By CHRISTOPHER KEATING
7:06 PM AKDT, October 26, 2011
Both chambers of the state legislature voted Wednesday night in favor of Gov. Dannel P. Malloy's controversial plan to recruit the nonprofit Jackson Laboratory to Farmington with a $291 million offer to construct a new building and create 300 direct jobs over the next 10 years.
On a strict party line vote, the Senate voted 21 to 14 in favor of the measure. Sen. Edwin Gomes, a Bridgeport Democrat, missed the vote because he is recovering at his home following a recent heart attack. The measure was immediately sent to the House of Representatives, which approved the bill by 101 to 41 on a mostly party line vote after 10:30 p.m. Wednesday.
All Democrats voted in favor of the measure, and they were joined by 8 Republicans, including the entire Greenwich delegation of Representatives Livvy Floren, Lile Gibbons, and Fred Camillo.
"Yes, this is about jobs - more than 6,800 of them,'' Malloy said in a statement. "But it's also about a lot more than that. It's about making Connecticut a leader in a growth industry.''
With manufacturing and other industries in decline in the Northeast, Connecticut needs to invest in the fast-growing bioscience industry in order to kick-start the economy to improve the state's 8.9 percent unemployment rate, they said. State officials project that the venture will be so successful that it will eventually create more than 6,600 jobs over the next 20 years, including other bio-science companies and restaurant, real estate, and retail jobs that are needed to service those workers.
Sen. Theresa Gerratana, a New Britain Democrat, said that Jackson promises to make future advances in the field of personalized medicine to help in the treatments of Alzheimer's disease, cancer, and Down Syndrome, among others. The scientists in Farmington would study the interaction of genes in an attempt to make medical breakthroughs.
"What is genomic medicine? It is the medicine of the 21st century. It is the medicine of the future,'' Gerratana told colleagues on the Senate floor. "The doctor can understand the very code of the cells of the disease. This is the way that medicine will go. ... I'm so happy to know that we're not going to be competing just in New England, but in the country and in the world.''
But Republicans said that the state was spending far too much money at $291 million, plus another $120 million in interest on the bonds, that includes a free building for Jackson. They noted that, as a nonprofit, Jackson will not pay any corporate taxes to Connecticut in the future or any local property taxes to Farmington on the University of Connecticut Health Center campus. They said Connecticut needs to be cautious about spending more tax money in a state that recently had the largest tax increase in its history and has the highest per capita debt in the nation. They added that the deal is too lopsided to spend nearly $300 million for 300 direct jobs. Without architectural drawings, they said that the state cannot know the cost of the building, even though it has been set at $144 million for the structure and $47.3 million for scientific and technological equipment. The plan is designed to provide a jolt to Connecticut's economy, which has not created any net new jobs since the creation of the state income tax 20 years ago.
Sen. John Kissel, an Enfield Republican, said, "Waiting 10 years for 300 jobs is preposterous.''
Sen. L. Scott Frantz, a Greenwich Republican, said he was happy that Jackson intends to come to Connecticut, noting that some board members of Jackson live in his district in lower Fairfield County.
"I think it's just terrific that they're interested in Connecticut,'' said Frantz. "However, with a capital H, ... this is no ordinary economic development deal. We have to be very, very careful about putting this many resources into something with an unclear outcome.''
Frantz said the Jackson deal is moving so fast that it is like a locomotive barreling along at 200 miles per hour down the track.
A highly successful, millionaire merchant banker in Greenwich, Frantz is deeply familiar with venture capital and taking risks in the business world.
"The higher the risk, generally, the higher the reward has to be,'' Frantz said. "There is no provision for Connecticut or UConn to share in the fruits of their labor ... any kind of royalty sharing.''
"Don't go putting too much into something until you can really get your hands around the investment,'' Frantz said on the Senate floor. "Economic development is a passion of mine. I've been involved in it for nearly 20 years in the state of Connecticut. ... This will spur lots of jobs in addition to the ones that are going to be placed there by Jackson Labs. We don't know what that ratio will be.''
Frantz said on the floor that the normal multiplier in such deals is 5.7, but the job multiplier in the Jackson case is 10. But state economic development director Catherine Smith and others say that the multiplier in this case is actually 2.
"REMI models are great, ... but it's a bit of a black art, a black science,'' said Frantz, a longtime investor. Sometimes the model is correct, but "others fell flat on their face,'' he said.
Farmington will be competing against 19 other states that are trying to recruit bioscience companies.
