Capitol recap: state starts deciding on more than $1B in months-delayed redevelopment assistance requests

    Startup Harrisburg cofounder Adam Porter

    Startup Harrisburg cofounder Adam Porter

    Nearly 400 agencies are waiting to hear from a long-standing, occasionally controversial grant program months past when they’d normally get word.

    State officials have funneled more than $5 billion through the Redevelopment Assistance Capital Program since its inception in 1986. The program, usually called R-CAP, is meant to help projects that can’t get funding from other state sources and are expected to add or keep enough jobs and/or tax revenue that it’s of regional significance.

    Gov. Tom Wolf announced two of the grants during the past week. One will expand Pitt-Johnstown’s chemical engineering program; the other, help pay for a mixed-use project a couple blocks from the Capitol complex in Harrisburg.

    “There were no R-CAPs last year, and so, there will be some catch up this year,” Wolf said after a news conference in the capital city. “But there’s really a practical limit. We can’t spend more than we can afford.”

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    So, how much can the state afford? Wolf and his spokesman couldn’t provide a target number or timeline for announcing other recipients — other than saying that the decisions will happen soon.

    The controversy

    There are 382 agencies waiting to hear about their combined $1 billion in funding requests. They are undeterred by the scrutiny the revolving loan fund has attracted over the years.

    George Mason University’s Mercatus Center took a close look at the program and published a report one year ago.

    Research fellow Adam Millsap says his interest stemmed from a general concern that such programs can distort economies.

    Millsap found that grants awarded through 2014, before Wolf took office, disproportionately went to projects in Allegheny and Philadelphia counties. With a combined 25 percent of the state’s population, they got 40 percent of this grant money, his analysis showed.

    He also noted the matrix used to evaluate applications gives an edge to bigger projects that promise to create more jobs and invest more money.

    Millsap says he ran numbers and reviewed documents available online and didn’t do many interviews to compile his report.

    After it was published last year, he says, one legislative staffer paid a visit to his D.C. office .

    “He was explaining to me about how some of the horse trading goes,” Millsap recalled. “You know, a rep or a senator who wants something in there, who wants one of these (projects) in their districts to get funded, will say, ‘Hey, if you do this project for me then we’ll put this money over there.'”

    One of the first beneficiaries announced for this RACP funding round is development firm WCI Partners. Its principal Alex Hartzler has been a consistent, generous campaign donor to state and local Democrats (including Mayor Eric Papenfuse, state Rep. Patty Kim, D-Harrisburg, and state Sen. Rob Teplitz, D-Dauphin).

    WCI’s application still had to compete against hundreds others vetted by the Wolf administration (records show Hartzler donated to former Gov. Tom Corbett, a Republican, during his failed re-election bid against Wolf).

    Millsap says, though, Pennsylvania “is somewhat unique” because these project grants “have to actually go through the legislative process and become law in order to get funded.”

    Similar programs in other states are administratively vetted and awarded by bureaucrats, not elected officials, Millsap says.

    Possible fix

    Elected officials in Pennsylvania did attempt an overhaul of the program in 2013 and began implementing the changes not long before Millsap started his research.

    They focused on the expense of the debt associated with the program, lowering the borrowing authority to $3.45 billion —which the “program has not come close to meeting,” Wolf’s spokesman Jeff Sheridan wrote in an email.

    Other changes were meant to make the vetting process more transparent; Wolf referred to it as “disciplined” the other day.

    Developers also don’t get the cash right away. Project costs are reimbursed, pursuant to an agreement hashed out between the developer and state officials.

    Wolf says he also wants to set up long-term cost-benefit analysis and accountability processes, that will last into multiple administrations.

    “By the time you really get to the point where you should look at what that return, is it what you expected, you’re out of office,” he says. “We’ve got to … figure out how we’re going to be handing off these accountability measures. I’m committed to doing that. And I’d be the first to tell you we don’t have things in place right now for that eight-year, nine-year tenure.”

    Why the delay?

    “We delayed announcements in 2015 because our focus was on enacting a responsible budget. We are now in the process of making final decisions,” Sheridan said in an email.

    Millsap says he’s not surprised officials would have put the program on the back burner.

    But he still doesn’t like the idea of, as he puts it,  “rural taxpayers essentially subsidizing business in big cities”.

    More than half of the applications during 2015 were for projects located in cities. Millsap says he didn’t analyze program awards among cities, boroughs and townships.

    Wolf has said he wants to level the playing field for cities, and referenced that during his remarks this week in Harrisburg:

    “The market has failed here and we have to ask ourselves why that has happened. And there are a lot of different potential answers to that. But it has. So when you have that market failure, you have to do something to prime the pump to actually push things forward.”

    Editor’s note: Keystone Crossroads partner stations WHYY and WITF have received grants from the Redevelopment Assistance Capital Program. This post has been updated to correct a typo and add campaign contribution detail.

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