Originally Published Wednesday, Dec. 23
General Electric (GE) - Get Report , which moved its headquarters from Manhattan to suburban Connecticut more than 40 years ago, may be returning to the state of New York, according to two Connecticut lawmakers.
A dispute over what GE executives characterize as an onerous tax increase, and the failure of the Democratic state government to make sufficient concessions on the plan mean there's a 90% chance GE will leave Connecticut, said State Sen. Toni Boucher, a Republican whose district includes the border towns of New Canaan and Ridgefield, the homes of CEO Jeffrey Immelt and CFO Jeff Bornstein, respectively.
Boucher sees a 50% chance of GE relocating to Westchester County in New York, which has the advantage of proximity for employees who may not want to give up their personal lives in Connecticut, and a 40% chance of the manufacturer moving to Boston.
"I would put my money that GE is not staying in town," said State Rep. Brenda Kupchik, a Republican state representative whose district includes Fairfield. "When we met with GE back in September, at their headquarters, they said they weren't happy with the taxes, and they said there was a systemic problem with the state of Connecticut's budgeting."
GE declined to comment beyond an e-mailed statement that its team was "taking many factors into consideration" and would communicate its final decision, once made, publicly.
A move would be yet another change to a piece of the manufacturer's identity, following a year that saw the acquisition of Alstom's power business, the largest deal in the company's history; the collapse of a second attempt to sell its appliance division; and the wind-down of much of its sprawling lending business.
It was just a day after Connecticut's legislature approved a budget plan with a $1.9 billion tax increase, in early June, that Immelt said he would form an exploratory committee to consider relocating. He urged employees to share concerns about Democratic Gov. Dannel Malloy's "significant and retroactive tax increases," which included a so-called unitary tax that effectively places a levy on corporations by altering how the government accounts for incomes earned outside of the state.
Other multinational corporations in Connecticut complained, too, including insurance giants The Hartford Group (HIG) - Get Report, Travelers (TRV) - Get Report, and Aetna (AET) , prompting the General Assembly to pare about $350 million in taxes from its 2016 budget during a special meeting on the state's deficit this month and $212 million in 2017. The increase in the unitary tax was capped at $2.5 million above the current level.
Boucher is concerned that wasn't nearly enough.
Connecticut's inability to withdraw the unitary tax altogether or develop a stable long-term corporate tax outlook may have been the "last straw" in its hopes for compromise with GE.
"My sense is that there was not enough done in the special session to make the kind of real structural changes that GE was looking for," she said. "Jeff Immelt was looking for long-term financial stability in the state of Connecticut."
That, says Kupchik, is something the Legislature failed to deliver.
"The long-term debt obligations of the state are very alarming to the state or any business," she said in a telephone interview. "It makes the state seem unstable. They're always going to be coming after anything they can. The way that the state's been managed over the last 20 years has shown very poor planning."
That, naturally, boosts the appeal of relocation. Not only would New York have a heightened allure because of its closeness -- the more than 800 employees in Fairfield could easily add a one-hour drive to Westchester along Interstate 95 -- the Empire State also boasts a long history with GE.
Founder Thomas Edison started New York City's first central power station in 1882, the company was the exclusive provider of switches and switchboards for the Empire State Building, and its headquarters for much of the 20th Century was at 570 Lexington Avenue in Manhattan.
It still occupies several floors of the iconic 30 Rockefeller Center and has a major research facility in the Schenectady area.
New York Gov. Andrew Cuomo, who met with GE officials and has a history of enticing businesses with tax-incentive packages, didn't respond to requests for comment.
But New York state Sen. George Latimer, a Democrat whose Westchester district includes Armonk and Purchase -- the corporate homes of IBM, PepsiCo and Mastercard -- said his state would be an ideal fit.
An incentive package for GE would likely be "very lucrative," he said in a telephone interview. "And New York is the greatest center for commercial activity that exists. You are going to have access to all the movers and shakers of the world."
Additionally, Latimer said, "if you are going to move a corporation from Connecticut, a move from Fairfield to Westchester would give you the most seamless transition."
Connecticut Gov. Malloy and the state's Office of Policy and Management didn't respond to requests for comment.
Despite its advantages, New York apparently doesn't yet have a lock on GE. Boston, with a highly educated workforce and proximity to the Massachusetts Institute of Technology and Harvard, is an attractive option for a company emphasizing technological advancements like the Industrial Internet.
That product, for which GE has been predicting rapid growth, is based on a software platform that uses sensors to gather data from heavy equipment including wind farms and rail locomotives, then make constant adjustments to improve performance.
Massachusetts Gov. Charles Baker didn't immediately return phone calls seeking comment.
Connecticut, meanwhile, hasn't given up. Democratic lawmakers hold out hope that even if GE moves its headquarters, some of its operations will remain in the Constitution State.
Immelt's decision to delay an announcement on the possible relocation from this month into January could signal good news, said State Rep. Cristen McCarthy Vahey, a Democrat who also represents Fairfield.
"My impression from all reports is that GE will attempt to maintain some kind of presence in Connecticut," McCarthy Vahey said in a phone interview. "I also think that the unitary is only one piece of what they are looking for, and making sure we have a solid infrastructure, good education system, and the ability to move people in an effective way is critical for GE."
McCarthy Vahey was appointed in November to Connecticut's Commission on Economic Competitiveness, which works to make sure the state remains competitive in attracting and retaining business.
Mike Tetreau, Fairfield's Democratic first selectman, the legislative equivalent of a mayor, said the special legislative session made meaningful advances in helping Connecticut compete with the tax structure of its rivals.
"Each of the steps they take has been a step in the right direction, making Connecticut a more job-friendly environment," he said in a phone interview. "We're not working in a vacuum here. Connecticut is a business that's selling product, and we have to look at other comparable states, and I think we have to have a good value proposition."
Senate Majority Leader Bob Duff, a Democrat, pointed out that the Legislature approved in its special session a variety of tax benefits, including an urban job-creation property tax cut, and the elimination of a propane tax on electrical generation.
Additionally, the state's strong education system, its location between New York and Boston and four decades of ties with GE give it a fighting chance.
"I certainly feel that Connecticut is the best play for GE," Duff said in a phone interview. "I think at the end of the day, hopefully, in their analysis, it will show that Connecticut is the right place for them."