"We're not the only ones at this. It's a highly, highly competitive field,'' Frantz said. "It's going to take a long time. It's 10 years before they have to be at 300 jobs.''
By comparison, for $20 million in state funds to NBC Sports, 450 jobs will be coming to Stamford in the next 10 months. Frantz attended the announcement of NBC Sports in Stamford and said it would create more jobs, in a faster way, than Jackson with 300 jobs over 10 years for a far higher price.
"I'm just wondering what the rush is,'' he said of Jackson. "I don't think we've done due diligence. Florida said no. A red flag went up. ... What kind of bang are we going to get out of it for our buck? There's probably one or two people who know something about the bioscience industry. ... But I can tell you about deal structures, and this is a venture capital deal.''
In addition, there will be no PILOT payments to Farmington because Jackson Lab is a non-profit and is not a state entity. Previously, some officials thought that Farmington would receive $700,000 in payments of lieu of taxes, but that will not happen.
Sen. Anthony Guglielmo, a Stafford Republican, said he had served on the board of a small bank, which was under pressure to lend money in order to get a rate of return. In the same way, he said that the state is under pressure to lend money to Jackson at 1 percent interest in a forgivable loan that will turn into a $291 million grant that includes a free building on state-owned land.
Since the deal was announced publicly only one month ago, Republicans complained bitterly that they have not had enough time to analyze the deal. In addition, despite constantly making statements about "transparency'' in government over the past 10 months, the Malloy administration has refused to release the letter of intent or the memorandum of understanding between Jackson and the state. Malloy's senior adviser, Roy Occhiogrosso, told Capitol Watch on Wednesday that the documents would not be released because they contain trade secrets. In the same way, Jackson did not release the documents when the institute was trying to open a similar branch in Florida.
Although Republicans said the process was a rush-job that was moving at the speed of a locomotive, a high-ranking Democrat begged to differ.
"This is not being rushed in any way, shape, manner or form. There have been enormous hours of due diligence performed by OPM or DECD,'' said Sen. Eileen Daily, a Westbrook Democrat who co-chairs the tax-writing finance committee. "We're not the negotiators. The governor was elected to negotiate. ... I would contend we are not rushing. It has had ample time. ... This is a time we need to take bold action. ... We have not rushed.''
Sen. Beth Bye, a West Hartford Democrat who previously served in the House of Representatives, said that 70 percent of venture capital investments in Connecticut are already in bioscience and 80 percent of the research dollars at the universities is in bioscience.
"Guess what? Jackson Labs is bullish on Connecticut,'' Bye said. "It's the right sector at the right time, and this is the right company. ... It's the right time. ... It's also the right company. This is not some fly-by-night. It has been in business since the 1920s. This is a major company. ... Are there some risks? Certainly there are some risks. But there is a lot of data behind these risks. We've heard of North Carolina and the Research Triangle. I don't think any member of the circle would say that has not worked out for North Carolina. ... Yes, the deal with Jackson Labs did not go through in Florida. The governor did not support the proposal.''
She added that other states will recruit Jackson if they do not come to Connecticut.
"If we don't welcome Jackson Labs in Connecticut, you can be pretty sure that Governor O'Malley will be picking up the phone this evening,'' Bye said.
Sen. Steve Cassano, the former Democratic mayor of Manchester, said that there were concerns about the deal before the now-successful Buckland Hill mall was constructed.
"The most difficult idea that we had to sell was the spinoffs,'' Cassano said. "I think we have the same situation today. ... You have to have a draw to get to step two.''
He compared the Jackson deal to the construction of Rentschler Field, Adriaen's Landing and the Connecticut Convention Center in Hartford that would not have happened without the votes of the state legislature.
"The euphoria in that building is unbelievable,'' Cassano said of the current atmosphere at the UConn Health Center as the employees assume that Jackson Lab will be coming there.
After Cassano finished, Sen. Leonard Suzio of Meriden stood up to say that he worked in biotech 25 years ago on the business management side and worked with some of the top scientists in the world as a leading edge company that was involved in human clinical trials on the AIDS vaccine.
"This was 25 year ago. We still don't have an AIDS vaccine,'' Suzio told his Senate colleagues, adding that the deal is "a lose-lose proposition for Connecticut taxpayers, no matter what happens.''
"It's important not to get carried away with emotions and euphoria,'' he said. "We have to be careful on how we dole out that money.''
Suzio researched the deal that fell apart for Jackson in Florida, including in Sarasota and Collier County in the state's southwestern corner.
