June 26.

Connecticut’s tax policy needs to project clear guiding principles and be relevant to today’s economy.

That was the message Connecticut Department of Revenue Services Commissioner Kevin Sullivan delivered at the CBIA 2015 Connecticut Tax Conference. The commissioner shared his outlook on the politics and policy of a legislative session that left his department little time to implement tax policy changes that were decided only two days before the July 1 start of the fiscal year.

Sullivan, who previously served as lieutenant governor and president pro tempore of the state Senate, acknowledged the inherent differences between the ways the state builds a budget and businesses build their strategic plans, saying policymakers need to realize that businesses need stable policies to guide their decisions and actions.

“At the Capitol, today’s decision is today’s decision, but businesses don’t work that way,” Sullivan said. “They have to plan and anticipate. They have to build economic assumptions into their horizon. They need to know what the rules are going to be, at least in the near term. They need legislators to understand what happens when those rules change overnight, which is what happened this year.”

The commissioner noted that the $700 million in business tax increases included in the budget and narrowly passed by the legislature on June 3 could have a destabilizing effect on an economy just starting to show signs of recovery.

“I don’t think anyone expected this much, this fast, this way,” he said, adding that the reaction against those taxes from Connecticut businesses of all sizes and their employees was “appropriate,” but that it was “time for a time-out.”

Three days later, the legislature heeded Gov. Malloy’s call to scale back some of those tax increases, reducing the proposed hike by about $178 million.

Toward a More Relevant Tax System

Looking forward, Sullivan pointed out that Connecticut needs a tax system more relevant to a new economy—a service economy of partnerships, S corporations, and LLCs with a mobile workforce.

“The old world paradigm—based on a production economy, C-corps with a physical presence, tangible property, and geographic boundaries—is the world current tax law is written for,” he said. “That’s not the world today.”

Sullivan agreed with the subsequently enacted delay in the imposition of combined unitary tax reporting until next year, adding that his department had hoped to begin discussions on the matter ahead of any legislative proposal.

“We had planned to convene a business group this summer to discuss moving forward on a unitary tax in the multilateral, multi-jurisdictional world in which we operate,” he said. “It was not our intention to go from A to Z overnight.”

Sullivan described the challenge DRS now faces in solving often conflicting provisions of hastily enacted tax policy. He pledged to work with CBIA and the business community to provide safe harbor for businesses acting in good faith where changes might go into effect suddenly.

Personal Income Tax Has Business Impact Too

The Connecticut Tax Conference also featured sessions on sales taxes specific to certain industries, as well as a plenary session led by the law offices of Shipman & Goodwin on issues including the extension of the corporation business tax surcharge, tax credit limitations, and changes to the personal income tax, estate and gift tax, and property tax laws.

Increasing the marginal tax rate for taxpayers whose income is above a certain threshold (for example, over $500,000 for a married couple filing jointly) is frequently—and often falsely—seen as a tax hike on the wealthy, said Ryan Leichsenring, associate at Shipman and Goodwin.

“This tax also applies to small businesses that are pass-through entities. We’re not just talking about wealthy residents; we’re talking about your LLCs and S-corps.

“And there will be ramifications to our economy if we start to see that flight down South,” he said, referring to Florida Governor Rick Scott’s bid to persuade Connecticut companies to relocate to a more business-friendly climate.

Lesia Winiarskyj (lesia.winiarskyj@cbia.com), CBIA’s research editor, writes on economic and public policy issues.

Business Climate and Budget

Gov. Malloy, Brennan, Griebel discuss the issues

By Bill DeRosa

L-R: Gov. Dannel Malloy, CBIA President and CEO Joe Brennan, and MetroHartford Alliance President and CEO Oz Griebel. (Photo: Brian Flaherty)

L-R: Gov. Dannel Malloy, CBIA President and CEO Joe Brennan, and MetroHartford Alliance President and CEO Oz Griebel. (Photo: Brian Flaherty)

The discussion was cordial, but both sides made their points.

On May 12, Gov. Dannel Malloy, CBIA President and CEO Joe Brennan, and MetroHartford Alliance President and CEO Oz Griebel took part in a Policy Pairings forum at the Thomas Hooker Brewing Company in Bloomfield. Connecticut Mirror Capitol Bureau Chief Mark Pazniokas served as moderator.

The event was the third in a four-part series hosted by The Mirror and sponsored by the CT20x17 campaign.

The topic on this night: Connecticut’s fiscal situation and its impact on the business climate.

Rankled by Rankings

A few days earlier, Chief Executive magazine released its Best & Worst States for Business index, which saw Connecticut slip one place since last year—from 44th to 45th.

When asked by Pazniokas about what metrics are most important in assessing Connecticut’s business climate, Brennan argued that gross state product and job growth are most salient.

