Economic Development, Malloy Jobs, Malloy, UConn Health Center
One key question in the Jackson Laboratory deal has finally been answered.
Courtesy of CTMirror.org
CTMirror’s Keith Phaneuf has a very enlightening story today titled: Jackson lab debate pits costs against jobs.
Although Republicans have mostly agreed to the elements of Malloy’s “Job’s Initiative” that will be voted on in tomorrow’s special session, Democrats, who will be voting to give Jackson Laboratory $291 million in state subsidies, continue to accuse the Republicans and others who raise questions about this $1.1 Billion bioscience initiative as being anti-jobs.
Governor Malloy has consistently said the project is a winner and, as his chief advisor recently put it “this is the best thing to happen to Connecticut in a long time.”
As proof Governor Malloy has said that “for every $1 the state is spending on the project, Jackson Laboratory will spend $3”
The Malloy administrations pitch has been that for only $291 million Jackson Labs will spend $809 million and Connecticut will reap the benefits of 300 Jackson Lab jobs in the next ten years, 660 Jackson Lab jobs in the next twenty, “more than 4,600 bioscience jobs”, 2,000 additional local service and retail jobs and 840 temporary construction jobs. That equates to over 7,400 jobs.
(On a side note, the state of Connecticut will have to borrow the $291 million to actually come up with the money so the total cost to taxpayers, after paying back the money with interest will really be about $410 million. As the CTMirror reports, Connecticut’s Commissioner of Economic and Community Development explained “We’ve never included the debt service” in describing state’s contribution to the project)
Regardless, the Malloy administration argues that partnering with Jackson Laboratories will create over 7,400 jobs and the Commissioner says even that number is conservative.
Speaking for the Democrats and in defense of the project, State Senator Gary LeBeau told the CTMirror that the Republicans are being short-sighted by simply looking at the amount of public versus private investment.
As Senator LeBeau puts it – “It’s like we’re planting a tree in the woods and they’re asking ‘How much can I sell the lumber for if I chop it down in 20 years? What they should be asking is ‘How many seeds will that first tree produce and will we be looking at a grove in 20 years?'”
An impressive analogy if I’ve ever heard one.
But truth be told every person I’ve talked to (including Republicans) believe that Connecticut should build a strong presence in bio-science. The fundamental questions have been the same since the day Malloy announced the Jackson Laboratory Deal.
(1) Is Jackson Laboratory the right partner and (2) is this the right deal for Connecticut?
Jackson Laboratory is definitely a “player in the genome field” but there are a number of other players as well.
As I wrote in my CTNewsjunkie commentary piece (Genomes: The New Plastics), the Malloy administration has said that Jackson Laboratory’s $809 million investment will come from a “combination of federal grants, philanthropy and service income”.
As of now Jackson Laboratory’s primary revenue is from the sale of mice. In fact, the sale of mice made up about two-thirds of its FY2010 revenues of $192 million.
Their revenue from selling mice was up about 17% in just the last year while their government grant support actually fell. The same pattern was true from 2008 to 2009 as well. Mice sales up, grant support down.
On the philanthropy side, Jackson Laboratory collected about $3.7 million in private donations in 2009.
And now, the day before the vote will take place, we learn that Jackson Laboratory’s $809 million investment is really their expected operating costs over the next 20 years.
Have our elected officials done their due diligence on this project?
Perhaps the best explanation is that in a world in which taxpayers pay tens of millions of dollars to companies like Cigna, ESPN, TicketNetwork, RBS and now NBC Sports to come or stay in Connecticut, this $440 million is the cost of buying the ticket that could win us that big Lotto Jackpot we want and need so much.
Economy, UConn UConn Health Center
Thanks to CTNewsjunkie for posting my commentary today. – http://www.ctnewsjunkie.com/ctnj.php/archives/entry/op-ed_genomes_the_new_plastics/
I know it’s only $291 million (well about $550 million since it is borrowed/bonded money) but I thought there were a few questions we might want to explore before we hand over the money.
Mr. McGuire: I just want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.
Or in our case, it is Mr. Malloy and the word is Genomes
Who could be against genomes? We need jobs and the study of genomes will create jobs. The only question is where and when.
On Thursday, October 20, 2011 the General Assembly will be holding a public hearing on Gov. Dannel P. Malloy’s plan to entice Jackson Laboratory to build our economic bridge to the 21st Century.
The legislative hearing is little more than a procedural step on the way to breaking ground. Democratic leaders have already lined up the votes, editorial boards are singing its praises and the only remaining question is whether some Republicans will or will not join their Democratic colleagues to support Connecticut’s share of this $1.1 billion project.
