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

Development Subsidies

Keystone Research Center▬▬

June 1, 2006Re:BUILDING OPPORTUNITY IN PA Conference

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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

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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.

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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

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What We Studied

• Three largest DCED economic development programs from 1998 to 2003Pennsylvania Industrial Development Authority (PIDA) Infrastructure Development Program (IDP)Opportunity Grant Program (OGP)

Amount of Assistance (millions)

Number of

Projects

PIDA $ 337.8 424 IDP $ 165.6 248 OGP $ 216.1 661

TOTAL $ 719.5 1,333

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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.

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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.

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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.

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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

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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

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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

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Some Smart Growth Points to A Better Way

• LancasterAlmost 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 AreaPIDA is much better than OGP – because of

common-sense rules

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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

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Keystone Research Center Map

• KRC http://www.keystoneresearch.org

• KRC Map http://www.keystoneresearchmap.org

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Media Coverage - QuotesSaint Paul Pioneer Press (Minnesota) May 4, 2004A 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.

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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.

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Recommendations

• Collection and disclosure ofBusiness 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

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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)

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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