How PA Feeds Sprawl and Creates Low-Wage Jobs Through Economic Development Subsidies

1. How PA Feeds Sprawl and Creates Low-Wage Jobs Through Economic Development Subsidies Keystone Research Center ▬▬ June 1, 2006 Re:BUILDING OPPORTUNITY IN PA Conference

2. The Case for Change • PA gives out 100s of millions of dollars in subsidies to businesses each year • Many projects create jobs that pay poorly • Many projects fuel sprawl rather than smart growth Keystone Research Center

3. Subsidies Create Low-wage Jobs • 312 PA Industrial Development Authority projects received $239 million in low-interest loans from 1998 to 2002. • 122, two out of every five, produced low-quality jobs (with projected payroll per job less than 80 percent of the industry average in the county with the project). • In Western, SE, and South-central PA, nearly half of all PIDA loans went to companies projected to create or retain low-quality jobs. Keystone Research Center

4. Subsidies and Sprawl • KRC contracted by Brookings to carry out the first-ever systematic examination of the geographic distribution of PA business subsidies • The extent to which economic development funds contribute to sprawling land-use patterns and job redistribution. • KRC used the opportunity to develop new communications technology Keystone Research Center

5. What We Studied • Three largest DCED economic development programs from 1998 to 2003 • Pennsylvania Industrial Development Authority (PIDA) • Infrastructure Development Program (IDP) • Opportunity Grant Program (OGP) Keystone Research Center

6. What We Studied • Pennsylvania Industrial Development Authority (PIDA) • PIDA was created in 1956 and distributes low-interest loans via local non-profit industrial development corporations (IDCs) to eligible businesses. • There are three categories of PIDA loans: • Job creation and retention loans to individual companies, • Multi-occupancy loans (to finance facilities that will house two or more unrelated PIDA-eligible tenants), and • Industrial Park Loans. • Loans for job creation and retention are capped at $1.25 million for a single project. • The cap is $1.75 million if the project meets a special designation such as Brownfield or Keystone Opportunity Zone. Keystone Research Center

7. What We Studied • Infrastructure Development Program (IDP) • In practice, almost all IDP funds are distributed as grants, which must be used for publicly owned infrastructure improvements. • Our data base contains two IDP loans. • A typical IDP grant might help pay for water and sewer line installation, or road and rail access to a new or expanding industrial site. • Other activities eligible for support include the construction or rehabilitation of drainage systems and energy facilities; the acquisition of land, right-of-ways and easements; demolition of buildings and the clearing and preparation of land. Keystone Research Center

8. What We Studied • Opportunity Grant Program (OGP) • There are no regulations for the program, which is administered based on DCED guidelines. • OGP funds may be used for a wide range of purposes including, but not limited to training, site preparation, construction, infrastructure, land acquisition, purchase of machinery and equipment, working capital, environmental assessments, and remediation of hazardous materials. • Funds may not be used to finance or retire existing debt or for costs unrelated to expansion or location at a site in the Commonwealth. • Those eligible for OGP grants include companies in agricultural, industrial (e.g., warehouse and terminal facilities, certain office buildings), manufacturing, research and development, and export service industries. • Also eligible for OGP grants are municipalities, industrial development authorities/agencies, municipal or redevelopment authorities, and real estate developers developing business locations for more than one company. • There is no maximum grant award. Keystone Research Center

9. Data & Definitions We Used • 1,121 Older Communities = 7,262,664 people • 58 Cities = 3,198,585 people • 972 Boroughs = 2,574,625 people • 91 First Class Townships =1,489,454 people • 1,458 Outer Communities = 5,117,696 people • Second Class Townships • 14 Metro Areas = 10,289,672 people • 1,506 Municipalities in Allentown, Altoona, Erie, Harrisburg, Johnstown, Lancaster, Philadelphia, Pittsburgh, Reading, Scranton, Sharon, State College, Williamsport, York • 763 Older Communities = 6,548,678 people • 743 Outer Communities = 3,740,994 people Keystone Research Center

