BRISTOL - If tax exemptions are repealed and the state imposes a tax surcharge on corporations and limits tax credits, the country's leading sports network could lose millions of dollars each year.

While Mike Soltys, vice president of communications for ESPN Inc.'s domestic networks, said he is confident that ESPN would not abandon its birthplace, he said that the budget decisions state lawmakers make this legislative session could affect the company's future.

"We would prefer to grow in Central Connecticut," said Soltys, a Southington resident, adding that over the last 10 years, the number of Connecticut ESPN employees has doubled, as has the number of acres ESPN owns in Bristol.

ESPN, a subsidiary of the Walt Disney Co., employs 3,400 people in Connecticut, and the company has 115 acres in Bristol. It also leases property in Cheshire and owns property in Southington.

But despite ESPN's best intentions, Soltys said, operating costs play a role in determining where ESPN expands. If lawmakers make it harder to do business in Connecticut, he said, ESPN might choose to explore other options. The company already owns property and has studios and offices in several states.

Just over the Southington-Bristol line sit ESPN's satellite dishes and large buildings. Inside those buildings, reporters cover the world of sports, anchors and commentators talk about the latest games and controversies and technicians work cameras and lights.

Denise Pellegrini, of Southington, works as an executive assistant to the executive vice president of content and is also a personal assistant for ESPN top executive George Bodenheimer and sportscaster Chris Berman, who lives in Cheshire. Another Southington resident, Jodi Logsdon, is a news editor in studio production.

"There's almost always something going on, and you're right in the middle," Logsdon said.

Early Thursday morning, ESPN was bustling with activity.

"SportsCenter" occupied a studio. A red light indicated that the show was on the air. Nearby, "Mike and Mike in the Morning," a simulcast of an ESPN Radio show, featured country music star Kenny Chesney. Sitting near numerous bobblehead dolls, the hosts, Mike Greenberg and Mike Golic, asked Chesney about everything from being a Boston Red Sox fan to being a musician.

Down the hall, ESPN employees were glued to television screens in the screening room. Their job is to keep track of statistics and game highlights to determine what viewers or listeners need to see in the short game summaries, explained Dave Nagle, ESPN's associate director of communications.

ESPN started small, Nagle said. Its founder, Bill Rasmussen, bought a parcel in Bristol sight unseen and ESPN began operating in 1979 - when cable television was barely under way. Today, ESPN is a corporate giant and has expanded its reach well beyond television. ESPN is now in everything from radio, magazines and greeting cards to lending its name to a chain of restaurants.

"Each entity promotes the other," Nagle said, adding that despite the growth, ESPN headquarters remains in Bristol.

People ask why the company does not move to a place such as New York City, but the cost of doing business is less in Connecticut and there is a better quality of life for ESPN employees, Nagle said.

"Why should we be in midtown Manhattan?" he said.

With the help of the lobbying firm Levin, Powers, Brennan & Shea LLC, ESPN is hoping to show lawmakers how important ESPN is to Connecticut. State lawmakers have a standing invitation to meet with ESPN staff and tour the Bristol facilities, and a few lawmakers, such as Rep. Vincent Candelora, R-North Haven, have already taken the company up on its offer.

"What we are doing is educating," said Mark Brennan, the lobbyist who primarily works with ESPN.

It is important for the legislature and the administration to see how the proposed changes would affect businesses such as ESPN, he said.

ESPN's greatest worry is that Connecticut could decide to repeal tax exemptions on broadcast equipment. The company needs to keep its equipment current and taxing the equipment will make that more difficult, Soltys said, adding that the change would tax a product that would be sold later.

The company is also worried about the future of other tax exemptions, including the exemption on media payroll services and the exemption on non-cable services, Soltys said. Repealing these exemptions would negate some of the film tax credit, which ESPN does take advantage of, he added.

The proposed 30 percent corporation tax surcharge also worries ESPN, as does the Democrats' desire to reduce the limit on the total value of corporation tax credits from 70 percent of a company's tax liability without the credits to 65 percent for next fiscal year and to 50 percent for fiscal years 2010 and 2011.

