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March 2, 2020

New Player, New Playbook: Can DECD’s new sheriff restore Hartford’s credibility with the business community?

David Lehman, Commisioner, Department of Economic & Community Development
By Michael C. Bingham

In December Gov. Ned Lamont named David Lehman, 42, of Greenwich to head the Department of Economic & Community Development — the state’s top economic post and point person to restore confidence in state government on the part of the business community — a group that under the Malloy administration had often felt like a pin cushion for policies that seemed uniquely crafted to drive them out of Connecticut. Lamont’s chose Lehman, a registered Republican, to add some Wall Street cred to his administration. His private-sector bona fides are unassailable: a 15-year career at Goldman Sachs, most recently as global head of real estate finance for the investment-banking behemoth. Lehman has made stabilizing the state’s fiscal situation, improving infrastructure, workforce development and retooling Connecticut’s economic-incentives approach to business attraction and retention the cornerstone of the Lamont administration’s new economic playbook.

What’s a nice Republican like you doing in an administration like this?

I spent 20 years in the private sector focused on financial markets and real estate. I’ve been a Connecticut resident for a little over 10 years now. Having seen the state’s economic performance and some of the fiscal issues that the state is trying to overcome, I wanted to see if I could help. I thought I could be useful to Gov. Lamont, so I raised my hand. At the time I didn’t know what DECD was or what it did — didn’t even know the acronym.

What was your understanding of what the challenge of this position was?

To assist the governor in getting Connecticut growing again. The three easiest metrics [by which to measure that] are GDP, income growth and job growth, with jobs and population being closely linked. The other thing we need to focus on in Connecticut is making sure growth is inclusive, because we have significant income disparity in the state.

When you meet with business people, what’s your elevator pitch about how things will be different now that there’s a new sheriff in town?

My elevator pitch is that we’re focused on improving the business environment [through] policies and initiatives that we think can grow the economy and grow jobs in the state of Connecticut. Lamont is the first businessman in 30 years to run the state. We also want to proactively market ourselves as a great state to do business in, and address some of the issues that we have to make it more welcoming to businesses.

On the other end of the conversation you’ve heard plenty of negativity and skepticism from business owners.

I visited over 100 businesses; we’ve done 10 roundtables with industry groups over the past year. In all those meetings, what I’ve heard, mainly, is four things: One, the fiscal situation of the state and the lack of tax certainty has been a big problem. You can’t encourage [private] investment if you don’t have that.

Tax ‘certainty’ on the side of those who pay taxes, or those who spend them?

Both. Whether it’s property tax, sales tax, individual income tax — the kind of grasp for revenue and inability to live within our means has been a big issue. The example I always give is that the state has raised income taxes three times in the past ten years.

The ‘temporary’ income tax of 1991.

That sends a real signal to individuals and businesses that are thinking of coming here, and they see the debt per capita and that we’re constantly looking for more revenue. We need to demonstrate that we can live within our means. That means spending within our means, and paying our bills as it relates to the [state employee] pension [obligations].

The business community has heard this song before.

We need to prove it. Ultimately the perception of Connecticut is going to change. Just look at Massachusetts: 25 years ago it was ‘Taxachusetts.’ Now, Connecticut and Massachusetts have basically switched roles. There’s a real playbook [in Massachusetts]. They’ve done smart investing in their physical infrastructure. They’ve focused on place, the density of their cities, the innovation ecosystem with all the higher ed they have. We need to run that playbook.

Gov. Lamont talks about our ‘crumbling infrastructure,’ but most people drive to work every day without anything crumbling on them. As a result many see that argument — to ‘fix’ something that isn’t really broken — as a pretext for imposing tolls — a new tax. What’s ‘crumbling’?

It’s hard to generalize here. There are certain bridges and tunnels in the state that have deferred maintenance and repair. With rail, it takes longer now than it did 100 years ago to get from [New Haven’s] Union Station to Grand Central. The New Haven Line is the busiest commuter line in the country — that’s such an asset of the state of Connecticut.

If commuters could get from New Haven to Grand Central in an hour…

Think about what a value proposition that would be — it would make the Northeast look more and more like one big city. That would be transformational.

