The BankWorld 2005 conference was held Tuesday at the Radisson Hotel in Cromwell. The event was organized by the Connecticut Bankers Association and The Warren Group, parent company of The Commercial Record.
Old and cold” may not be the way most New Englanders see their region, but it’s the way many businesses do see it, according to Peter Gioia, an economist at the Connecticut Business and Industry Association.
Gioia addressed bank executives Tuesday during the BankWorld 2005 conference at the Radisson Hotel in Cromwell. BankWorld, which is in its 10th year, attracted nearly 900 attendees from across New England.
The Connecticut Bankers Association and The Warren Group, parent company of The Commercial Record, organized the conference. Gioia discussed the economy in Connecticut and the rest of New England during the event.
The region, and especially Connecticut, has stumbled recently in attracting new businesses, which has led to growth rates that lag behind the rest of the country. According to Gioia, the demographics in Connecticut are part of the reason why companies aren’t flocking to the area.
“Our demographics make [Connecticut] the third-oldest state,” he said. That aging population, he explained, can make the state less attractive to businesses.
One solution is for Congress to allow more skilled, foreign workers to get visas and for Connecticut to attract them. But there are conflicting interests in Congress that make that difficult, Gioia said. States in the Southwest and the South have pushed against increasing immigration because of their burgeoning workforces, while the Northeast, in some cases, is losing skilled workers. Connecticut has negative labor growth, Gioia said.
There are other issues keeping businesses – and job growth – out of Connecticut.
“I think that Connecticut has some serious and multiple problems,” Gioia said.
The cost of doing business is a major stumbling block, he said. The state’s business costs are the fifth highest in the country, and infrastructure issues could compound that problem. Most lawmakers don’t appreciate enough how much the bottleneck in lower Fairfield County affects not just the state, but the entire region, Gioia said. That’s one reason why companies don’t relocate to Connecticut.
“It’s access,” Gioia said.
‘Surreal Atmosphere’
There are also serious problems with the state’s electrical system. The state Siting Council last month voted unanimously to approve a 69-mile-long power line upgrade between Middletown and Norwalk. The upgrade is needed because the antiquated transmission system currently there can’t handle today’s demand for electricity.
Most agree that the upgrade is necessary to avoid any future power interruptions, but residents and lawmakers in some of the cities and towns where the power line is slated to be aboveground are concerned about possible health risks associated with high-voltage power lines. As a result, some lawmakers in that part of the state have decided to continue fighting the ruling.
But those sorts of challenges make it difficult to fix the aging power lines, which are not efficiently transmitting power to parts of the region.
“If that’s not solved, it will have cost effects that will hit every business in the state of Connecticut,” Gioia said.
Much of the progress in Connecticut that is good for business is fought against tooth and nail by some of the state’s residents and lawmakers. Blue Back Square in West Hartford is a development that, when built, will incorporate a health center, retail, restaurants, offices and apartments. About 59 percent of eligible voters came to the polls last October and approved a master agreement for the project by a vote of 13,680 to 9,072. But a nearby mall vowed to continue fighting the mixed-use development, and Blue Back Square is now facing legal issues, Gioia said.
Ethical failures in the state government, particularly the scandal that led to the resignation of former Gov. John G. Rowland, also have made it more difficult to attract new businesses. But those should not stop the state Legislature from trying to do so, Gioia said.
Gioia also outlined the top risks for the state economy.
Oil prices could become even more of a burden; when Gioia gave his speech on Tuesday, oil was trading at $54 a barrel. But health care is also a big challenge, with both Medicare and Medicaid in bad shape and in need of being addressed, he said.
Terror continues to be a concern, both locally and nationally. There is also a risk of inflation, even though it is not a great risk, Gioia said.
One of the biggest risks to the Connecticut economy is what Gioia called the “surreal atmosphere” in the Legislature in Hartford. The Legislature is increasing the budget by much more than it should as the state comes out of a sub par recovery, Gioia said.
He encouraged the bankers present to call their lawmakers, noting, “There’s got to be a message that gets sent.”
Gioia also emphasized that the country’s economy is resilient.
“When you put into perspective some of the challenges, keep in mind the resiliency of the economy,” Gioia said. “I think it’s important to think of that resiliency.”
He talked about some of the challenges – such as the high cost of oil – but emphasized that the United States’ economy continues to grow. The global economy is led by the United States and China, with the United States showing a 4.7 percent growth in gross domestic product this year, compared with China, which might surpass 9 percent growth.
The United States also will likely add 2 million-plus jobs this year, Gioia said, even though industries such as manufacturing were hit during the recession.
Some areas of the national economy will soften a bit this year, he said. Residential real estate had several years of booming sales, but will probably soften this year, although it won’t crash, Gioia said. Real income also will be somewhat softer, he added.
Companies such as Strunk & Assoc., Fiserv, Diebold and BNK Advisory Group also sent speakers to the conference. They covered topics from ATM security to the Check Clearing for the 21st Century Act, better known as Check 21.
