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Tax Breaks Sealed Deals On $369M In New Projects

By DIANE WEAVER DUNNE, Hartford Business Journal Staff Writer

April 14, 2008

When the two worldwide insurance companies with headquarters in Hartford needed to expand their operations, state and city officials stepped up with attractive tax breaks, helping to close deals on $369 million in new construction and office renovations.

On April 22, Aetna will open a new 14,000-square-foot customer center at its Farmington Avenue headquarters, thanks in part to a tax deal that partially offsets construction costs on its $219 million in new construction in the city.

In addition to the customer center, Aetna plans to soon begin demolition of its parking garage — visible from Interstate 84 — and replace it with a 1,200-space, modern parking facility. The company also recently completed construction of a 1,400-space employee parking garage on Flower Street.

Nearby, on Asylum Avenue, The Hartford Financial Services Group recently got the nod from the Hartford City Council for a seven-year tax-fixing agreement to help lower its $150 million construction and technology equipment investment costs.

The Hartford plans to build a new 31,725-square-foot data center and extensively renovate 106,200 square feet of office space at its headquarters.

As other states circle the state’s insurance sector, ready to swoop up the highly skilled insurance and financial services jobs, state and city officials have proactively kept them at bay.

In addition to offering tax incentives, state lawmakers are currently considering a bill that would substantially lower the 1.75 percent insurance premium tax rate to stay competitive with other states, such as Iowa, Nebraska and New Hampshire, that have already cut their premium tax rates.

“While all jobs are important, these are good paying, highly skilled jobs,” said Christopher Cooper, spokesman for Gov. M. Jodi Rell. “Attracting and retaining our strong insurance and financial services base is one of the state’s priorities.”

Aetna was founded in Hartford in 1850 and The Hartford was founded in its namesake city in 1810.

Seven-Year Deal

If a tax break results in multimillion dollar investments and a long-term commitment by an insurer, it’s the right thing to do, said Hartford Mayor Eddie Perez.

“This is good news for the city of Hartford to keep those competitive employers, good quality jobs in the city,” Perez said.

“The city is still in a very competitive situation,” he added. “The Hartford has a choice to locate outside the state, city and country.”

The Hartford also operates offices in Japan, Brazil, Ireland, England, Canada and throughout the United States and generated $25.9 billion in revenues in 2007.

The tax-fixing agreement requires The Hartford to make its $150 million investment in Hartford before 2012.

Based on the city’s current mill rate, the tax deal is expected to save the financial services company $13.6 million by phasing in tax assessments on the construction of its new data center and its $100 million in renovations.

The agreement also includes a reduced tax assessment on information technology equipment to be housed in data center, said Shannon Lapierre, a spokeswoman for The Hartford.

Lapierre said the company is consolidating six of its data centers into two locations: one in Hartford and one in Denver.

“The Hartford demonstrated to us that they needed the [tax] support in order to make the investment at their headquarters in Hartford, said Mark McGovern, the city’s acting director of development services.

McGovern noted that the company was also considering sites in Pennsylvania, Minnesota, New York and other places in Connecticut for its new data center.

Aetna’s tax deal was struck with the state, not with the city. It exempts the company from paying sales tax on construction materials. Aetna expects the tax deal to save the company up to $6 million.

Fred Laberge, an assistant vice president at Aetna, pointed out that the new customer center, which brings representatives from about 200 client companies to the city annually, translates into a small boost to the city’s restaurants and hotels.

Previously, the company’s service center was located in Middletown.

Aetna, which employs about more than 7,500 employees in Hartford and reported revenues of nearly $28 billion in 2007.