Citing CNBC’s 2014 America’s Top States for Business index, he pointed out that the state ranked very low in economic performance.

Gov. Malloy expressed skepticism about the reliability of national business climate rankings in general, referring to Connecticut’s high rank in many areas, including health outcomes and education.

“In 12th-grade reading, writing, and mathematics, we’re number one in the country,” he said. “We’ve implemented some new standards quite effectively in holding ourselves responsible for even greater educational outcomes, particularly in our urban environments.”

Brennan noted that because Connecticut’s poor business climate rankings are consistent across numerous indexes, they should not be ignored.

‘A Horrific Signal’

Discussion quickly turned to the $2.56 billion tax hike recently passed by the legislature’s Finance Committee and the $1.5 billion in new spending approved by the Appropriations Committee.

Griebel said the committees’ actions “send a horrific signal to the private sector in terms of their confidence” in state government.

He suggested that “sending a strong signal that there are going to be structural changes in this budget is critical,” advocating for the adoption of the Connecticut Institute for the 21st Century’s sustainable spending recommendations.

“The key is creating more economic vitality, economic growth,” said Brennan. “You can’t take tax money from one group and give it to another and expect to solve our [fiscal and economic] problems.

“I don’t think we’re at the point where people understand that there are more alternatives than either raising taxes or cutting funding to families with disabled children. That’s a false choice.”

Brennan noted that CBIA has been advancing a positive agenda, emphasizing Connecticut’s enormous economic potential, but the committees’ proposals “changed the game.”

He added that such a budget would make it extremely difficult for the business community to support the spending necessary to carry out the governor’s long-term plan to improve the state’s transportation infrastructure—a vital component of a healthy Connecticut economy.

“We’ve been supportive, but we have to ask how the state is going to be competitive if we have a huge tax increase and then have to pay for a major transportation upgrade.”

Gov. Malloy was upbeat on the subject.

“I predict we’re going to come out [of budget negotiations] better than it appears right now,” he said, arguing that the legislature has “no chance of getting their tax package passed.” ■

Bill DeRosa (bill.derosa@cbia.com) is editor of CBIA News.

Top 20 or Bottom Five?

State legislators have a big say in Where Connecticut ends up

With a month to go in the 2015 legislative session, state lawmakers have a lot of decisions to make—some that will have a significant bearing on whether Connecticut becomes a top 20 state for business by 2017 or continues to languish near the bottom among other economically underperforming states.

Connecticut’s 2014 economic performance was ranked 49th in the country by CNBC’s America’s Top States for Business. Placing Connecticut at 46th overall, the CNBC index also gave the state poor marks for cost of doing business (47th) and infrastructure (42nd).

Although our job growth numbers are improving, our jobs recovery has been slow compared with the nation as a whole. After posting 25,100 new jobs in 2014 for a growth rate of 1.5%, Connecticut is still trailing the national economy, which grew jobs at a rate of 2.3% last year.

So what can lawmakers do in the next few weeks to move Connecticut up?

The legislative progress reports on the facing page provide a brief guide to some of the most economically impactful bills now before the legislature, indicating which ones would move Connecticut up (and should get a yes vote) or hold the state down in national economic competitiveness rankings (and should get a no vote).

Budget: Why Lawmakers Need to Get It Right
The state budget submitted to the legislature by Gov. Malloy attempts to close the deficit with spending cuts in a variety of areas and tax increases that fall mainly on the business community.

The tax measures include reducing the value of investment incentives for research and development (R&D) and other key economic activity, which would effectively raise taxes only on companies investing in Connecticut.

The proposed budget also reduces the net operating loss carry-forward (an important tool and prerequisite to attracting and retaining businesses in Connecticut) and extends indefinitely the temporary 20% corporate surcharge, which keeps our corporate tax rate at 9%—the sixth-highest in the country.

Connecticut is already ranked by financial website WalletHub as having the fifth-worst state and local tax burden in the nation (the worst when adjusted for cost of living).

The most critical task legislators now face is creating and building consensus around an alternative budget that:

  • Erases projected deficits of $1.3 billion in FY 2016 and $1.4 billion in FY 2017
  • Comes in under the state’s constitutional spending cap
  • Avoids tax increases or structural changes to the tax code that would further slow economic recovery and job creation

Confidence Is Key

“Although increasing taxes on business is intended to solve fiscal problems, it will ultimately make them worse,” says Joe Brennan, CBIA’s president and CEO. “By devaluing the state’s own economic development tools and creating a less favorable business tax environment, these tax increases shake the confidence of businesses and entrepreneurs that Connecticut is a good place to invest and create jobs.

