By Stacy Brown | PA Independent
HARRISBURG — Lawmakers want to cut the red tape for businesses seeking tax incentives, but some critics say doing so would expose Pennsylvania taxpayers to financial risks.
Gov. Tom Corbett wants to streamline the state's multi-pronged economic development apparatus into a single financing authority he has dubbed the Liberty Financing Authority.
Corbett's plan is proposed in Senate Bill 1257, introduced by Senate Committee on Community, Economic and Recreational Development Chairwoman Jane Earll, R-Erie.
However, taxpayer advocates said this financing authority would compromise the taxpayer.
"How can this not affect the taxpayer? Anytime you talk about financing and bonds, it's taxpayer-backed, and the taxpayer is at risk," said Eric Epstein, founder of Rock The Capital, a Harrisburg-based political watchdog group, that has come out against Corbett's plan.
The governor’s plan is intended to promote business growth by taking advantage of low-interest bond rates.
"The premise of the fund is the collection of taxpayer funds. The bond is an instrument of collateral and, almost every day, you read about a municipality, a government defaulting on its bonds," Epstein said. "The taxpayer will be caught holding the bag, and the taxpayer has no say."
The new authority could sell up to $1 billion in bonds to investors that would generate revenue and make the funds available for business loans.
"Both the public sector and the businesses we are seeking to retain, grow, and attract will benefit from a more streamlined, flexible approach to state financing packages," said Dennis Yablonsky, CEO of the Allegheny Conference on Community Development, which represents Southwestern Pennsylvanian businesses.
Businesses will benefit specifically, because they would no longer have to seek financing for working capital, real estate and equipment by applying to multiple entities, Yablonsky said.
"The proposed Liberty Financing Authority streamlines what is often a time-consuming and complicated process," he said.
Businesses that were rejected because they applied for loans under the wrong program would be re-routed to the appropriate lending source, said Earll.
One of the challenges in economic development today is the realization that, in many cases, job retention is as important as job creation, said David Black, vice president of the Pennsylvania Economic Development Association, a statewide association of local, state, corporate and nonprofit economic development professionals.
By making it easier for businesses to acquire funding, companies in Pennsylvania would have funding available to hire new employees, and the program would make the state a more attractive destination, Black said.
Black also is president of the nonprofit Capital Region Economic Development Corp., the economic development arm of the Harrisburg Regional Chamber, which advocates for job creation and business growth through policy change.
An important factor in creating the authority is the state's need to develop its own funding rather than constantly going to the taxpayers "with our hat in hand," said Alan Walker, Secretary of the Department of Community & Economic Development.
However, forming the new authority would be "streamlining a number of debt-financed corporate welfare programs that should be eliminated entirely," said Nathan Benefield, director of policy analysis for the Commonwealth Foundation, an independent conservative think tank here.
"State government should stop trying to pick winners and losers and racking up additional debt in independent agencies rather than trying to improve the process with different economic planners," Benefield said.
The programs that would be combined are:
- The Pennsylvania Industrial Development Authority, created to finance business expansion projects;
- The Pennsylvania Minority Business Development Authority, designed to stimulate the creation, retention and expansion of minority-owned businesses and to create jobs;
- The Machine and Equipment Loan Fund, which provides low-interest loans to businesses who want to purchase and install equipment or upgrade equipment;
- The Small Business First Fund, designed to enhance overall economic development and job creation for small business;
- The Export Finance Program, which provides up to $350,000 in loans to business to acquire inventory and pay direct and indirect costs for manufacturing and purchasing goods;
- The Community and Economic Development Loan Program, which provides low-interest loans for projects in distressed communities;
- The First Industries Fund, which helps the agriculture and tourism industries.
The Liberty Financing Authority would be governed by a 15-member board with appointees from the public and private sectors named by the governor and the General Assembly, Earll said.
The governor would appoint the board's chairman, but lawmakers would control eight of the appointments.
