The Idiot's Guide to How Pennsylvania Could Give Bart Blatstein $100 Million
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The Idiot's Guide to How Pennsylvania Could Give Bart Blatstein $100 Million
When you think of Pennsylvanians in need of government assistance, who do you think of? We bet it’s not millionaire developer Bart Blatstein. And yet, Blatstein is a candidate for up to $100 million in state government grants for a slew of construction projects in Philadelphia, through something called the Redevelopment Assistance Capital Program (RACP).
How on earth did Pennsylvania end up with a program that gives millions of dollars to millionaires? We’ll try to explain.
Q: When did Pennsylvania start giving money to private developers?
A: RACP was started in 1986 and has helped fund a wide variety of projects, from a new arena for the Pittsburgh Penguins to renovations to Panther Valley High School’s football stadium in Carbon County. This year, money could go to help build the Sen. Arlen Specter library at Philadelphia University, a hotel in downtown Swarthmore and a spa and golf course in Chester County.
Q: Why does Pennsylvania give money to private developers?
A: RACP issues grants to projects that are supposed to spur economic development, or provide some type of historic or cultural benefit. Backers argue that it helps attract businesses, boosting the local economy and providing jobs.
Q: How do I get the state to give me millions of dollars?
A: To be considered, a project needs to be named in legislation authorizing the governor to spend RACP money on it. Then, the governor needs to actually agree to fund the project.
Q: And can any old project get this money?
A: There are some eligibility requirements. Projects need to be a certain size to qualify — at least $5 million if it's happening in Philadelphia — and must have a certain amount of matching funds lined up. Some infrastructure and housing projects funded through other state programs aren’t eligible.
Q: How much money goes into these projects?
A: As part of this year’s budget process, the Legislature gave the governor the power to spend up to $600 million. When the governor gives that money out, the state will have spent, in total, more than $4 billion on RACP.
Q: But wait. The state’s hard up for cash. How is it coming up with money for this?
A: It’s borrowing the money. Remember, the state has two different budgets. The operating budget, which pays for things like employee salaries, is funded with taxes and needs to be balanced each year. It’s in trouble because of the recession. The capital budget, on the other hand, pays for infrastructure – things like roads or state office buildings, which last a long time. The state gets capital money by issuing bonds and then slowly paying them back, with interest, over many years. RACP money comes from the capital budget.
Q: So the state can spend as much as it wants on RACP projects?
A: Not really. Paying back debt gets expensive – the state currently spends about 3.5% of its operating budget each year on capital budget debt service. The more projects the state spends money on, the more tax dollars have to go to paying that debt down, meaning there’s less money for other programs.
Q: Is that why people object to this program?
A: It’s one reason. Some people, like the conservative Commonwealth Foundation, are philosophically opposed to the state spending money on private projects. Then there are good-government activists who think the allocation process could be cleaned up.
Q: What’s wrong with the process?
A: Well, for one, it's impossible to tell which state lawmaker is behind which RACP project. The projects eligible for RACP are introduced en masse by legislative leaders, so there's no name attached to individual proposals.
Critics also point out that RACP projects aren’t chosen through an open competitive bidding process – they’re just picked by politicians.
Q: That’s ridiculous. Does anyone else do things like this?
A: Other states do use capital money for private economic development projects like stadiums.
Q: Is anyone trying to change things here?
A: The state's good-government groups are just getting mobilized around the issue, and some have yet to take a clear position. Tim Potts, one of the co-founders of Democracy Rising Pennsylvania, says his group is going to talk about filing a suit to shut RACP down at its October board meeting.
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This was interesting. Now could we get an article on if any of these buildings have boosted the local economy or provided new jobs? If not, it's a perfect argument against lowering taxes for the rich because it proves more money doesn't mean more jobs.— HandNik- Question, is this 3.5% considered to be big or little money? "Paying back debt gets expensive – the state currently spends about 3.5% of its operating budget each year on capital budget debt service." Is public debt service comparable with personal debt like credit cards or student loans? Meaning, does the state experience stress from its public debt the way individuals experience stress from their personal debt? Also, is it possible that the amount of debt service might actually be higher than stated numbers, as in the way real unemployment is actually higher than the official numbers because of the games played with statistics?— MB6
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- Handnik, Your point is stupid. If the buildings have not boosted the local economy then then that is an arguement for not giving money to developers to build those buildings. It has NOTHING to do with lowering or not lowering taxes for the rich. If you have a problem with the rich who pay ALL the taxes not paying more then what do you think about the slackards who don't pay any taxes?— womblast
- We should eliminate ALL public housing. It was public housing that destroyed these neighborhoods in the first place. The Demohoodrats who live in public housing destroy the neighborhoods with crime, litter and graffiti. They destroy the schools and make it impossible to learn. Once we eliminate public housing the hoodrats will go back to the ghettos where they belong. They can live in the 40,000 empty units in the gettos. After they leave the good honest working people will return and the tax base will increase.— womblast
Playing the funding game involves, not only high appointed connections in your corner, but the ability to write grants in the proper format using all the "buzz" words to maneuver the maze and red tape of funding appropriation request. Apparently Balstein is a pro at this. I'd be smiling too......— dogman5- Handnik, take a reading comprehension course. This article was not about taxes. Try rereading the article.— junethe4th