“Without that confidence, Connecticut’s economic growth will continue to be weak, compromising tax revenues and virtually guaranteeing budget imbalances year after year. Policymakers must give businesses a reason to be confident that the state understands the connection between private-sector investment and fiscal stability.”

At press time, the legislature’s Finance Committee had not yet finalized a tax package as a legislative alternative to the governor’s proposals.

“CBIA has made it clear that our members want the legislature to reject tax increases and a host of labor mandates and other anticompetitive bills that will add to the high costs and miles of government red tape Connecticut businesses now face,” says Brennan.

And, he argues, legislators must undertake systemic reforms to state spending, including by expanding the use of nonprofits to deliver state programs and services, accelerating the rebalancing of long-term healthcare toward home-based care, and reforming the corrections system to reduce Connecticut’s prison population.

“Our state has a lot to offer,” says Brennan, “and legislators now have an opportunity to make it even better, but it will require doing things differently. In the short term, that means approving bills that will help Connecticut rise and rejecting those that will hold us down.” ■

CBIA has the tools and resources you need to engage your state legislators:

1. Get started by identifying your state senator and representative.

2. Contact CBIA’s Nicole Cline (860.244.1929; nicole.cline@cbia.com) for advice on connecting with your legislators.

3. Follow and interact with lawmakers on Twitter.

4. Sign up to receive CBIA’s digital Government Affairs Report.

 

Keeping Track

Which bills move Connecticut up? Which ones don’t?

As this issue of CBIA News goes to press, the state legislature is considering numerous proposals that would help Connecticut move up into the top 20 states for economic competitiveness by 2017 and others that wouldn’t. Below are just some of the most important. For a complete list of bills, click here.

Legislative Progress Report

These bills drive economic growth and job creation. Urge your legislators to vote YES.

STATE BUDGET & TAXES

  • SB 40: Prohibits the use of bond proceeds to pay for ongoing government expenditures and requires they be used only for their specified purpose
  • SB 946 (Sec. 21): Eliminates the $250 Business Entity Tax
  • SB 952: ”Second Chance Society” prison reform bill to help nonviolent offenders transition to becoming productive members of society
  • SB 1017: Updates and makes more usable the manufacturing apprenticeship tax credit passed last year to expand the manufacturing talent pipeline

BUSINESS LAW & LIABILITY

  • SB 1032: Creates a fair and reasonable statute of limitations time frame for the state to bring legal action on certain contracts and projects

ENERGY

  • SB 1078: Empowers the state to enter into regional agreements to address high energy prices in New England

ENVIRONMENT

  • SB 941: Ensures that more rigorous environmental reporting requirements don’t become effective until the regulatory procedures for administering those new requirements are in place

REGULATORY REFORM

  • SB 961 (Sec. 3): Requires agencies to develop “federal deviation analyses” when proposing regulations for which federal standards or procedures exist in order to clarify compliance requirements and streamline regulation development

TRANSPORTATION

  • HJ 62: Amends the constitution to prohibit the use of funds in the Special Transportation Fund for non-transportation purposes
  • HB 6840: Contains the governor’s 30-year transportation infrastructure improvement plan

WORKFORCE DEVELOPMENT

  • HB 7007: Adopts the recommendations of the Connecticut Higher Education Planning Commission

Legislative Progress Report

These bills stop economic growth and job creation. Urge your legislators to vote NO.

STATE BUDGET & TAXES

  • SB 1 (Secs. 51–54): Multifaceted property tax “reform” measure that will mean higher property taxes for most, if not all, job creators in Connecticut
  • SB 946: Tax measures in the governor’s budget proposal that effectively increase taxes on businesses by nearly $500 million and seriously weaken the state’s strategic tax policy promoting innovation
  • HB 6824: Governor’s budget bill making appropriations and other provisions related to revenue for the biennium ending June 30, 2017

LABOR

  • SB 1044 & HB 6791: Impose a tax of $1 per hour worked by any employee paid less than $15 per hour on employers with either 500-plus or 250-plus employees (respectively) or franchisors whose local franchises (mainly small businesses) collectively meet or exceed those thresholds
  • HB 6932: Mandates that employees pay into a system allowing 12 weeks per year of paid leave, during which businesses must continue to provide non-wage benefits; taxpayers would fund the administration of the program
  • HB 6933: Requires employers to post employee schedules 21 days in advance or risk a “predictability pay” tax; failed in committee but could resurface

ENERGY & TELECOMMUNICATIONS

  • SB 570: Increases the portion of consumer energy bills based on the amount of energy used, raising costs on manufacturers and other large energy users
  • HB 7055: Creates a new program for subsidizing development of renewable power, which would add $180 million to ratepayer bills over the life of the program at a time when Connecticut has the highest energy costs in the continental United States

HEALTHCARE

  • SB 955: Drives up the cost of health insurance premiums for small employers by transferring $8.8 million from the Department of Public Health budget to the Insurance Fund

CBIA Board of Directors Adopts Resolution on State Budget Proposal

Urges bipartisan cooperation in closing deficits

At their March meeting, CBIA’s Board of Directors adopted the following resolution regarding the governor’s 2016–2017 state budget proposal now before the legislature:

The CBIA Board of Directors believes that Connecticut has enormous economic potential—potential that can be reached if our state’s policymakers address the fiscal challenges that are weighing down Connecticut’s ability to thrive.