"Florida is not new to this,'' Suzio said. "They've got some pretty impressive companies down there in the biotech field. ... If you go into a deal with all sorts of euphoria, you better be ready for the long haul.''
Noting that he attended a Republican caucus with state officials and DECD commissioner Catherine Smith, Suzio said he was "sorely disappointed and very alarmed'' that the Malloy administration showed "30 slides for $300 million.'' He said that Smith "was the point person on the deal who was making it up on the fly.''
"If that was the boardroom of a bank, she would have been asked to leave,'' Suzio said of Smith. "I got nothing but fluff, and that alarmed me. ... I expected her to be prepared, and she wasn't.''
At one point, Daily rose to interrupt Suzio and said, "We don't impugn the character of our state officials or each other.''
The Malloy administration soon released a 26-page, glossy brochure on JAX Genomic Medicine that outlined some of the details of the deal, including summaries of the developments at the Research Triangle in North Carolina, along with Florida and San Diego.
Like Frantz, Suzio questioned the job estimates and the multiplier that is outlined on page 8 of the 26-page brochure.
"Pardon my skepticism,'' Suzio said, adding that the job estimates are based on "a totally incredible assumption.''
He said that Jackson cannot be credited with every biotech job that is created in Connecticut over the next 20 years.
"Don't rush to judgement. Don't let your euphoria, your enthusiam, your emotions rule over your brain,'' Suzio said to his colleagues. "I worked in biotech for a while. I believe in it. ... I was so enthusiastic, two days ago, I sent a letter to the governor, offering him to put together a deal. Governor, maybe if you're listening, we can meet tonight.''
Suzio said that he and a friend laughed out loud when the Malloy administration said that the letter of intent between the state and Jackson could not be released because it contains trade secrets. He called it "a secret deal'' that senators were prevented from seeing.
"I thought we were talking about transparent government,'' Suzio said. "Redact all of the confidential stuff and show us the basics of the deal.''
He said it does not make sense that Connecticut will borrow money at 5 percent interest and then give a 1 percent loan to Jackson that is forgivable.
"I've never seen such a lopsided deal,'' Suzio said. "It's a one-way street. ... It's a no-win situation. We are putting all the risk-money on the table. ... I've never seen a deal in which one party takes all the risk and the other party gets all the benefits.''
In Florida, Jackson proposed a 10 percent royalty that Suzio said was outlined in the documents. As such, he said that Connecticut should get the same royalties.
"Why aren't Connecticut taxpayers entitled to that?'' Suzio said.
Sen. Edith Prague, a Columbia Democrat, noted that UConn Professor Fred Carstensen is delighted by the deal that is projected to change the trajectory of economic development in the state.
"It gives us hope - hope for the future,'' Prague said at about 4:30 p.m. Wednesday. "I am particularly enthusiastic about the personalized medicine. ... The cost of healthcare is out of control. This is one way in the future that we will be able to look at each individual and decide what is the best way to treat them, and that will be a huge development to control the cost of healthcare. If people like Fred Carstensen think the same way, it's got to be a good deal for the state of Connecticut.''
Sen Edward Meyer, a 76-year-old Guilford Democrat, disputed the notion that the Malloy deal was a rush to judgment. As a young man, Meyer said that he bought shares of Texas Instruments at $12 per share and later sold it at $247 per share - allowing he and his wife to use the profits to buy his first house.
"I remember my father saying, 'What is semiconductors? That is a foolish thing to do,' '' Meyer said, adding that his father told him to invest in General Motors.
Quoting Yogi Berra, Sen. Robert Duff, a Norwalk Democrat, said, "When you get to a fork in the road, take it.''
He added, "This is Connecticut. This is our sweet spot. ... Industry comes here because we have such a highly educated workforce. We're not the state that makes the 10-cent widgit. We could lose that to maybe a state down south. ... It's not just about Jackson Labs. My hope, my vision is we will see other companies in this industry come to Connecticut. ... Madam president, I do believe that we are at the fork in the road, and I do believe we should take it.''
Sen. Paul Doyle, a conservative Wethersfield Democrat who had been on the fence as he has on other bills, decided to support the Democratic Malloy because he wants to see another North Carolina-like Research Triangle in Connecticut.