According to Malloy, Jackson Laboratory “will commit $809 million toward the $1.1 billion project, through a combination of federal grants, philanthropy and service income, while the state of Connecticut will commit $291 million to the project, $192 million in a construction loan, and another $99 million in research partnership participation.”
As Malloy’s office has noted the state’s commitment would equate to $1 for every $3 of private money spent by Jackson Laboratory.
And the result of this massive investment would be jobs!
According to Malloy’s Commissioner of Economic and Community Development, Jackson Laboratory will create 661 direct jobs over the next 20 years and spin-off companies will create another 4,000 bioscience jobs. All that economic activity will also lead to more than 2,000 new retail and service jobs in the surrounding communities.
Some Republican legislators say they have reservations or questions about the project but Roy Occhiogrosso, Malloy’s chief adviser was quoted as saying that legislators “have been given plenty of specifics on Jackson Labs” and is seems that Republicans “are bending over backwards to find a way to say ‘no.’ This is the best thing to happen to Connecticut in a long time.”
I don’t know what concerns Republicans may or may not have. Genome research is, and will continue to be, a major economic force. Putting aside the fact that the Malloy administration has already made massive budget cuts to UConn and more are on the way, there is no logical reason that Connecticut’s public research university can’t play a major role in genome research in the years to come.
In my mind the question is whether Jackson Laboratory is the right partner for Connecticut and whether this particular “deal” will work or makes sense.
Hopefully Thursday’s public hearing will answer a few of the following questions.
1. Jackson Laboratory is supposed to put up $809 million in funding for this project?
That’s a lot of money and it is certainly appropriate to ask where that money will be coming from. Presently Jackson Laboratory’s primary revenue is from the sale of mice. In fact, the sale of mice made up about two-thirds of its 2010 revenues of $192 million.
Apparently Jackson Laboratory is very good a growing mice. Revenue from selling mice was up about 17 percent in just the last year while government grant support was down. According to the company’s financials and auditor’s report, the same story was true from 2008 to 2009 as well. Mice sales up, grant support down.
The Malloy administration has said Jackson Laboratory’s investment will come from a “combination of federal grants, philanthropy and service income”. Last year the company’s gross operating profit appears to have been in the realm of about $20 million.
2. Can federal grants be a major source of funds for this project?
Jackson Laboratory appears to have an impressive record of getting federal grants. Three weeks ago the Bangor Daily news reported that “The Jackson Laboratory has received a $24.6 million federal grant to continue operating the world’s largest database for genetic information on laboratory mice that are key to human medical research.” According to media reports “The five-year grant from the National Institutes of Health will provide funding for a program, known as the Mouse Genome Database, which directly employs 35 people (at the company’s facility in Maine.”)
It also seems that Jackson Laboratory understands how Washington works. Over the last decade it spent $650,000 in lobbying fees to a $10 million-dollar-a-year lobbying firm that now goes by the name of K&L Gates. It is never quite clear the connection lobbyists play in things, but before earmarking was prohibited Jackson Laboratory did get one of Maine’s Senators to earmark $1.6 million to the company from the Defense budget for Translational Research for Muscular Dystrophy. Of course, one assumes that Senator would want that money to be spent exclusively in Maine.
3. Will Connecticut’s $291 million investment really create that many jobs?
There is no question genome research will create jobs in the years to come. Dr. Edison T. Liu, Jackson Laboratory’s new CEO has assured people in Maine that that the new facility in Connecticut would “drive both research funding and laboratory mouse sales, thus creating more jobs here in Maine.” At the time, the new CEO pointed out that since the company opened their office in California 11 years ago, they have added more than 300 jobs in Maine and 125 in California.
When Jackson Laboratory was down in Florida hunting for state investment, a state Senator there told his colleagues that the $710 million dollar plan what would bring 420 high paying jobs to Florida in the first year and within ten years would account for more than 7,500 new jobs in the region.
4. New York City
And finally, we all know Connecticut seems to be constantly engaged in a battle with New York City to attract and keep jobs here versus there (note the recent massive commitment of taxpayer funds to get the Royal Bank of Scotland to agree not to lay off as many people in Stamford as they move more and more of their operations to NYC).
While undoubtedly it is a very different situation altogether, Connecticut legislators should inquire about New York City Mayor Michael Bloomberg’s plan to fund a major new “Applied Sciences Campus” in the City.
Bloomberg is supposed to announce his plan by the end of the year and apparently one of the strongest proposals comes from New York University which has submitted a plan that includes the New York Genome Center, Albert Einstein College of Medicine, Columbia University Medical Center, Memorial Sloan Kettering Cancer Center, Mount Sinai School of Medicine, Rockefeller University and, none other than Jackson Laboratory.