Connecticut can, and will, spur the necessary growth in our economy if we enact the reforms needed to break the continuous cycle of operating deficits, rising debt, and unfunded liabilities that threatens to undermine our future stability.

The Board recognizes the difficult challenge facing Governor Dannel Malloy and the Connecticut General Assembly in crafting a balanced biennial budget that adheres to the state’s constitutional spending cap, but believes that the Governor’s proposed budget and tax plan will strike a serious blow to business confidence and the state’s economic recovery.

The Board asserts that Connecticut can be a top destination for investment and job creation, but the state needs to encourage—not discourage—the investments that help create jobs; and that the proposed tax increases will threaten investments by the very companies that drive our economy.

Therefore, it is resolved that the CBIA Board of Directors urges the General Assembly to reject proposed reductions to key investment incentives as well as the proposal to make permanent the surcharge on the corporation business tax.

It is further resolved that Gov. Malloy and the General Assembly work together in a bipartisan manner to adopt a new two-year budget that:

  • Is balanced without tax increases or borrowing, while continuing to make state government more efficient and effective
  • Adheres to the state’s constitutional spending cap
  • Encourages increased capital investment through competitive tax policies
  • Implements proven spending reforms and best practices as recommended by the Connecticut Institute for the 21st Century and by CBIA

A strong economy helps Connecticut thrive, and there’s room to grow. The Board believes Connecticut can make meaningful and measurable progress to be a better place to work, live, and raise a family. ■

Resolution adopted March 10, 2015.

If You Talk, They Will Listen

A veteran of the state legislature talks about what works and what doesn’t when it comes to communicating with lawmakers

Brian Flaherty, CBIA’s senior vice president of public policy, was an eight-term member of the state House of Representatives.

At a recent statewide economic conference in Hartford, CBIA President and CEO Joe Brennan told 500 business leaders, “We have to be relentless in our advocacy” if Connecticut is to become a top state for business.

For many businesspeople who may be unfamiliar with the ins and outs of state-level policymaking, becoming an advocate for business and economic growth might sound like a lot of work and perhaps a bit intimidating.

But, says Brian Flaherty, that doesn’t have to be the case. And he should know. Hired in December as CBIA’s new senior vice president of public policy, Flaherty served in the Connecticut House of Representatives for eight terms, representing the towns of Watertown, Middlebury, and Woodbury.

Most recently, he was vice president for public policy and external affairs at Nestle Waters North America in Stamford.

CBIA News talked to Flaherty about the role businesspeople can play in educating and influencing lawmakers.

CBIA News: Many people are cynical about the ability of one person to impact legislative decisions. What do you say to those people?

Flaherty: One person can make a difference, and I’ve seen it happen.

I had a small employer in my district who had only five employees. At the time, there was a proposal in the legislature for a set of unemployment compensation reforms. On paper, I understood essentially what the proposal was trying to solve. But I didn’t fully get it until this man walked me through his books and showed me how the existing law impacted his business.

One bad experience with the unemployment comp system because of one employee suddenly shot his experience rating and unemployment comp taxes up almost exponentially. And he felt powerless. But I didn’t fully get it until I saw it. His company was small enough so that any little policy move could have a major impact on his business and his employees.

He became a valued advisor to me in evaluating the proposed legislation and whether it would work to solve the problem it needed to solve.

CBIA News: What what would you tell businesspeople who might feel a little intimidated by approaching their state legislators?

Flaherty: Legislators come from the same walks of life as the rest of us. They’re our neighbors, our kids’ coaches. They go to the same churches and shop at the same stores. I’ve served with truck drivers, house painters, farmers, insurance agents, and manufacturers. Most legislators are not career politicians, and they need you to get elected and stay elected.

Although they have desks at the Capitol, their offices are in the districts they represent. That makes them very accessible, very present throughout the year. By and large, they’re motivated to serve and hungry for information.

CBIA News: What’s the best way for a businessperson to get his or her feet wet?

Flaherty: The world often turns on personal experiences or stories about the unintended consequences of laws that are passed every year. So anytime you can humanize your business or an issue, do it.

