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    Local Columns
    Tuesday, May 07, 2024

    Groton should reject Gov. Ned Lamont's corporate welfare for tax-free data centers

    A map of the parcels for a proposed data center near Interstate 95 in Groton. (Courtesy of the Town of Groton)

    Gov. Ned Lamont's rush last year, under the guise of an emergency, to lavishly subsidize data computer processing centers, exempting them from sales and local property taxes, was based on a bogus premise.

    Lamont's senior economic adviser, David Lehman, a former Goldman Sachs executive, hatched the idea after some legislator in New Jersey, a state full of Wall Street data centers, had proposed a transaction fee on the centers that Lehman decided was going to make them all want to decamp for Connecticut.

    So Lehman and Lamont quickly twisted Connecticut lawmakers' arms, and they passed a bill, under emergency provisions with no committee review or public hearings, to exempt new centers from Connecticut taxes.

    Legislators obediently passed the bill at head-spinning speed, faster than they've ever done anything to help hardworking Connecticut taxpayers, and Lamont promptly signed it.

    The thing is, New Jersey never imposed that new tax, and there was no emergency at all, no reason for the centers to suddenly flee to Connecticut and no reason to shut the public out of the legislative discussion here.

    Of course, this can't help but remind me of Lamont's deputy budget chief suggesting no-bid contracts for school construction work under the guise of emergencies, contracts that now seem to be part of an FBI investigation.

    So Groton taxpayers should be aware that a new proposal for a tax-free data center — the town already approved a similar deal — is pending, with a public forum on the plan scheduled for Thursday night.

    The "emergency" legislation promoted by Lamont allows for the municipality to have a final review and negotiate a host agreement.

    If not for a few sober voices on the Town Council, Town Manager John Burt would have already convinced councilors to ink a deal without any public input. The developer wanted it done by March 8.

    It's an emergency. Hurry. Hurry.

    It turns out another ugly component of this love fest for data centers, which, by the way, don't employ a lot of people or generate much other economic development, is that they want to make private deals for discounts on the rates they pay for electricity. They use a lot.

    That's why — hurry, hurry — they are rushing to communities like Groton, with local public utilities that can be intimidated into making sweet deals.

    In fact, Groton City Mayor Keith Hedrick, de facto head of Groton Utilities, wrote to town councilors to say they already have negotiated a special electricity price for the proposed data center.

    He responded promptly to an email asking for the terms of the pricing deal, saying he would keep me posted on progress in providing requested information.

    Someone should ask at the public hearing Thursday night about the electricity deal.

    My guess is Groton officialdom will claim some Freedom of Information Act exemption and refuse to tell the taxpayers who pay full fare for their electricity how much of a discount on electric rates they are offering to the out-of-towners proposing a tax-free data center.

    In Groton, apparently, just the little people pay taxes and full fare for their electricity.

    The host agreement, which the town manager is asking town councilors to approve, provides some annual fees in lieu of taxes, from $500,000 to $1.5 million, depending on the size of the buildings. It's a pittance compared to what would be due in taxes on buildings full of tens of millions of dollars' worth of computers.

    Of course, the fees in that instance are contractual, not like taxes, for which there is an established and simple legal procedure of liens and foreclosure for the town to use in the event of nonpayment.

    Indeed, a principal of the entity proposing the new center, a legal entity formed only in December, was the head of a company that proposed a data center in Montville and which is now in a lawsuit over a $33 million claim.

    I know a lawyer in town who has done some research on that lawsuit and its many tendrils, and I can suggest none of it bodes well for a proposal by anyone connected with the entities in those messy legal proceedings.

    Groton taxpayers also might remember that the last big proposal in town, the former Mystic Oral School, endorsed by the same town manager, who downplayed the fact that the developer had pleaded guilty in New York to giving bribes, is now headed toward an expensive lawsuit.

    It's certainly worth noting that the companies that have proposed data centers in Groton have never built a data center. They look more like real estate speculators to me.

    This is the kind of investment we get in Connecticut, where economic development is plotted by a governor who takes his advice from a former investment banker, one who eschews public participation and seems to cater to anyone in an expensive suit.

    This is the opinion of David Collins.

    d.collins@theday.com

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