It will be interesting to see which questions will be asked and answered during Thursday’s public hearing or if the desperation for job creation will be enough to convince legislators to simply vote knowing genomes are today’s plastic.
Malloy, State Legislature, UConn Malloy, State Legislature, UConn Health Center
“Despite claims the bill had been “rail-roaded” through the legislative process, the House gave final passage early Wednesday morning to a measure that approves more borrowing to renovate the University of Connecticut Health Center. It passed 97-45.” (CT Newsjunkie)
Another billion dollars… including a bizarre $203 million dollar special deal in which a private entity will build a new surgery center for UConn on state land and then UConn will be forced to lease the building…even though UConn already has a surgery center…even if UConn determines that another major surgery center is not economically feasible. (Connecticut already has 143 surgery centers in the state).
At least Mark Twain said “Get your facts first, and then you can distort them as much as you please”
But let’s face it… it takes time and effort to get the facts.
And who has the time for that?
You can read more about the debate on the Health Center bill, but – “Spoiler alert” – you won’t find any facts about how the project will really work.
Oh and in case you were wondering, no one raised the question about who is this bill for? (Someone or some organization is going to make a whole lot of money on this one).
But at least Hartford areas hospitals will get $30 million in extra state funds – the price needed to buy them off and keep them quiet on the legislation.
As part of this project, $30 million of this money would be diverted to the UConn Health Network Initiatives to be used in part for (1) A simulation and conference center on the Hartford Hospital campus that uses new technologies and simulated care settings to educate and train healthcare professionals; (2) A Connecticut Institute for Primary Care at the Saint Francis Hospital and Medical Center; (3) A new cancer treatment center to be built at the Hospital of Central Connecticut in New Britain and (4) Patient room renovations at Bristol Hospital.
Read more at:
CT Newsjunkie: UConn Health Center Expansion Receives Final Passage: http://www.ctnewsjunkie.com/ctnj.php/archives/entry/uconn_health_center_expansion_receives_final_passage/
CT Mirror: Malloy’s UConn Health Center gets final approval on the fast track: http://ctmirror.org/story/12865/malloy-uconn-health-center-house-vote
Hartford Courant: House Approves UConn Health Center Expansion: http://www.courant.com/news/politics/hc-uconn-health-center-house-0608-20110607,0,7414602.story
Malloy, State Legislature, UConn Malloy, State Legislature, UConn Health Center
(Cross-posted from Pelto’s Point at the New Haven Advocate)
A new surgery center for UConn…when they already have one… ?
So who is it that is going to make a lot of money on Malloy’s Health Center Plan?
For the last two weeks, legislators have been complaining about the Malloy Administration’s demand that they adopt the Governor’s UConn Health Center Initiative without having the time to actually review and investigate the proposal. When it went before the Finance, Revenue and Bonding Committee legislators were required to vote even before the legislature’s own Office of Fiscal Analysis could prepare a memo on the project’s fiscal impact.
Nonetheless, the State Senate has passed SB1152, Malloy’s $864 million mega proposal, pretty much along party lines and the House will follow suit in the next fifty eight hours (before the legislative sessions ends).
Senate passage came only 15 days after Governor Malloy released his plan to renovate and expand the University of Connecticut Health Center while turning Connecticut into one of America’s premier Bio-Science research centers.
According to Malloy, the project would create 3,000 construction jobs annually from 2012 through 2018 and 16,400 full time jobs once the project is complete, which in turn will generate a $4.6 billion increase in personal income by 2037.
While some legislators and others have raised concerns or at least questions about the project, proponents have sung its praises.
A Hartford Courant editorial called it a “bold stroke, one designed to carve out a bigger share of the growing bioscience business for Connecticut while stabilizing the University of Connecticut Health Center’s finances.” Other newspapers have taken a similar approach. The New Britain Herald, for example said “We like Malloy’s plan because of its broader vision.”
On the other hand, editorials in both the Journal Inquirer and New Haven Register have identified major problems with the plan and columnist Kevin Rennie had a must read column in Sunday’s Hartford Courant (link below)
Malloy’s nearly $1 billion initiative would be paid for with $254 million in new state bonding, which would come on top of the $338 million in bonding that the Legislature approved last year for the UConn Health Center.
UConn would be required to come up with an additional $69 million on its own and the final $203 million would come from a new, privately owned surgery center to be built at the Health Center. UConn would be required to sign a long-term lease with the private entity thereby assuring them of the revenue stream to pay back their investment.