Invite your legislators to your workplace. There’s no substitute for letting them walk a mile in your shoes. I’ve never learned more than when I had the opportunity to walk the shop floor at a company in my district. In my experience, it’s a small investment of time with a great return.

CBIA News: What kinds of constituent communications resonated with you?

Flaherty: A personal email or letter, but not a form letter. Better yet, a phone conversation. Even better, talking face to face over a cup of coffee.

Politics’ stock in trade is a handshake, a look in the eye, and a story well- and truthfully told. That’s where the personal connections are made, and they’re always more memorable. It’s not unlike building a business one customer at a time, except the marketplace at the Capitol is one of ideas.

CBIA News: What tactics generally don’t work?

Flaherty: Exaggeration. Not every situation is the end of the world. Not every good idea is the cure for the common cold. Credibility matters and is generally assumed, but if you overstate your case, it undermines your credibility—and your legislators’ ability to help.

On the other hand, if you’re honest and factual, your legislators can turn your experiences and stories into good policy. That’s how representative democracy is supposed to work. The process can and does work, and I believe in it. ■

CBIA has the tools and resources you need to engage your state legislators:

1. Get started by identifying your state senator and representative.

2. Contact CBIA’s Nicole Cline (860.244.1929; nicole.cline@cbia.com) for advice on connecting with your legislators.

3. Follow and interact with lawmakers on Twitter.

4. Sign up to receive CBIA’s digital Government Affairs Report.

5. Attend Connecticut Business Day on March 25 at the Legislative Office Building in Hartford. For details, contact CBIA’s Adam Ney at 860.244.1933 or adam.ney@cbia.com.

The Real Lego Story

LEGO Systems president discusses the firm’s brick-by-brick comeback

By Lesia Winiarskyj

Remember New Coke?

McPizza?

Volkswagen’s $60,000 Phaeton?

Every once in a while a major brand makes a major blunder: ignoring what its customers want.

No one knows that better than LEGO Systems President Soren Torp Laursen, who saw his company pushed to the brink of bankruptcy before the remarkable rebound that made it the world’s number-one toymaker last year.

“We had simply lost our way in wanting to be too much, too fast,” he said.

Laursen was the keynote speaker at the 2015 Economic Summit & Outlook in Hartford last month, which drew 500 business executives from around the state.

Hosted by CBIA and the MetroHartford Alliance, the event brought together business analysts, economists, and leaders representing various industries for a morning of discussions on Connecticut’s economic health, challenges, and progress toward becoming one of the top 20 states for business.

Back from the Brink

In a globally flat toy market, LEGO recorded 11% consumer sales growth in 2013, the most recent year for which figures are available. Over the past decade, the company’s revenue has grown 400%, and since 2002, employee growth in the Americas has surpassed 520%—all at a time when many businesses have suffered losses and layoffs. Today, LEGO products are sold in 130 countries.

“The last 10 years have been pretty awesome,” said Laursen.

Of course, it wasn’t always that way. Fifteen years ago, the maker of the iconic plastic brick was nearly bankrupt after venturing into markets as diverse as children’s clothing, watches, Hasbro-type action figures, and computers—“areas we knew absolutely nothing about,” said Laursen.

The company went from a period of no growth into a trajectory of decline between 2000 and 2007.

“Our company was not listening to its customers. We were so enthusiastic about those other areas that we neglected what we were good at.”

‘A Relentless Focus on Our Core’

The turning point wasn’t a change in leadership or personnel, said Laursen. “The team that fixed LEGO’s problems is the same team that screwed them up 15 years ago.” The turnaround came when the business decided to go back to what it’s good at, rebuilding its brand brick by brick.

“We placed a relentless focus on our core. We had product developers live with families to get insights that helped drive innovation—products that appeal to girls, storytelling, becoming a bigger player in the digital space.” (Its animated TV series Ninjago is a Cartoon Network staple, and The LEGO Movie was nominated for a 2015 Golden Globe award.)

Overseas Opportunities

LEGO is also focused on globalization.

“Seventy percent of our current business comes from the western part of the world, where only 30% of future growth is occurring,” said Laursen, noting that his company is looking to increase its presence in China, Latin America, and Africa.

Though they closed their Enfield manufacturing plant in 2000 and distribution center in 2006, LEGO’s corporate sales, marketing, and financial services operations are still anchored here.

“This is our hub,” said Laursen.

“Would we like lower taxes in Connecticut and a better infrastructure? Of course. But it’s not all as gloomy as that. Connecticut has an excellent strategic location. It has a well-educated workforce. We’ve brought on 100 new employees in Enfield each year over the last four years—into higher-paying jobs—and we expect to continue that trend well into the foreseeable future.” ■

Lesia Winiarskyj writes on economic and public policy issues for CBIA. Contact her at lesia.winiarskyj@cbia.com.

