State Redevelopment Projects Exposed

By Leo Knepper State Redevelopment Projects Exposed

We have long been critical of “economic development projects”. Many times, the projects amount to little more than corporate welfare. Project backers frequently over promise, and under deliver in terms of jobs and an impact on the local economy. Using state funds to benefit private interests is a breeding ground ripe for crony capitalism and corruption. A project in Montgomery County provides an example of another problem, the bait-and-switch.

In 2008, the General Assembly and Governor Rendell authorized an expenditure of $15 million for the “[a]cquisition, infrastructure, rehabilitation, construction and other costs related to the redevelopment of the Ardmore Train Station, including the abatement of hazardous materials.” Seven years later the project has yet to break ground. Making matters even worse, the redevelopment of the Ardmore Train Station no longer includes redeveloping the actual train station.

While in the planning stages, Lower Merion Township drastically expanded the scope of the project to include the creation of “mixed use” property and a parking garage adjacent to the train station. Because of funding issues the train station project and mixed-use project were separated. As time went on less emphasis was placed on rehabilitating the train station, and more attention went into the private development. However, the state funding source never changed.

Although the funds were earmarked for redeveloping the train station, the township ultimately approved using the funds for a parking garage. In December of 2013, Governor Corbett’s Office of the Budget rescinded $12 million in funding. As noted by an extensive article from the Main Line Times, the Office of the Budget correctly recognized that the scope of the project had shifted markedly and, as a result, the funding would be reduced and made for the train station only.

The Office of the Budget was correct in its decision. Although the rehabilitation of the train station would have had a minimal impact on the economy of the area, it was at least a project for the “public good”. In contrast, the bulk of the benefit from the multi-use and parking portion of the project would have been to the bottom line of the property developer: Dranoff Properties. The decision to rescind the money did not stand long. After lobbying from Dranoff, the project had $10.5 million in funding reinstated by the Office of the Budget.  As an interesting coincidence, Carl Dranoff made $10,000 in campaign contributions to Governor Corbett’s re-election campaign over the course of 2014.

The legislative language explicitly tied the original funding to the rehabilitation of a train station. However, the project has shifted focus entirely to a private development, and that is a wholly inappropriate use of public funds. A local organization, the Save Ardmore Coalition, has filed a lawsuit against the township and Governor Wolf regarding this matter. They were also kind enough to bring this issue to our attention. We will monitor the lawsuit as it progresses, and we would also encourage members of the General Assembly to revisit the appropriateness of the project given the explicit authorization language.

State Redevelopment Projects Exposed

Bad Pension Legislation Lives

By Leo KnepperBad Pension Legislation Lives

Bad legislation never dies in Harrisburg, and it doesn’t even slowly fade away.

So the Tobash plan for changing the design of pensions for certain classes of new employees is getting another push. The Tobash plan, HB 1499, is sponsored by Rep. Mike Tobash (R-Schuylkill), but it was originally the idea of folks at the Public Employees Retirement Commission (PERC). It is their duty with respect to the state pensions systems “to assure their actuarial viability through a review of any proposed legislative changes in those plans.”

When reviewing HB 900 this past June, which really does “stop the bleeding” and would eliminate the unfunded liabilities of SERS and PSERS over 20 years, PERC decided that it was more important for legislators to consider other budget priorities. In other words, the institution, whose sole purpose is to assure the soundness of public employee pensions, instructed legislators in PERC’s review of HB 900 to continue their dreadful and harmful 12 year policy of diverting funds from pensions to other purposes.

Perhaps it’s just a coincidence that four of the nine members of PERC’s board are legislators, and one of them is Rep. Tobash. The other five members are gubernatorial appointees. What incentive do they have to assure that pensions will be adequately funded when the last three governors, including the current one, wanted no such thing?

The Tobash plan was introduced last year as an amendment to HB 1353. At that time, it set up a “stacked” retirement benefit system. The first $50,000 in state employee pay is eligible for a traditional pension; beyond that there is a 401(k) style plan. It is worth noting that the average state employee salary was $52,655 for 2014. In other words, the Tobash plan as introduced last year would have had impacted very few future employees. According to actuarial analysis done last year, 98.8% of the “savings” projected under the Tobash plan is 15 years or farther into the future, which is a pretty big problem since SERS and PSERS are on course to be bankrupt in 15 years.

While some of these same criticisms certainly apply to SB1, the Senate’s pension reform plan, Tobash’s plan goes completely in the wrong direction. Rather than addressing the unfunded liabilities and pension costs of current employees, the Tobash plan would merely provide lawmakers the ability to say they passed pension reform without actually addressing anything.

Politicians are very sensitive to current and near-term costs because the next election is less than 2 to 4 years away. But the massive harm heading toward the commonwealth in less than a generation-well, that’s someone else’s problem apparently.

And so, another Rube Goldberg device will be trotted out, debated, lobbied, perhaps even voted on (and if passed, vetoed) and all the while the unfunded liability which impends doom for the future of the commonwealth remains unaddressed. It’s simply the politicians’ usual play: bait and switch-promise changes later and call that savings. Then use the phony savings to justify continuing to underfund the pensions and divert monies to other places in the budget.

The priority is always less pension funding today, and when tomorrow comes, the priority will be less funding then too. It might get politicians re-elected, but it’s not exactly anyone’s definition of statesmanship.

Mr. Knepper is with Citizens Alliance of Pennsylvania.

Bad Pension Legislation Lives