Kevin Rennie: Changing Connecticut’s business climate takes more than boosterism; opening the door to data centers could be a start

Chief Executive magazine is menacing Connecticut again. The periodical for, well, its target reader is in its name, is conducting its annual survey on the best and worst states to do business in. The poll gets a lot of attention and has been unkind to Connecticut. Last year our state placed a dismal 46th as a welcoming place to conduct business.

Good cheer and smiling faces have been part of the state’s economic development strategy for several years. Dour former Gov. Dannel P. Malloy complained about our collective complaining. Gov. Ned Lamont, who seems genial by nature, wants us to turn our frowns upside down when we speak of our state.

AdvanceCT, a renamed state-funded nonprofit economic development agency, has adopted the keep-your-sunny-side-up strategy of promoting business in the state. It is encouraging state business leaders to participate in the poll and boost Connecticut in it. The Connecticut Business and Industry Association (CBIA) has also urged some of its members to take the poll in progress.

But this new boosterism took a blow this past Tuesday. UConn economist Fred V. Carstensen testified in support of a bill to make the state more attractive for companies that build massive data centers. Carstensen, as has become his custom, shared some hard realities. “Connecticut has the worst performing state economy in the nation since 2008. By a wide margin.”

We are, according to Carstensen’s calculations, nine years from getting back to our 2008 level of economic activity. “Twenty-three years with ZERO net real growth! And we will likely face staggering deficits beyond FY 2024 that will push recovery further into the future,” he told legislators.

Carstensen concluded in his testimony, “It is absolutely critical that we shape a different trajectory; we must restore our competitiveness and economic vitality. Adopting this legislation would be a major step in the right direction.” The proposal Carstensen referred to is a measure rushed through the legislature to give the Department of Economic and Community Development (DECD) authority to offer significant tax breaks to companies that build data centers in Connecticut’s opportunity zones. Any company that meets certain high thresholds can qualify. Tax breaks are often abused, but at least this one comes with standards, not the crony capitalism of the past.

A data center is a vast building crammed with sophisticated technology. States compete to attract companies that need to build and operate data centers. Apple famously searched the nation before settling on putting a massive data center in remote, poor Catawba County, North Carolina. No matter. Siri isn’t looking out a window when it tells you the weather forecast.

The Lamont administration appears to be in the hunt (or hopes to be) for a data center and pushed last week’s legislation. A data center is a big score for any governor. Perhaps a stock exchange or other big-foot company wants to build one not far from Manhattan. Connecticut’s proximity to New York and Boston, as well as some advanced technology lines in the ground provide an advantage.

There are some obstacles to success in the data center game. Land here is more expensive than in those remote spots that have recently attracted data centers. The cost of electricity is among the highest in the continental United States. Data centers do not require a lot of employees, but they are voracious consumers of electricity. Lamont has cited the recent decline in electricity consumption in Connecticut as a reason to oppose the advancing fortunes of a natural gas powered energy plant in Killingly (which is designed to accommodate advances in hydrogen technology). That is a mistake if Connecticut is going to become home to data centers.

To attract 21st century businesses, Connecticut will need a steady source of electricity. Gas, which emits far less carbon than oil and coal, is the bridge to a sustainable energy future. The cost of providing that plentiful and reliable supply may bring rebukes from Swedish teenage climate change campaigner Greta Thunberg, but that is part of the tariff reality imposes as innovation continues to progress.

Changing a state’s business climate from hostile to welcoming requires more than two years of Lamont cheerleading. Address the cost and supply of electricity, stop using state government to compete with businesses already here, and squelch annual bids to increase the cost of living in Connecticut. Then, that dreaded annual Chief Executive magazine poll will take care of itself.

Kevin Rennie is a lawyer and a former Republican state legislator. He can be reached at kfrennie@yahoo.com.

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