Keys to Avoiding Prosecutions for Environmental Violations

EPA, DEEP, U.S. attorneys to manufacturers: ‘We want you to succeed’

By Lesia Winiarskyj

How do we define success?

It’s a question every organization, and every department within it, must answer.

In the field of environmental enforcement—where success seems to be measured by the number of violations recorded, total dollars collected from fines and penalties, and the number of civil and criminal prosecutions—the deck appears to be stacked against businesses.

But Connecticut manufacturers heard some good news at a recent meeting of CBIA’s Environmental Policies Council. The meeting, held at E. C. Goodwin Technical High School, included a panel of federal criminal enforcement agents as well as officials from the U.S. Environmental Protection Agency and Connecticut’s Department of Energy and Environmental Protection.

Their message to businesses was clear: We don’t expect perfection. What matters most is how seriously you take environmental compliance and how you respond to a mistake.

“A successful year,” said Assistant U.S. Attorney for the District of Connecticut Ray Miller, “would be one in which my office had no prosecutable cases. The closer we get to compliance, the better.”

Compliance Traps

U.S. Attorney for the District of Connecticut Deirdre Daly gives manufacturers an overview of environmental compliance issues her office handles.

Deirdre Daly, U.S. Attorney for the District of Connecticut, explained that a company’s internal environment is often what undermines its environmental compliance program.

“In some cases, middle managers and boots-on-the-ground workers know about violations,” she said, “but a hierarchical corporate structure, a culture of intimidation, and fear of retribution keep those folks from reporting up the chain.”

Other traps, said Daly, are seemingly positive environmental policies that backfire.

“Some companies have a policy of zero tolerance. But zero tolerance isn’t always the best practice. It can force issues underground, so a company’s leaders may not hear about environmental violations. The news never makes it to the top.“

Also problematic is the notion that everyone is responsible for environmental safety.

“When engineering is responsible, and EH&S is responsible, and everyone else is responsible, then no one is responsible.”

In addition to policies that fail, said Daly, common occurrences and practices that lead to environmental lapses include:

  • Workers operating in silos
  • Production managers doing double duty as EH&S managers
  • Inadequate auditing and training of personnel
  • A failure to “get the right personalities in EH&S who can handle the healthy tension between the environmental safety management and production ends of a business”
  • Leadership transitions

On this last point, Robert Girard, assistant director of enforcement for DEEP’s Bureau of Air Management, noted, “We all would admit that environmental regulations can be very complex. Violations often occur when and where there’s staff turnover—a break in continuity—people who may not be up to speed on environmental compliance or a company’s approach to it.”

‘Not Out to Criminalize Civil Action’

Ninety percent of cases initiated by the U.S. Environmental Protection Agency’s Criminal Enforcement Division result in convictions, said John Gauthier, special agent in charge at the EPA, who acknowledged the challenges businesses face when it comes to staying on top of numerous and changing statutes.

“There’s RCRA, CERCLA, CWA, SDWA, CAA, EPCRA, FIFRA, TSCA”—environmental laws that are often nuanced and difficult to interpret.

“We’re not out to criminalize civil actions,” said Gauthier. “We’re not after companies for failing to correctly interpret the law or for making mistakes.”

“That’s not where we’re going to shine a light,” Daly agreed.

In fact, Gauthier noted, most of the cases brought to his office are never pursued.

So, what makes an environmental violation a criminal case?

Miller explained. “Agents look at what is the company’s record, its history of violations. What catches our attention: Were employees trained? Supervised? Did supervisors participate in the violations, or did they work to address and correct them? Were violations properly and promptly reported? There are certain notification windows.”

Joseph Catalano operates a mill, cutting down cold rolled steel. Catalano, a senior at Goodwin Tech, met with local manufacturers on a tour of his school’s manufacturing center. The tour led to a job offer with a stamping and tooling company as soon as he graduates in June.

He added, “People make mistakes. How the company reacts is, quite frankly, of paramount importance to us. What we look at closely is the corporate response to a bad act.”

Peter Kenyon, senior regional criminal enforcement counsel for EPA Region I, reiterated that the federal government is not trying to criminalize innocent or negligent behavior.

“We want the standards to be quite clear. We don’t want people to wonder if they’re committing a violation. While ignorance of the law is no excuse—these are public health statutes—we know that there are thorny compliance issues.

“What turns a civil case into a criminal case is often the corporate response to it. Was there voluntary disclosure?”

This past August, the former head of a New London manufacturing company pleaded guilty to a criminal charge of knowingly allowing the dumping of chemical pollutants into a publicly owned treatment works for over seven years. Workers repeatedly warned him about illegal wastewater discharges after he took over as CEO in 2003. (The company had been discharging industrial wastewater without a required permit since at least 1986.) Employees had requested that the company install a pretreatment system, and a manager had emailed the CEO asking him to bring the company into compliance.

