OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 ↓ (860) 240-0200
http: //www. cga. ct. gov/ofa
AN ACT PROMOTING ECONOMIC GROWTH AND JOB CREATION IN THE STATE.
OFA Fiscal Note
The bill authorizes the issuance of $701 million in bonds and results in an increase in debt service of an estimated $1. 1 billion over 20 years. In addition, the bill has various cost and revenue impacts that result in a net impact on the General Fund of up to $-9. 3 million in FY 12 and up to $-54. 8 million in FY 13.
Sections 1 – 3 result in a cost of $175,000 in FY 12 and $195,000 in FY 13 to the Department of Economic and Community Development for the creation of the Small Business Express Program. These costs include two additional staff as well as approximately $50,000 marketing and legal fees in order to implement the program in FY 12. It is anticipated that at least two additional full time employees with a combined annual salary of $150,000 plus benefits, would be required to implement the program. However, the number of staff necessary may vary depending upon the number of applications received through the program.
Sections 4 – 5 authorize $20 million in General Obligation (GO) bonds ($10 million in each of FY 12 and FY 13) for the Subsidized Training and Employment program (STEP) for certain small businesses and small manufacturers. This program is established in the Department of Labor (DOL) and the bill allows DOL to utilize up to 4% of bond funds hire outside contractors to administer the program. Thus, the DOL may use up to $400,000 in FY 12 and $400,000 in FY 13 in bond funds to administer STEP.
Section 6 requires the Department of Energy and Environmental Protection (DEEP) to study the department's state permitting and enforcement processes and the feasibility of developing a methodology of processing such permit applications and enforcement actions based on tiered levels of risk to the environment. This will not result in a fiscal impact to DEEP. This section also requires the agency to submit a report to the Environment and Commerce Committees by February 1, 2012, which will not result in a fiscal impact.
Section 9 requires the Department of Economic and Community Development (DECD) to develop recommendations for a certification program similar to the state of New York's "Build Now-NY/Shovel Ready Certification Program". DECD is required to submit a report on its findings by January 1, 2013. There is no fiscal impact to complete the study by the required reporting date.
Section 10 requires the Office of Policy and Management (OPM) to, within available appropriations, contract for consultant services to apply LEAN practices and principles to the permitting and enforcement practices of DEEP, DECD, DAS and DOT. It is estimated that this will result in a cost of approximately $500,000 to OPM.
Section 11 requires the Departments of Energy and Environmental Protection (DEEP), Transportation (DOT), and Economic and Community Development (DECD) to make recommendations to the Environment, Transportation, and Commerce Committees, no later than February 1, 2012, for the revision, repeal of any agency program, or statute relating to such agency that the agency determines to be obsolete or in need of revision for making the operations or procedures of the program or provision more efficient. There is no anticipated fiscal impact to the agencies.
Section 16 is expected to result in a $75 annual General Fund revenue gain from allowing one additional farm wine festival to be held for in-state farm wineries (current law only permits one festival). Sixteen Connecticut wineries participated in the FY 11 wine festival.
The additional wine festival is also expected to result in an annual General Fund revenue gain of between $2,500 and $7,500 in sales tax revenue associated with the sale of bottles of wine.
Section 18 expands the Manufacturing Reinvestment Account eligibility from 50 businesses to 100 businesses, and increases from $50,000 to $100,000 the maximum amount businesses may deposit. These changes are expected to result in a revenue loss from the Corporation Business Tax of up to $300,000 in FY 12, up to $487,500 in FY 13 and up to $587,500 annually thereafter, depending on the number of manufacturers that choose to participate in the program.
There is no fiscal impact to Department of Economic and Community Development as the agency can expand the program without additional resources. As of October 24, 2011 no businesses have participated in the program.