"The easy vote is a no vote. That's crystal clear,'' Doyle said. "Do I like the pricetag of the bill? Absolutely not. ... If the risk leads to thousands of jobs, that's a victory. ... If this bill goes down today, Jackson Labs is not going to come to Connecticut. ... We're all going to be long gone before we see the potential benefits. When this governor is long gone, when we're long gone, that's when we're going to know whether this is going to be a success or not. ... It's a visionary vote. Twenty years from now, I could be proven wrong. ... I'm willing to take a risk. It's not a reckless risk.''
Dismissing the notion that it is a secret deal, Doyle said that the Republicans who are concerned about a secret deal should run for governor so that they can negotiate the deals in the future.
He added, "This governor, whether you like it or not, is elected.''
In Florida, the state had at least three deals that were more costly than the Jackson deal here, he said.
But Sen. Joseph Markley, a conservative Republican from Southington, said the Senate should not be voting on a deal that it does not have full knowledge of.
"I don't claim to understand investment strategies,'' he said. "The difference between risky and reckless is a matter of perception.''
He said that he trusts Frantz, who holds an MBA from Dartmouth College, and Suzio, who graduated with a degree in economics with a concentration in finance from the famed Wharton School at the University of Pennsylvania, the most on financial deals - and they are both against the Jackson deal.
"I'm not confident that I know the trajectory of the world enough'' to have confidence that the deal will work, he said.
Senate Majority Leader Martin Looney of New Haven said that state "cannot stand on the sidelines and watch the world go by. ... This is our time. This is our opportunity to do this. Timing is everything in these proposals.''
Looney noted on the Senate floor that Franklin Delano Roosevelt had three vice presidents during his tenure, and the shortest was Harry Truman - who went on to become president.
"Timing is everything,'' Looney said.
He noted that North Carolina had the foresight about 50 years ago to realize that it could no longer rely only on textiles, tobacco and furniture-building to run its economy. As such, the state decided to capitalize on its high-quality universities and decided to build the now-well-known Research Triangle.
Deputy Senate GOP leader Leonard Fasano of North Haven sought unsuccessfully to get the letter of intent between the state and Jackson.
"I was told that I could not have that letter of intent,'' Fasano said on the Senate floor. "The letter of intent sets out the basic framework, and then you do a contract'' with further details.
"I was told you cannot have it because it has trademark protection under FOI. I'm not asking how you raise the mice,'' Fasano said. "I'm asking what is the financial deal?''
At the same time, Fasano received details in writing from Malloy's chief of staff, Timothy F. Bannon, and he publicly thanked Bannon for those answers. But he still had questions remaining. The state will be paying about double the price of a building that size, he said.
"Can they sell the building? The answer, I'm told, is no,'' said Fasano, a lawyer who attended Yale University as an undergraduate. "Yes, I think it is rushed. For us, as legislators, we've known about it for two weeks. For this big a deal, without giving us the details, that's rushed. ... Can they build something that is a showplace as opposed to a research lab? I don't know. What protection do we have if they don't pay the guy who pours the concrete? I'm told there will be some protection - not negotiated yet.''
The bill is officially Senate Bill 1401, known as An Act Establishing The Connecticut Bioscience Collaboration Program.
Speaking last as part of the Senate tradition, Senate President Pro Tempore Donald Williams said, "Doing it six months from now, doing it six years from now, is not acceptable. ... With this legislation, Connecticut is leading and thinking big again. We were a world leader. We were part of the industrial revolution in the 1820s and 1830s. ... Today, we're in the midst of a new revolution, the revolution of advanced technology.''
He noted that the state of Massachusetts has invested $1 billion in bioscience, and Connecticut needs to step forward, too.
"In Florida, they're wondering: how did we lose Jackson Labs?'' Williams said in his wrap-up speech at about 6 p.m. Wednesday. "We have a remarkable opportunity. ... The projection of up to 6,000 direct jobs represents only those with the Jackson development'' and not all of the jobs throughout the state related to bioscience.
While the North is spending money on bioscience, states in the South has spent hundreds of millions of dollars to attract foreign automakers to construct factories for high-end cars.
"For too long, we have heard people talk down Connecticut,'' Williams said. "We are number one in the nation in terms of per capita income. ... We're 8th in the nation in terms of patents.''Lawrence Cook, a press aide for state Senate Democrats, questioned Republicans’ opposition to the Jackson bill – saying that the bill contained guarantees of job creation along with financial penalties if the company doesn’t deliver. Cook called it “a dichotomy” and “an irony” that the Republicans opposed the Jackson bill with its job-creation guarantees, while they favored the much-more-expensive jobs bill that did not carry any such guarantees of increased employment.