The CEO, who ignored employees’ warnings and requests, could face three years in prison and thousands of dollars in fines.

‘We’re Willing to Meet with You’

DEEP Commissioner Robert Klee meets with Connecticut manufacturers and instructors at a special meeting of CBIA’s Environmental Policies Council held at E. C. Goodwin Technical High School.

Cases like this one are, fortunately, rare in Connecticut.

Calling environmental violations in the state “mostly minor and correctable,” DEEP Commissioner Robert Klee emphasized his agency’s continued focus on transparency, process improvement, and “heavy investments in pre-application guidance and compliance assistance.”

“We’re working toward a reverse pyramid,” said DEEP’s Nicole Lugli, describing an approach to environmental compliance that’s accomplished primarily through technical training, education, and permitting assistance rather than referrals and administrative orders. Lugli is office director of compliance assurance for the agency’s Office of Planning and Program Development.

“The message is we’re willing to meet with you to understand your business and your challenges and help you solve those problems,” said Klee.

The special meeting at E. C. Goodwin Tech ended with a Q&A between manufacturers, regulators, and enforcement officials, followed by a tour of the school’s manufacturing center, where students training for jobs in various high-demand industries met with prospective employers. ■

Lesia Winiarskyj is a writer on economic and public policy issues at CBIA. Contact her at lesia.winiarskyj@cbia.com.

Learn more about CBIA’s Environmental Policies Council here.

CBIA Establishes Connecticut Bioscience Growth Council

Strengthens support for state’s biotech, biopharma companies

As the biotechnology, biopharmaceutical, and related industries in the state continue to grow and innovate, they will now have a greater voice with the creation of the Connecticut Bioscience Growth Council.

As part of CBIA, the council will represent the interests of biotech and biopharma companies—large and small—at the State Capitol and regulatory agencies, providing greater advocacy support and resources and developing an overall plan for better positioning these companies at the state, regional, and national levels.

The council is led by CBIA’s Paul Pescatello.

“Biotechnology and related industries are a keystone for Connecticut’s future,” says Pescatello.

“The value they bring to the state and, most importantly, to patients and consumers, will be more effectively represented and communicated by the deep bench of government affairs talent and resources at CBIA.”

“These industries represent new and emerging technologies as well as key economic drivers for the state,” says Joe Brennan, CBIA’s president and CEO.

“As they develop lifesaving medicines, new medical treatments, critical medical devices, and other innovative products made possible with life sciences technology, we need to make sure that Connecticut is a great, desirable place for these companies to operate and invest.”

Pro-Growth Policies

Paul Pescatello will head up CBIA’s new Bioscience Growth Council. He also serves as president of the New England Biotech Association, chairs We Work for Health Connecticut, and works closely with the Biotechnology Industry Organization (BIO).

As part of the Bioscience Growth Council’s government advocacy, Pescatello will work to enhance and secure important policies, such as the research and development tax credit for both established and early-stage companies.

Tax credits foster innovation, spur employment, create better opportunities for long-lasting careers, and make Connecticut a more attractive place for companies looking to relocate. Such policies also drive economic activity and help Connecticut compete with other states and countries.

The council supports well-funded basic, translational, and industry research, coupled with robust clinical and product development, which leads to new medicines on pharmacy shelves, new medical device options for patients, and higher quality foods for consumers.

“The Bioscience Growth Council will be a highly effective means to amplify the voice of Connecticut biotechnology,” says Mary Kay Fenton, executive vice president and chief financial officer at New Haven-based Achillion Pharmaceuticals and a CBIA board member.

“If we want this vital industry to grow in Connecticut, policymakers need to know the issues that are important to us.

“Tax policy, intellectual property protection, and infrastructure improvements—including transportation—are critical to us and are paramount to the mission of the Connecticut Bioscience Growth Council.”

“With the establishment of the Bioscience Growth Council, the biopharmaceutical sector is connected directly to the larger Connecticut business community,” says Jim Baxter, senior vice president, development, at Boehringer Ingelheim in Ridgefield and a CBIA board member.

“That broader community, in turn, will benefit greatly from the talent pool, innovation, and economic growth biopharma helps bring into Connecticut.”

Up-and-Comers

While the state’s established biopharmaceutical firms are critically important, also essential to the health of Connecticut biopharma is nurturing a pipeline of startup ventures. Recognizing that, the council is committed to collaborating on public policy concerns with the state’s entrepreneurial and economic development organizations.

