State lawmakers face hurdles to expanding economic development program for cities

State legislators have been pushing to increase the number of CRIZ designations, but financial and political factors could keep these struggling communities out of the program.

State Rep. Patty Kim, D-Harrisburg, has introduced a bill that would let Pennsylvania’s capital participate in the state’s ultra-competitive Community Revitalization and Investment Zone program.

She and other legislators representing distressed cities – State Sen. Sean D. Wiley, D-Erie, and Rep. Kevin Schreiber, D-York, among them – have been pushing since last year to increase the number of CRIZ designations planned through 2015.

But financial and political factors could keep these struggling communities out of the CRIZ program.

A CRIZ allows taxes with a defined geographic area to help pay for development rather than into the Commonwealth’s coffers, typically by repaying debt issued to finance projects.

Only third-class cities with populations of more than 30,000 can apply directly for CRIZ designations, aside from two pilot zones planned for townships and boroughs, Kim said.

Currently, the Commonwealth’s Department of Community and Economic Development won’t even consider approving a CRIZ designation for local governments that have been in a receivership, the most restrictive form of state oversight in Pennsylvania.

Harrisburg’s receivership was the state’s first – and remains its only one. Brought on by crippling debt and failure by local officials to agree on a plan to deal with it, the receivership ended in February after more than two years.

“It is unfair,” Kim said.

She spoke during a House Urban Affairs Committee meeting Monday, when state lawmakers returned to Harrisburg after their summer break.

“Harrisburg was unfairly [excluded from] this great economic development tool that could transform a municipality like ourselves,” Kim said afterward. “It makes no sense.”

Kim points out in the bill memo that the city has long faced unique challenges as the state capital, most stemming from its restricted tax base, other cities do not.

“This is common sense,” Kim said Monday. “We’re the type of city that needs this kind of stuff.”

Kim was on Harrisburg City Council when crippling debt prompted city leaders to seek help through Pennsylvania’s Act 47 process for struggling municipalities.

She left to take her current post at the start of 2012. Gov. Tom Corbett had just appointed the city’s first receiver, after local leaders failed – after sparring for over a year – to agree on a recovery plan for Harrisburg.

Erie, Reading and Altoona are among the other cities where officials say their CRIZ applications are ready to go. Same goes for Scranton, which can go for a CRIZ as part of a joint application with an adjacent municipality.

Current CRIZ guidelines allot just three designations – two in cities and a pilot in a township or borough – through 2015 on top of those made last year in Bethlehem and Lancaster.

House Bill 1177 would more than double that to seven.

Right now, though, the state faces a budget shortfall estimated up to $1.7 billion, so it’s unclear how much tax revenue the Commonwealth will forgo. That’s increasing the pressure on lawmakers faced with a bill tying the CRIZ expansion to a proposed tax hike on cigarettes in Philadelphia to raise money for the city’s public schools.

Wiley says in a statement issued last week that legislators could instead isolate the initiatives, but he’s in favor of keeping them together to avoid delaying or preventing the CRIZ expansion.

Kim’s bill is separate from that, and isn’t tied to the Philadelphia cigarette tax. Her fellow House Urban Affairs committee members didn’t oppose the bill Monday.

The bill’s practical implications for Harrisburg could be severely limited if the state’s fiscal constraints prevent the expansion of the program, even absent those potential political obstacles.

And Kim acknowledged others might arise during the process of getting her legislation passed and signed into law.

“Everything’s about a deal here, you know. I don’t know what they’re going to ask from me,” Kim said. “I definitely want to see this go by, but I’m not going to sell my first child to get this passed.”