One of the keystones to the administration’s new economic-development plan is targeting key industries — financial services, life sciences and renewable energy — for growth.

The big thing you’re going to see in this plan is a greater focus on places than on specific industries — places like New Haven. Life science and bioscience are clearly one of the strengths of [greater New Haven]; all the IP and all the patents that come out of here, and the idea-generation — how do we commercialize that and make sure it stays here? So there will be a major focus on building a bigger innovation network. There will be a big physical [component] of that as well. The question is: How do we really designate New Haven as an innovation hub for life science — and build the physical infrastructure as well as the ability to commercialize that?

What’s the answer?

It starts with real estate. Creating a physical location is a big part of succeeding. We need to have in Connecticut to attract business and to encourage [graduates] from Yale or UConn or Southern to stay in this area. We want to make sure we’ve got the right ecosystem, the right office space, that’s there’s access to capital, to turn their ideas into successful companies. We need to build up the density of the ecosystem.

You talk about wanting to grow the state’s cities. Why — and how?

There’s been a de facto segregation in Connecticut for generations. Our cities have higher unemployment, lower incomes and much higher poverty than the state [average]. From a public-policy perspective that’s something we need to address. We want the people in the cities to succeed, and we can create higher incomes and better-paying jobs for those people. That’s going to help from a housing perspective, too. So as we get better jobs in our cities and raise incomes, rents will rise, too. In successful cities, that’s what they’ve done. New York used to be a big, scary place as well. That’s why this year we’re introducing legislation that will incentivize companies to create more high-paying jobs.

The most important element of the Massachusetts ‘playbook’ is Boston. But we don’t have a Boston, and New Haven is not going to become Boston.

We need to run their playbook in the Connecticut way. We’re not going to have Boston. But the value proposition is, can we deliver 80 percent of what Boston can deliver in terms of amenities at 50 percent of the cost — with 50 percent less traffic? To me, that’s compelling. At some point could New Haven have 300,000 or 400,000 people? I realize that’s very ambitious, given the headwinds to growth in the state. But we need to think like that. We need to attract that kind of development and density — then young people are going to come here.

Even if we’re not Boston, most people at this point accept that New Haven is leading the pack among the state’s cities in terms of economic dynamism. What’s the approach to bring the state’s other cities along?

Objectively, where you see most of the development and job growth right now is New Haven, and also Stamford. Each of the [remaining Connecticut] cities needs to look at their respective strengths and figure out where they want to define themselves as innovative areas. To look at Waterbury and Bridgeport, for example, you’re starting to see some of that same [revitalizing] activity — cleaning up brownfields sites, conversion to residential, more densely populated downtowns...We want to be sure the state’s doing everything it can to help those real-estate investments, with an emphasis on innovation. That’s going to be critical in all our [cities] to compete for jobs.

What would you tell a CEO of a company looking to expand or relocate why he should consider Connecticut?

It depends on the industry. If you’re in manufacturing, Connecticut has a density of manufacturing employers that’s twice the nation[al median] — five times greater if you’re in aerospace and defense. You have an unsurpassed quality of life, great health care, great education. From a fiscal standpoint the state is making significant improvement — and you’ve got the first businessman in 30 years in the Capitol. If you come to Connecticut you’re going to get the state on the upswing. We don’t want to try to compete on costs. That’s not going to be to our advantage — except maybe versus New York. The [Connecticut] value proposition is the density of the ecosystem, coupled with all the other benefits that Connecticut has.

Workforce development: Everyone talks about it but no one seems able to move the ball.

This starts at the K-12 level. We’ve always had great education, but making sure that our workforce continues to be top quartile and evolves the changing needs of business is really critical. We need to do a better job retaining Connecticut residents. The whole Northeast is facing that demographic headwind. Population growth in the Northeast is much lower than in the rest of the country, and you have more outmigration. With manufacturing jobs, we need to do a better job of letting eighth-, ninth-graders know the appeal of these jobs. For 40 years you’ve seen manufacturing employment go down significantly, so the [education and training] infrastructure just wasn’t there [any longer]. So a lot of what the focus is is making sure there’s awareness and the right school and training programs to keep Connecticut residents here for those manufacturing jobs. [In manufacturing] you don’t need a bachelor’s degree to succeed and make a good living. 

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