Sections 19 – 22 establish a job expansion tax credit for a number of taxes. They also phase out three existing job creation tax credits, although the current cumulative annual cap ($20. 0 million) on job creation tax credits is retained. These changes are expected to result in a revenue loss of $15. 0-$17. 5 million annually, beginning in FY 13 and continuing through FY 16. The estimate assumes that employers will begin to utilize the credit in the fiscal year following the income year in which they become eligible for it, and for the following two fiscal years.
These sections nave no fiscal impact on the Department of Economic and Community Development (DECD) because the agency currently administers three job creation tax credit programs. It is anticipated that DECD can phase out these program while administering the new Job Expansion Tax Credit within current resources.
Section 23 makes the Business Entity Tax (currently a $250 annual payment) payable every other year, beginning with the 2013 tax year. This results in a revenue loss of $40. 0 million in FY 14 and every other fiscal year thereafter.
Sections 24 – 27 require the Department of Economic and Community Development, in consultation with the Department of Energy and Environmental Protection, to identify, market, and remediate five state-owned properties and to develop a priority list by January 1, 2012. The bill authorizes $20 million in General Obligation (GO) bonds for the purpose of identifying, marketing, and remediating the five properties. It is anticipated that a portion of these funds can be utilized to support any administrative costs associated with the program.
Section 29 lowers, from $100,000 to $25,000, the minimum investment that is required to qualify for the angel investor income tax credit. The current cap on total credits of $6. 0 million in FY 13 and $3. 0 million in FY 14 remains unchanged. The change in minimum investment is expected to result in a revenue loss of $1. 5 million in FY 13 due to increased utilization of the credit.
Sections 31 - 32 authorize the following General Obligation (GO) bonds: (a) $2. 2 million ($1. 1 million in each of FY 12 and FY 13) to expand the precision manufacturing program at Asnuntuck Community College and (b) $17. 8 million ($8. 9 million in each of FY 12 and FY 13) for three regional community-technical colleges to establish or expand manufacturing technology programs.
Currently the Regional Community Technical Colleges (RCTCs) operate a manufacturing program with an operating cost of $790,500 at Asnuntuck Community College in Enfield. Funds totaling $790,500 were transferred to the Board of Regents for Higher Education (Manufacturing Technology Program - $610,500 and Expand Manufacturing Technology Program - $180,000) for both years of the biennium in the consolidation of higher education.
The expansion provided in Sections 31 and 32 is anticipated to result in increased operating costs of approximately $800,000 per year to the RCTCs once renovations and capital expansions are completed based on the cost of operating the current program.
Section 33 has no fiscal impact on local and regional boards of education by requiring them to inform middle school students of opportunities at regional vocational-technical high schools and at regional agricultural science and technology centers.
Section 37 requires the Office of Legislative Management (OLM) to contract with the Connecticut Academy of Science and Engineering (CASE) to study, in consultation with the Department of Economic and Community Development (DECD), the Labor Department, and Board of Regents for Higher Education, strategies for evaluating the effectiveness of programs and resources for assuring the state's skilled workforce meets the current and future needs of business and industry. This section also requires reporting of the findings to the higher education and employment advancement, commerce, education, and labor on or before January 1, 2013. Public Act 11-6, as adjusted by PA 11-61, the Biennial Budget Act, provides funding of $100,000 in both FY 12 and FY 13 for CASE to conduct studies.
Section 38 expands the First Five Program to the First Five Plus Program from up to five projects over FY 12 and FY 13 to up to ten projects in FY 12 and up to five in FY 13. The bill authorizes $340 million in General Obligation (GO) bonds to the Manufacturing Assistance Act (MAA) program. The MAA program is intended to fund the First Five Plus Program.
There is no additional fiscal impact to the Department of Economic and Community Development in expanding this program. The DECD is currently reviewing multiple businesses for eligibility for the original First Five Program. As of October 25th, four companies were invited to the original First Five Program.
Sections 39-45 allow for the establishment of additional airport development zones surrounding any of the state's general aviation airports. This is estimated to result in a revenue loss of up to $500,000 annually from the Corporation Business Tax to the extent that additional zones are established and eligible business facilities are located within them.