Separately, the House of Representatives voted at about 5:30 p.m. Wednesday on a bipartisan jobs bill that is designed to spend $516 million in borrowed money to help small businesses and create jobs. The vote was 147 to 1 with the only "no'' vote from Rep. Christopher Coutu, a conservative Republican from Norwich who is running for Congress in the 2nd District against Democratic U.S. Rep. Joe Courtney.
The Hartford Courant's Jon Lender reports that the original $516-million price tag on the jobs bill grew to $701 million Wednesday with a new report by the nonpartisan Office of Fiscal Analysis – which considered initiatives associated the bill when extended several years beyond the administration’s original two-year estimate. Paying that $701 million over 20 years through bonding, will cost a total of $1.07 billion including interest, the report said.
In the House on Wednesday night, lawmakers debated the Jackson bill for hours - not long after the measure was approved by the Senate.
"You don't have to be a lawyer to know what we are doing tonight is malpractice,'' said Rep. Richard Smith, a New Fairfield attorney.
Rep. Dan Carter, a Bethel Republican, said he had no regrets voting against the bill because it was "a pipe dream'' that is highly risky for the state.
"It's a bad investment,'' Carter said shortly before 9:30 p.m. Wednesday. "There's just no way to support a bill like this. ... Three hundred jobs is not worth $300 million, I'm sorry. ... I would be better off at the casino.''
But Rep. Jack Thompson, a veteran Democrat from Manchester, said, "If it's taking a risk, don't worry. We will succeed.''
Coutu said his background in finance tells him that the risks are quite high for the state. He compared the Jackson deal to the federal deal for Solyndra, the highly controversial company in an "exciting,'' cutting-edge industry that collapsed after receiving federal money.
"This is a risky proposition,'' Coutu said of Jackson. "It would be exciting to buy an 80-inch TV, but we don't buy an 80-inch TV because it's exciting.''
House GOP leader Larry Cafero of Norwalk fired off a series of questions about the deal. He compared the situation to 2007 when Lehman Brothers and Merrill Lynch were powerful Wall Street firms. By mid-September 2008, those firms were in huge trouble and Lehman Brothers had filed for bankruptcy.
"Guess what, folks? Stuff happens,'' Cafero said on the House floor.
"We could be pessimists and pick this to pieces,'' Rep. Patricia Widlitz, the co-chairwoman of the tax-writing finance committee, said during Cafero's early questioning. "I feel confident this is a risk very well worth taking.''
Widlitz said later that there are 400 different types of lung cancer, and patients could be treated on a personal level that is targeted at their specific need.
"I think it's off-the-wall exciting,'' Widlitz said.
Cafero at one point told the tale of meeting Jackson's newly hired CEO, Dr. Ed Liu, a geneticist who called Cafero at one point from his home in Singapore.
"I said, Dr. Liu, why do you want to be in Connecticut?'' Cafero asked. "How come you're not in Florida? ... I believed him. I believed him to this day that he wanted to be here.''
In the phone conversation to Singapore, Cafero said that Liu told him that he would work on the idea to give more flexibility for the state to have title to the building so that Republicans like Cafero would feel more comfortable with the deal. But 24 hours later, that was over and Cafero was told that the terms were non-negotiable.
Like Frantz, Cafero said the state just negotiated a far better deal with NBC Sports, which has pledged to bring 450 additional jobs to the south end of Stamford at the former Clairol hair coloring factory south of Interstate 95.
"When you juxtapose this with that, you say, 'I don't get it,' '' Cafero said. "We don't know what the hell we're voting on. That's what's scary. ... I want them here with all my heart. But you've got to work with us. Folks, stuff happens. Stuff happens.''
In his wrap-up remarks at about 10:30 p.m. Wednesday, House Majority Leader J. Brendan Sharkey said, "Great minds bring other great minds together. That is what this Jackson Labs deal signifies. ... Let's admit it. We've been burnt before in other programs, other deals. That is why there is a desire to insure - on both sides of the aisle, in good faith - that all of us will have some assurance that our financial investment is going to reap some rewards.''
He added, "We have to take a leap of faith. Six years ago, this chamber invested in stem-cell research. ... It was a seed that we planted six years ago. Earlier this year, this body and the Senate approved a bond package for BioScience Connecticut ... for exactly this type of research. Those were seeds that we planted. Those seeds we planted are exactly the reason why Jackson Labs chose Connecticut. ... This is the fruit that comes from those investments. Ladies and gentlemen, we need to harvest that fruit. ... Right now, this is the moment.''