Foley-Somers clarification: Some state help for business is OK

In last Sunday's column, I suggested Heather Somers, Republican candidate for lieutenant governor, could best address speculation about how her business benefited from state aid - and whether such state help is even consistent with the GOP platform - by candidly answering all questions about it.

This past week she did just that, sitting down Thursday with several reporters and editors here at The Day for more than an hour.

"I'm here to be an open book and fully disclose whatever it is you all want to know because I have nothing to hide," she told us.

She came across as a person with genuine pride about helping build a company that has utilized innovative technology to heal difficult wounds, while growing jobs in the economically distressed village of Willimantic in northeast Connecticut. The Groton town councilor, now under the microscope that comes with running for the second highest office in Connecticut, expressed hurt that this success story could be a source of campaign controversy.

The reason that it is an issue, at least from my perspective, is that Republican gubernatorial candidate Tom Foley has been highly critical of what he sees as the corporate welfare policies of the man he hopes to unseat, Gov. Dannel P. Malloy.

In 2000, Somers and her two partners benefited from state assistance. Whether it amounted to corporate welfare is a matter of opinion and perspective. I don't consider it such, but some pure free-market conservatives don't feel there is any role for investment of taxpayer dollars into private companies. The market, not government, should be betting on potential winners and losers, goes that argument.

Somers and her partners, she explained, landed a $1 million equity investment from the Connecticut Development Authority, later to become Connecticut Innovations. The CDA split its investment, $500,000 for semiconductor technology development, $500,000 for the wound-healing technology, with the state agency expecting the creation of 100 jobs.

The semiconductor operation would fail, costing the state its investment, an outcome Somers attributes to the economic aftershocks of the attacks of Sept. 11, 2001. But a dressing for wounds, called Hydrofera Blue, proved successful, though never hitting the job goals initially envisioned.

Two years ago, with the product patent within a few years of expiring, the partners sold the business to wound-care company Hollister Inc. Connecticut Innovations signed off on the deal, getting a $475,000 return on its initial investment, plus collecting a $10,000 penalty because job-creation goals were not met. A sale provision requires keeping the company in Connecticut for at least four years.

While simple math points to a loss - a $1 million state investment generating a $475,000 return - Somers noted the other benefits, including creation of more than 40 jobs, the tax revenues those jobs generated, and the ripple effect in the economy, collectively making it a great return on investment.

"(Connecticut Innovations) considers this a success story, even though it appears no wants to believe that, it is the truth," Somers told us.

Calling it proprietary information, Somers said she could not disclose the sale price, but said she received only a $200,000 return on her own equity investment.

Somers said state investment in such small start-up companies with growth potential "is exactly what we have to do to change the course of our cities."

So why the harsh criticism by Foley of Malloy's efforts to use state aid to grow businesses and keep them in Connecticut?

At his first post-primary conference with Somers, Foley sought to draw the distinction.

"I'm not against incentives for businesses that are properly conceived and administered. Many of the incentive programs the government has offered, long before Governor Malloy, I support. But the First Five program and what I call corporate welfare is when you are merely bribing businesses to stay here who are being driven out because you are anti-business - that I'm against," he said.

That's a nuanced point that could prove difficult for Foley to make in the midst of a campaign, sort of like Mitt Romney trying to explain why Romneycare in Massachusetts was OK, but Obamacare a scourge on the land.

The fact is, the approach demonstrated by the investment in Somers' company can help revitalize Connecticut cities, but it remains unclear where Foley wants to draw the line in providing such state help.

Paul Choiniere is the editorial page editor.

Twitter: @Paul_Choiniere


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