Additionally, to the extent that enactment of the bill encourages development by eligible businesses within established airport development zones, a potential grand list expansion will result. A temporary (generally five years) eighty percent (80%) exemption would be applied to the assessed value of any improvements and/or machinery and equipment purchases.
There is not anticipated to be a fiscal impact to the Connecticut Airport Authority because any administrative duties associated establishing additional airport development zones are expected to be handled by current staff.
Section 48 reduces, from $750. 0 million to $650. 0 million, the total amount of tax credits allowable under the urban and industrial site reinvestment tax credit. This results in a potential revenue gain of up to $10. 0 million per year in FY 16-19 and up to $20. 0 million per year in FY 20-22.
Section 49 authorizes $10. 0 million in General Obligation (GO) bonds ($5 million in each of FY 12 and FY 13), to Department of Energy and Environmental Protection (DEEP) for the energy efficiency fuel oil furnace and boiler replacement, upgrade and repair program established in Section 50. There is no cost to DEEP because the program will be administered by the Fuel Oil Conservation Board (FOCB).
Section 50 requires DEEP to enter into a contract with FOCB for the purchase and installation of the energy efficient oil furnaces and boilers or upgrades and repairs to existing equipment and requires the FOCB to administer the program.
Section 53 establishes a new category of television production eligible for film production tax credits. This is expected to result in a General Fund revenue loss of $10. 0 million-$19. 0 million in FY 13 and an annual loss of $5. 0 million-$10. 0 million from FY 14 to FY 22. The revenue loss in FY 13 includes approximately $5. 0 million-$9. 0 million in film production infrastructure tax credits since the bill requires a minimum investment of $25. 0 million in order to qualify as an eligible production under the newly established category; the remaining $5. 0-$10. 0 million annual revenue loss is due to increased utilization of film production tax credits.
Section 54 expands the types of tax credits a taxpayer may use to reduce liability under the insurance premium by up to 55% in 2011 and 2012, to include film production and infrastructure investment tax credits. This is expected to result in a revenue loss of approximately $8. 3 million in each of FY 12 and FY 13.
Sections 56-73 update Connecticut statutes concerning captive insurance companies. Currently, there are no captive insurance companies in Connecticut. In order to license and regulate the captive insurance industry, the Department of Insurance (DOI) will need an additional 4. 5 positions with an annualized personal services and fringe benefit cost of $560,000.
Should the provisions of the legislation and the establishment of administrative capacity at DOI result in the licensing of captive insurance companies in the Connecticut, additional revenues may result to the state. First, each captive that applies for a license must pay an annual $800 license fee to DOI. Additionally, captives must annually pay to the Department of Revenue Services a tax based on any insurance premiums collected. The bill specifies that 11% of the premium tax revenue collected must be transferred to DOI to pay for the new regulatory costs noted above. Of this amount transferred, not more than 2% of the premium tax may be further transferred to the Department of Economic and Community Development for reasonable expenses associated with promoting the captive insurance industry in Connecticut.
The amount of revenue generated will be dependent upon the number and size of captive insurers attracted to the state, which cannot be known in advance.
Sections 80-88 allow state agencies to enter into public-private partnerships with private contractors, which could result in the development of state projects that would not otherwise have been occurred.
The contractors' costs for developing such projects would be paid from the income stream arising from operation of the project and might include grants, loans and appropriations from the state. The contractors are expected to finance the cost of the projects through bank loans at prevailing commercial market rates. Using public-private partnerships to develop state projects could be a more expensive option when compared to the net benefit to the state of: (a) financing the project with state-issued bonds; and (b) collecting the income stream from the project as state revenue. This is because the state can issue bonds at a lower interest rate than the rates available to the private contractors in the commercial market.
The bill exempts any property developed, operated, or held by a private entity pursuant to a partnership agreement from property taxes. This will preclude a future increase in a municipality's taxable grand list for property developed under a public-private partnership agreement.
Out year impacts of individual provisions are described in the section by section analysis above.
The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.