As part of this project, $30 million of this money would be diverted to the UConn Health Network Initiatives. These dollars would be used to help protect other area hospitals from any competition that might develop from the enhancement of the UConn Health Center.
These taxpayer funds will be used in part for (1) A simulation and conference center on the Hartford Hospital campus that uses new technologies and simulated care settings to educate and train healthcare professionals; (2) A Connecticut Institute for Primary Care at the Saint Francis Hospital and Medical Center; (3) A new cancer treatment center to be built at the Hospital of Central Connecticut in New Britain and (4) Patient room renovations at Bristol Hospital.
But that $30 million is “chump change” compared to the state funds that will flow to the private entity that is building the new ambulatory/surgery center.
The legislation requires the University of Connecticut to construct a “new ambulatory care center through debt or equity financing obtained from one or more private developers who contract with UConn to build the center.”
Let’s face it. Someone out there is going to be making a lot of money on this deal.
The only question is who?
In return for putting up $203 million for a new building in Farmington, the private developer will have the ultimate tenant, the state of Connecticut, for life.
The law REQUIRES UConn to lease the building from the private developer (contract details to be worked out at a later date).
Even if the UConn Health Center decides it doesn’t want or need the space UConn will be on the hook.
Even if market factors beyond UConn’s control make a surgery center unprofitable, UConn will be on the hook.
And that means Connecticut taxpayers will be responsible for paying the private developer no matter what.
Talk about removing the risk from a private investment.
A public-private partnership where all the risk is carried by the public.
And to make the situation even more suspicious, the legislation is moving so quickly that legislators didn’t have the time to examine whether a new surgery center is really needed considering Connecticut already has 143 surgery centers including many in the Hartford area.
And more even more incredible is that legislators are voting on this plan without being aware that the UConn Health Center already has a surgery center that was created through a public-private joint venture back in 2002.
According to their own website “The Medical Arts and Research Building (MARB), which opened in 2005, added to the campus a four-story, 103,663 square-foot, facility… It is also home to the Farmington Surgery Center, a multispecialty outpatient surgery center.”
Back in 2002, the University of Connecticut Health Center applied and received permission from the Connecticut Office of Health Care Access to create the Farmington Surgery Center.
The Health Center and Health Resources International (HRI), a private surgery center company joined together to create the Farmington Surgery Center, LLC. As part of their application to the state the partners committed $5.6 million to create the new surgery center.
While the Office of Health Care Access eventually approved the creation of the Farmington Surgery Center it blasted the applicants saying “The concept of a free-standing ambulatory surgery center is a sensible solution to JDH’s [John Dempsey Hospital’s] need for additional space and equipment in its surgical suite. However, none of the information related to control by the UCHCFC, [UConn Health Center Finance Corporation] the impact on JDH, the continuity of care, the financial feasibility of the project itself had been developed. At the time of the application’s submission, critical agreements between the Applicants had not yet been executed. While the late file submissions have alleviated some of OHCA’s concerns, OHCA should not have needed to conduct 4 hearings and accept numerous late file submissions to have adequate information”.
Connecticut’s Office of Health Care Access went on to rule “the Certificate of Need application of the University of Connecticut Health Center Finance Corporation, on behalf of the John Dempsey Hospital, and Health Resources International, LLC, d/b/a Farmington Surgery Center, LLC is hereby approved with conditions.”
But just four years later, in 2006, the UConn Health Center went back to the Office of Health Care Access for permission to change the ownership structure of the Farmington Surgery Center.
Apparently, as a result of financial and operational problems, UConn moved to “consolidate its ownership of the Farmington Surgery Center (“FSC”) at a total capital expenditure of $1,892,500.”
At the time, just over 25% of the Farmington Surgery Center was owned by Health Resources International (HRI) and three physician groups. UConn’s explanation about their decision to purchase back control of their surgery center was that it would allow the surgery center to “operate under the hospital’s acute care hospital license; bill third-party payers at a more favorable provider-based rates; and reduce the professional liability expenses and exposure as a result of the facility being covered under JDH’s self-insured medical malpractice plan.”
It turned out that UConn didn’t actually need state agency approval for this change so after paying out the $1.8 million, the UConn Health Center became the sole owner of the Farmington Surgery Center.
And now here we are 5 years later, as a result of Governor Malloy’s initiative UConn will be legally required to contract with yet another private entity to expand its surgery center but this time, instead of a $6 million public-private investment, it is a $203 million dollar private deal.
While legislators race to put Malloy’s Health Center plan into law, the question remains…
Someone is going to make a lot of money on this deal…
So who is this project for?
For more on Malloy’s initiative take Kevin Rennie’s piece in the Courant – UConn Health Center More Rash Than Bold