Conn. politicians trade accusations over loss of GE

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The GE logo adorned a sign on the company’s corporate headquarters campus in Fairfield, Conn.Michael Melia

Massachusetts politicians raced last week to congratulate themselves for the type of selfless bipartisanship and keen economic thinking that could land a whale like General Electric, which announced intentions to relocate its global headquarters to Boston.

Across the border in Connecticut, the tone is quite different, less a back-slapping convention than a circular firing squad. In GE's spurned current home, the theme is political fratricide.

Connecticut Republicans tore into Democratic Governor Dannel Malloy, saying his burdensome tax policies had pushed the company, ranked eighth in the Fortune 500, and its 800 Fairfield-based jobs out the door.

Malloy, said Connecticut House minority leader Themis Klarides, is arrogant and delusional.

"He blew it," said state Representative John Frey who, like Klarides, also blamed the Democratic majorities in both legislative chambers.

"There was a lot of rhetoric coming out of the House and Senate leadership that 'the GE executives need to get off their yachts, they're not serious,' which didn't help the situation," he said.

Democrats returned fire.

"What they're doing is really a cynical dark-side-of-politics thing," state Senate President pro tem Martin Looney said Thursday. Democrats say GE was not so much repelled by Connecticut's tax code as it was lured by Boston's tech-hub reputation as the company seeks to modernize.

"Obviously, the Republicans here have tried to make a partisan issue out of GE's departure. And the reality is, the basis on which they're making their attacks is completely irrelevant," Looney said, adding, "For the Republicans to attack us is really a cynical brand of political opportunism."

Malloy's office did not respond to requests for comment.

In Boston, the coup was hailed as the lucrative result of the friendship and cooperation between Republican Governor Charlie Baker and Democratic Mayor Martin J. Walsh. "We won Powerball," Walsh gushed.

And executives close to the deal said the one-two combo appealed to GE, which had explored New York, where the relationship between Governor Andrew Cuomo and Mayor Bill de Blasio, both Democrats, regularly generates acid headlines.

"That's a place where the mayor and the governor won't be in the same room together, let alone work on the same project," said John Regan, executive vice president of Associated Industries of Massachusetts, a business group that helped lure GE.

"They just decided, given the stable state and city government, given not the worst tax climate, not the best in the country, we're kind of right in the middle of the pack — and the workforce — that this was the place to come," Regan said.

In Connecticut, the damage goes beyond political fissures, Republicans said. For one, they say the state is cultivating a reputation as hostile to corporate investment. On Thursday, the front page of the Waterbury-based RepublicanAmerican newspaper bore a banner headline reading "Turn off the lights, GE."

"We continue to pass policy and make laws that are anti-business," Klarides said. "We might as well just hold up a sign at the state border that says 'Get out.' "

More immediately, officials in both parties worry that GE's relocation will ripple through the local economy.

"I've heard from jewelry stores, car dealers, restaurants, they're all concerned," Frey said.

Republicans said that Democrats were slow to recognize the gravity of GE's threat to leave the state, adding that Democratic leaders exacerbated the situation by accusing GE of fear-mongering and bluffing.

Frey said he received a telephone call on the last Sunday in May of last year from one of his constituents, Jeff Bornstein, who is also GE's senior vice president and chief financial officer. Bornstein said he had learned that weekend the details of Democrats' plans to levy the second-largest tax hike in state history, on the heels of the largest, in 2011, and called the governor on Saturday.

Frey said Bornstein told him he had informed Malloy "that if these taxes were adopted, they would have to reconsider where they called home. He felt that Governor Malloy did not take him seriously."

Frey called Malloy on Sunday with the message. I know these guys, he told the governor. They're not bluffing.

Later that week, the House and Senate adopted the tax changes, and GE quickly followed suit by announcing a relocation committee.

The measures that businesses like GE found most objectionable included new curbs on tax credits for activities such as research and development, higher levies on software development, a tax-calculation method called unitary reporting, and curtailed use of losses carried forward.

Over eight years, Frey said, GE calculated that its total tax hit in Connecticut would approach $1 billion.

Eventually, some of those proposals were scaled back. But GE officials warned that Connecticut's structural budget problems, prompting the suggestion of such measures in the first place, had made them uneasy, and they went ahead with the search for a new home.

Looney, the Senate's top Democrat, said Massachusetts "has a very similar tax climate," noting that Massachusetts has already instituted a policy similar to Connecticut's "unitary reporting."

"It indicates that the basis for GE's move is really to be part of a high-tech cluster. They want to be seen as a leading-edge software company rather than a traditional manufacturing company," he said, adding, "What has happened with GE points out that Connecticut needs to be even more high-tech investment rather than less."

After the budget passed, officials continued to pursue GE in an effort to convince the iconic company to stay. But when Malloy's team met with GE officials in Fairfield, as other states also lined up as suitors, the presentation they brought with them had one major, if cosmetic, flaw. The front page bore the picture of a jet engine, a signature GE product.

But, GE executives quickly noted, rather than a GE engine, the image was of one manufactured by Pratt & Whitney, a top GE rival, said two people familiar with the presentation.

Now, Connecticut is worried not just about the lost tax revenue and the psychological hit of losing a renowned American company, but of losing ancillary benefits. After the 2012 school shootings in Newtown claimed 26 lives, for instance, GE donated $15 million for the town to build a new community center and sent four executives to help the town recover.

Today, GE has about 5,700 employees in Connecticut, and has said it will site about 800 in Boston. Malloy has assured residents that "the company will continue to have many employees working here in Connecticut."

But the battle to keep GE already soured the political climate there, and stirred fears of what will be left behind once the company moves.

Said Frey, "It's all going to go away."