“This council will be an indispensable bridge between early-stage companies, scientists, and the established biopharma community,” says Usha Pillai, Ph.D., president of Aria Management Consulting. Pillai, who worked in new medicine development at Pfizer for over 15 years, also worked with Connecticut United for Research Excellence (CURE) and the New Haven Economic Development Corporation to create Bioscience ClubhouseCT.

“It ties one of the state’s key economic development efforts—the recruitment and retention of biotech R&D, including The Jackson Laboratory—to one of its most important business sectors.”

To learn more about CBIA’s Bioscience Growth Council, contact Paul Pescatello (860.244.1938; paul.pescatello@cbia.com) or Therese Wallace (860.244.1950; therese.wallace@cbia.com). Or visit cbia.com/ctbio.

Energy Forecast: Cloudy, Periods of Sun

Regulators, businesses, media weigh in on Connecticut’s energy future

By Lesia Winiarskyj

Speaking at 21st Century Energy, an annual conference presented by CBIA and the Connecticut Power & Energy Society, DEEP officials Katie Scharf Dykes and Robert Klee give an overview of Connecticut’s energy challenges, including accessibility, capacity, environmental impact, and cost.

In his 2015 energy forecast, delivered at this year’s 21st Century Energy: What’s the Deal conference, DEEP Commissioner Robert Klee noted that with a “cheaper, cleaner domestic energy supply just 90 miles away,” his agency is aiming for 50% natural gas penetration in Connecticut to achieve parity with neighboring states.

He acknowledged, however, that natural gas is not a viable option for the foreseeable future in half the state, “which is why need to keep pursuing energy efficiency…and driving down the cost of alternatives.”

Noting that “there are limits to what consumers can and will pay,” Klee called for leveraging more private capital to reduce subsidies—crowdsourcing, the Groupon approach, and other innovative ways to encourage deployment at scale.

‘It All Boils Down to…’

“We’ve entered a very volatile period in our energy market,” said Deputy Commissioner of Energy Katie Scharf Dykes, underscoring the challenges to sustaining a competitive economy.

“It all boils down to a problem of inadequate infrastructure.”

Connecticut’s pipeline constraints and limited natural gas buying capacity, said Dykes, resulted in $3 billion in additional costs last winter and are expected to keep prices elevated this winter too.

Stopgap solutions such as increased reliability on coal and oil “take us backward from a cost perspective [by increasing wholesale electricity costs] and an environmental perspective,” she said.

“And the problem will only get worse.”

‘Too Big for One State to Solve’

Price volatility in New England will continue, said Dykes, until three things happen: we secure adequate natural gas infrastructure; we diversify our energy supplies to include more renewables and large-scale hydropower; and we reduce consumption of electricity or gas—or both.

She acknowledged, too, that our energy challenge requires a regional approach, such as the New England Governors’ Energy Infrastructure Initiative, which would expand natural gas and renewable energy infrastructure capacity by appropriate cost-sharing—cooperative investments in pipelines, electric transmission, renewable generation, and energy efficiency across the six New England states.

“This problem is too big for one state to solve on its own.”

The Politics of Energy

A panel of Connecticut business reporters discusses the politics of energy. L-R: Moderator Steve Kotchko, Connecticut Radio Network; Brian Dowling, The Hartford Courant; Luther Turmelle, The New Haven Register; and Mark Pazniokas, The Connecticut Mirror.

21st Century Energy: What’s the Deal was held on Oct. 8—less than four weeks before Election Day, when Connecticut’s race for governor was in a dead heat.

Moderating a panel of reporters, Connecticut Radio Network News Director Steve Kotchko asked why the gubernatorial candidates weren’t more vocal about their energy strategies—especially with energy prices expected to spike again this winter.

“Cheaper has left town,” said Mark Pazniokas, Capitol bureau chief at CTMirror.org, calling energy a politically “dangerous and difficult issue,” one that requires nuance and complexity—which, he noted, don’t work well in political campaigns.

“This is not an easy issue to tackle, with so many moving pieces,” he said, referring to changing markets, technology, environmental impacts, regulatory policy, and something that Kevin Hennessy, New England director of federal, state and local affairs for Dominion Resources called a “mismatch in the gas and electricity markets,” with the natural gas industry based on long-term contractual agreements (commonly 1511–20 years), while New England’s electricity industry operates on short-term market price signals—up to seven years for new resources and year-to-year for existing ones.

Echoing Dykes’ remarks, Pazniokas reiterated that any meaningful change in transmission capacity in New England is a regional problem, which complicates the issue of having a single gubernatorial hopeful make energy a key part of his or her platform.

Luther Turmelle, north bureau chief for the New Haven Register, agreed.

“A lot of what determines the price of energy does not happen at the state level, so it’s kind of disingenuous for anyone to claim victory for lower prices.” [Read more…]