While Soltys says the company would lose millions of dollars if some of the proposals are enacted, he would not compare what ESPN would lose to the company's overall budget. ESPN and Disney declined to release the company's operating budget figures last week.

Fred V. Carstensen, director for the University of Connecticut's Center for Economic Policy Analysis, suspects the impact would be tiny, in part because ESPN was the main beneficiary of a change in corporate tax law in 2000. Companies such as ESPN may determine taxable income based on the ratio of their gross receipts from sales in Connecticut to total receipts from all sales, allowing companies with lots of property and employees in Connecticut to pay lower taxes if most of its sales are outside of the state.

Even though it is giving ESPN a tax break, the state still comes out ahead, Carstensen said.

But still ESPN is concerned, and they are not the only business worried about taxes going up.

"What ESPN is saying is very similar to what we're hearing," said Joe Brennan, senior vice president for the Connecticut Business & Industry Association.

Lawmakers need to be mindful of the economic world because if they push too hard, they will drive businesses out of Connecticut or see the state's bigger businesses look to expand in other states, he said.

"There are huge, huge risks involved here and the legislature has to be very careful on how they structure its budget," Brennan said.

Businesses are concerned that Democratic lawmakers are proposing a corporation tax surcharge at a level never before seen, Brennan said. Surcharges have been imposed before, but never at 30 percent and never for more than two years, he said.

A reduction in limits on tax credits would make any tax credit less valuable to businesses, Brennan continued. It would mean that businesses would place no confidence in the credits and there would not be as much reliance on them as in the past, he said, adding that the tax credits were thoughtfully passed by legislatures to spur economic development.

Brennan also does not want to see Connecticut lose businesses because of the repeal of more than 50 tax exemptions. The proposed exemptions target key traditional industries and growth industries, such as bioscience, and Brennan said the state historically has not taxed materials that go into a product.

All these proposals come during a time of economic decline, when even companies such as ESPN are feeling the effects of a national recession. In January, ESPN initiated a hiring freeze and announced that it could cut as many as 200 jobs this year, and Nagle said the company is trying to be even smarter with its spending and overall budget.

The more costs increase, the more attractive other locations become, Brennan said.

Candelora, a member of the Finance, Revenue and Bonding Committee, understands Brennan's point.

"Businesses are portable," he said. "They are in a global market."

Candelora toured ESPN about two weeks ago and met with members of the company's communications team and employees who deal with finances. He now sees ESPN as a great anecdotal story of how the Democrats' tax plan hurts businesses. Most lawmakers have not given serious thought to the repercussions associated with their proposal, Candelora said.

"I think this story rang home," he said, adding that the Republicans' version of a biennial state budget does not raise any taxes, but relies on a series of cuts and consolidations.

Rep. Cameron C. Staples, D-New Haven, co-chairman of the Finance, Revenue and Bonding Committee, could not be reached for comment last week, but has said that Democrats had to make some difficult decisions when deciding on a biennial budget proposal that would eliminate a two-year projected deficit of nearly $9 billion. The corporation tax surcharge alone is estimated to bring in more than $300 million in additional revenue over the next three years.

Carstensen believes that both cuts and tax increases will be necessary to balance a state budget, but said that lawmakers need to think strategically and to be mindful of the future. It is time they make a serious effort to revamp the state's tax system to change long-time trends, he said, adding that the best time for change is during a crisis.

"This is when you can redefine the market," Carstensen said.

Carstensen suggests lowering the state sales tax, but broadening the range of taxable items, meaning that people will pay less for goods, but that several of the tax exemptions would be repealed. He also hopes that lawmakers will use a better way of projecting how policy decisions affect businesses. They now fly blind when making revenue decisions, he said.

As lawmakers ponder how they will approach the next two years, businesses such as ESPN wait. They can only do so much to convince the legislature to minimize the tax increases, and with lawmakers keeping their options open, they know that they will not be in the clear until a state budget is signed.

"It is such a complicated puzzle," Soltys said, "when they say everything is on the table."

afalcone@record-journal.com

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