Audit reveals inappropriate loan forgiveness and excessive tax credits by DECD
The Department of Economic and Community Development, which provides forgivable loans and low-interest tax credits to businesses, has been too lenient and generous, according to a new audit.
Small business, manufacturing and corporate loans and tax credits provided by DECD are linked to job maintenance and growth, but auditors found the ministry amended and canceled loans then. that companies were not meeting their hiring requirements.
According to the audit, DECD canceled $ 97 million in loans over a three-year period, including $ 1.7 million in forgiveness of loans for companies that failed to meet their recruiting targets and even reduced their workforce.
“DECD provided $ 1,719,219 in loan forgiveness that businesses would not have been entitled to under the original aid agreements,” the auditors wrote. “In 2 cases, the changes allowed companies to benefit from a loan discount for reducing their workforce.”
The auditors also found that DECD paid a company $ 1.5 million more than state law allowed under the First Five Plus program and awarded $ 49.4 million in funding. more in film production tax credits at Blue Sky Studios in Greenwich.
Disney-owned Blue Sky Studios recently announced it is shutting down and laying off more than 450 employees after receiving nearly $ 95 million in state aid between 2017 and 2019.
The DECD disagreed with many of the auditors’ findings, alleging that without offering a loan discount to these companies, the companies would likely have failed and the state would not be able to collect anything.
The department also argued that the nearly $ 50 million in film tax credits was provided under two film tax credit programs – the Film Production Tax Credit and the Film Tax Credit. tax for digital animation – and therefore were eligible under state law.
The latest audit is just one more example in many years that DECD’s loan programs have come under scrutiny for failing to meet the demands of job growth, shifting business lending into delinquency, over-granting loans and tax credits, and unduly canceling loans.
While the various business loan, grant, and tax credit programs have been used extensively over the past 12 years in an effort to grow Connecticut’s economy and attract businesses to the state, Connecticut’s economy has largely stagnated, and many incentives are geared more towards keeping businesses. to leave the state or to close.
However, bills submitted to the General Assembly that are supported by DECD Commissioner David Lehman would limit some of the state’s old lending practices.
Bill 6440 would establish a tax reduction program that would cap financial assistance for jobs, require employers to meet their professional goals before receiving tax cuts, and would not require additional bonding from the government. ‘State to help businesses.
A second bill – House Bill 6467 – would change Connecticut’s Small Business Express program to partner with private lenders to help businesses get loans.
Lehman testified that the Small Business Express program was never designed to be a long-term program, but rather to provide support to businesses in the aftermath of the 2008 recession.
Although Gov. Dannel Malloy’s administration has doubled grants, loans, and business aid, numerous studies have shown that public incentives for businesses have no effect on the state’s general economy. Connecticut has largely backed money to support its various business incentive programs.
Auditors also reported on a financial review process, program monitoring, and a loan of $ 150,000 to a company that never made a payment on its first loan. The first business loan was canceled.