10. What We Found • The actual business site address was available for half the projects. The municipality was available for 99% of the projects. • Older communities and outer townships receive the same dollar amount per capita • Inner-ring suburbs get almost nothing • Outer townships get more than twice as much per capita for industrial & business parks • 13 mega projects in “distribution” for $45 million Keystone Research Center

11. Subsidies Fuel Sprawl in Philly, A-B-E • In these 2 metros, outer townships receive more than 50% more subsidy $ per capita • In five-county Philly area, suburban counties get more than 2 ½ times as much in grant $ • In Erie, Harrisburg, Reading, Scranton-WB-Hazelton, York, and Pittsburgh metro areas, older areas receive no more than 39% more $ per capita than outer townships Keystone Research Center

12. Some Smart Growth Points to A Better Way • Lancaster • Almost all of Lancaster’s subsidy $s go to the city • 9 times as much per capita $s go to older areas compared to outer townships • Philadelphia Metro Area • PIDA is much better than OGP – because of common-sense rules Keystone Research Center

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15. Use the KRC Map to Look at Your Area • Easy-to-use, interactive, web-based Geographic Information System (GIS) tool that makes transparent where the money goes Keystone Research Center

16. Keystone Research Center Map • KRChttp://www.keystoneresearch.org • KRC Map http://www.keystoneresearchmap.org Keystone Research Center

17. Media Coverage - Quotes Saint Paul Pioneer Press (Minnesota) May 4, 2004 A second chance for cities? by Neal Peirce • New reports suggest that with smarter state policy-making and a dose of ingenuity, much more could be done to defend and redevelop older cities. • State government agencies handing out subsidies for business expansion are notoriously reluctant to provide public information. • It's a delicious example of computer-armed reform advocates not only tracking down closely held data, but making it transparent and accessible by new digital technology. Keystone Research Center

18. Media Coverage - Quotes Abe Amoros, Deputy Press Secretary, Governor Ed Rendell • "This definitely helps us out tremendously…We need to identify what the problems are, and clearly the [Keystone GIS] map points to many troubling policies that seem to have accelerated sprawl.” Government Technology: Solutions for State and Local Government in the Information Age, June 2004 • More and more, GIS is becoming the means through which land- and infrastructure-based research is best and most easily disseminated. Keystone Research Center

19. Recommendations • Collection and disclosure of • Business site address • Land-use classification • Industry • Job quality and quantity • When projects get multiple bits at the subsidy apple • Prior location of the business • All of the above for tenants in industrial parks Keystone Research Center

20. Other Recommendations • Wage and benefit standards for jobs created • Limits on subsidy per job • Clawbacks – state gets some money back when company doesn’t deliver • Shift money away from subsidies for individual companies to public goods (education, industry training partnerships, industry centers of excellence) Keystone Research Center

21. Proposed Legislative Reform • House Bill 146 Session of 2005 • Introduced by Solobay, Barrar, Bebko-Jones, Belfanti, Benninghoff, Blackwell, Caltagirone, Corrigan, Crahalla, Curry, Deweese, Fabrizio, Goodman, Grucela, Hennessey, Kotik, Leach, Maher, Mann, Melio, Mundy, Preston, Readshaw, Reichley, Sainato, Santoni, Sather, Shaner, Sturla, Surra, Tangretti, Thomas, Tigue, Wansacz, Washington, Youngblood and Yudichak, January 31, 2005 • House Bill No. 521 Session of 2005 • Introduced by Levdansky, Grucela, Veon, Belardi, Bebko-Jones, Belfanti, Blaum, Caltagirone, Daley, Deweese, Fabrizio, Freeman, Gergely, Haluska, Lagrotta, Mccall, Mundy, Ruffing, Sturla, Tangretti, Walko, Washington, George, Goodman, Josephs, Manderino, Mcgeehan, Rooney, Solobay, Surra, Thomas, Wansacz and Williams, February 15, 2005 Keystone Research Center