12/26/13, "For ESPN, Millions to Remain in Connecticut," NY Times, Steve Eder
"With nearly 100 million households paying about $5.54 a month for ESPN, regardless of whether they watch it, the network takes in more than $6 billion a year in subscriber fees alone. Still, ESPN has received about $260 million in state tax breaks and credits over the past 12 years, according to a New York Times analysis of public records. That includes $84.7 million in development tax credits because of a film and digital media program, as well as savings of about $15 million a year since the network successfully lobbied the state for a tax code change in 2000.
For Mr. Malloy and other public officials in Connecticut, the
conventional wisdom is that any business with ESPN is good business.
After all, ESPN is Connecticut’s most celebrated brand and a homegrown
success story, employing more than 4,000 workers in the state....
This spring, it is scheduled to open
the 193,000-square-foot Digital Center 2, which is being built with
Malloy’s pledge of nearly $25 million in state support. Workers there
recently constructed the massive studios that will house ESPN’s flagship
lineup of shows. The main hallways in the building were designed to be
wide enough to fit a racecar....
The critics say incentives should be redirected to smaller companies
that are more in need than ESPN, which accounts for nearly half the
operating profit of Disney, its corporate parent. They also say ESPN,
sitting on 123 acres in central Connecticut, is hardly a risk to move
elsewhere....
The critics say ESPN has been successful in getting an audience at the
State Capitol in Hartford partly because of its ability to communicate
its needs effectively to the state’s decision makers. ESPN employs one
of the top lobbying firms in Connecticut and has spent $1.2 million on
lobbying expenses since 2007, records show.
But Mr. Malloy, a Democrat who will be up for re-election in 2014, says
no lobbying is needed to convince him of what he considers obvious: ESPN
is one of Connecticut’s best resources, and the state must use all
tools available to aid its growth and keep its home base and the
thousands of well-paying jobs it promises in Bristol.
He sees ESPN as a magnet for attracting other sports media jobs to his
state. NBC Sports, which also received state benefits, recently opened
its new headquarters in Connecticut. “I don’t want to imagine
Connecticut without ESPN,” Mr. Malloy said in a telephone interview,
adding that state incentive programs benefited large and small
companies. “We want ESPN to have the biggest possible footprint in
Connecticut, and we want them spending their dollars in Connecticut
instead of any other state.”
Everyone seems to agree that ESPN is a shining success story for
Connecticut, in terms of the state’s early support of an upstart through
its development into an international powerhouse. The company’s
executives acknowledge that state and local officials have played
important roles in their success. But they also say their company has
provided an exceptional return on the investment. For the past 25 years,
Connecticut has been last in the nation in job creation, with no net
job creation over that period....
Since 2000, ESPN has spent about $1 billion on construction in and
around Bristol, a town of about 60,000, erecting 13 new buildings and
expanding several others. During that period, the company’s work force
in Connecticut has swelled from 1,700 to more than 4,000. That makes
ESPN the 25th-largest employer in the state, according to rankings by
the Hartford Business Journal....
The network’s Connecticut origins stem from its founder, Bill Rasmussen,
an executive with the Hartford Whalers who wanted to use satellites to
beam Whalers and University of Connecticut games to cable television
subscribers. The fact that ESPN made its home in Bristol, an old
manufacturing town about halfway between New York and Boston, was a
point of pride to locals.
Politicians who were not on board with ESPN did not find much success:
One mayoral candidate campaigned against the network’s dishes, saying
they were a danger to birds. That message did not register in a place
that was quickly emerging as the home of ESPN....
Incentives to Stay
By the spring of 2000, ESPN had shed its roots as a small start-up and
was beginning to look more like a mature corporate behemoth.
Disney, its owner, looked to ESPN as a key part of its revenue machine
and one poised for immense growth. The network had 1,700 employees in
Bristol, and another 700 worked elsewhere — as the network now had
facilities or subsidiaries in seven other states.
That is when ESPN did what other big, multinational companies had done:
It went to the statehouse in Hartford and sought financial incentives in
exchange for continued growth in Connecticut. At the top of ESPN’s
agenda was supporting a measure by state lawmakers that would change the
corporate tax formula in a way that would save broadcasters money.
The legislature had done this three years earlier for financial
companies. If the adjustment was applied to broadcasters, ESPN stood to
be the biggest beneficiary by far — reducing its taxes by about $15
million a year....
The lawmakers were pleased to have ESPN on hand; one even stated, “for
the record,” that he watched “SportsCenter” “two nights a week during
the legislative session” but “four nights a week the rest of the year.”
The lawmakers approved the change to the corporate tax formula, and a
review by Connecticut’s Office of Legislative Research in 2004 showed
that ESPN was fulfilling its promise to the legislature.
In 2006, as ESPN continued to grow, the Connecticut General Assembly,
along with Mr. Malloy’s predecessor, M. Jodi Rell, had designs on
expanding the state’s digital media sector. They wanted to offer tax
incentives to companies that use the state as a base for initiatives
like making films, building studios and increasing their online
operations. Since the program began, the state has awarded about $450
million in tax credits to businesses that have spent $1.6 billion in the
state.
ESPN has been among the largest participants in that program, spending
$318 million in Connecticut and receiving $84.7 million in tax
certificates — about a fifth of the total amount awarded. Companies like
Blue Sky Studios and World Wrestling Entertainment have also benefited.
The program has provided ESPN with financial incentives for the development of ESPN.com
($54 million) and ESPN Mobile ($3.2 million), as well as infrastructure
credits for the construction of a research and development building
($6.6 million) and the Digital Center 2 ($14.4 million). ESPN also
qualified for $6.2 million in credits to support the production of “The
Bronx Is Burning,”
a television mini-series.
ESPN regularly sells the tax credit certificates to other entities in
private transactions, which could mean that the network receives less
value than the amount on the voucher. Such transfers are common and
within the rules of the program.
George Norfleet, the director of the state’s Office of Film, Television
and Digital Media, said he was in regular contact with ESPN, treating
the network as a “corporate constituent” with room for growth. “We want
to make sure that happens here, not in Orlando or Los Angeles,” he said.
A recurring theme in ESPN’s dealings with the state is that the company
could move its operations elsewhere. When Malloy announced ESPN’s
inclusion in “First Five,” a state plan to create jobs and promote
business development, he said the network had other places where it
could have invested. He mentioned recent production facilities in Los
Angeles and Austin, Tex.....
Mr. Malloy, for his part, is comfortable with the state’s ties to ESPN.
In fact, the governor said he would like more of them.
“We want a larger footprint for ESPN in Connecticut rather than a
smaller footprint for ESPN in Connecticut because we know that a large
footprint is harder to move out,” Mr. Malloy said."
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