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- In this case, the real issue at hand is the fact the THERE IS NO DEMAND FOR A HOTEL IN NORTHERN LIBERTIES. PERIOD!— hotelguy
- Blatstein has done a good job pioneering the NoLibs comeback, with many shops, small businesses, condos/apts and the Piazza. Without that, NoLibs was on the way to looking like 22d and Allegheny. I don't know if Blatstein got any public money for NoLibs, but it wouldn't bother me if he did. Compared to what the alternative was going to be, NoLibs seems to be thriving. Full disclosure - my wife runs a small business up there and Blatstein is our landlord.— pj katauskas
- This piece is typical DN populist drivel. Nothing at all wrong with govt contributing to redevelopment projects. Has been going on for decades. Watch for fraud/bribery, but there's nothing at all wrong with the concept.— pj katauskas
- hotelguy, and you know that because? Seriously, you could be right but then again, you could be crazy. Apologies to Billy Joel, and hotelguy, couldn't resist. There are lot of young singles, marrieds and marrieds with kids up there. I bet if a hotel were built that didn't charge CCity rates, family and friends visiting NoLibs residents might create a demand.— pj katauskas
@HandNik - seems, since you mention "taxes for the rich" that you are unaware that we have a flat rate of income tax in Pennsylvania. Everyone pays the same percentage and there are virtually no deductions. Do you pay income tax? If 'RACP' (which is a brand name for pork) were eliminated, all the taxes that go to pay the debt service on 'RACP' would instead go to pay governmental expenses (the general fund) and taxes could be lowered by that amount. Seems Mr. Blatstein is eating a huge helping of pork.(how ironic is that). One alternative to cutting off any more pork might be that the State take an ownership interest in these projects, proportionate to the pork they dish out. For instance, on a $100 million project, if we fork over $10 million in pork, we retain a 10% ownership interest. Then, when the project showers him with gelt (profits), we the taxpayers who are saddled with paying the debt service on his pork would share in the returns with lower taxes. That seems fair. Sound tasty to you?— phluphya19147- 19147, I like the ownership interest idea.— pj katauskas
- Blatstein is a crook. He owed Driscoll and Torcon money.
Pj Katauskas is clueless. Blatsteins project in Northern LIberities was privately funded. That is a contradiction in PJ's position. He brings up a successful PRIVATE job as a reason to use public funds for additional jobs. That is stupid. The future jobs should be funded by Blatstein and Blatstein can keep the profits. If Blatstein wants to use MY money then give me the profits and credit for fixing up the hood.— womblast - We should eliminate public housing. Once public money is invested all the hoodrats move in and destroy everything. If we eliminate public housing the hoodrats will go back to N. Philly where they belong. Crime will drop, the schools will improve and the tax payers will return.— womblast
- @junethe4th- I beg to differ that the article was not about taxes. It was about one of the myriad forms of State spending. The State has no money. All money the State spends comes from the taxpayers. If the State borrows money as they do to dish out pork to private developers, the taxpayers are saddled with paying that debt back to the bondholders along with interest. Bit by bit by bit.— phluphya19147
- You know, womblast, you really need to learn how to read carefully. Here's what I actually said: " I don't know if Blatstein got any public money for NoLibs, but it wouldn't bother me if he did." And name-calling is really pretty juvenile. But then, of course, maybe you really are 14.— pj katauskas
- PJ Katauskas. If you do not know if the Northern Liberties project had public money then why would you use that as an example of why Blatstein should get public money for future projects??????? Wouldn't the Northern Liberties success as a PRIVATE project be an example of why Blatstein should NOT get ANY public money?— womblast
- I used NoLibs as an example of a good inner city development project, i.e., one that it wouldn't have bothered me if the state/city had chipped in, because Blatstein seems to have pulled it off, or at least the area looks promising. You been up there lately? You still need some remedial reading.— pj katauskas
- just not the right time for this stuff.— Paul Deon
- Good point, Paul, although maybe it spurs employment in the private sector?— pj katauskas
- How do you get your hand in the pork barrel? You need to "know people". How do you get to "know people"? Spend some money. You know, the old "pay to play".— DonQ
- James, wouldn't that be the R-3, not the R-5, to WaWa?— pj katauskas
- PJ. You are out of touch. Do you live in section 8 housing? The reality is the public housing destroy good neighborhoods. When there is public housing all the ghetto hoodrats infultrate the neighborhood and the neighborhood turns into a ghetto. That is what happened to SW and West Phill and it is happening right now to NE and S. Philly. We need to eliminate all public housing.— womblast
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- Fortunateson. Why shouldn't the rich be rewarded? Didn't Obama give a speech last week at Masterson encouraging kids to work hard, get jobs and eventually become rich? Your plan is moronic. You basically want to punish the people that work hard and reward all the Demohoodcrats who are too lazy to go to school and get jobs. Explain why you would reward someone who is too lazy to go to school and get a job? The real problem is all the hoodcrats who don't pay any taxes not the rich who already pay most of the taxes.— womblast
- @phluphya19147, thank you for your civics lesson. You are right, this is not about a grant program that is administered by politicians, with not transparency as to who is behind the project and at a time when the State is hard pressed for funds. Smells like pork to me.— junethe4th
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it was only a matter of time until the taxpayers found out about this.
It happens in all states and Federal government gives gazillions but they call it affordable housing and various people friendly names.
Most of the information about this give away ( and mind you this money was unded to fund the very development that supplied the housing bubble.)
it is a huge giveaway and the the numbers of people boht developers, plannig depts, zoning depts, and legislators is huge.
I would rather have all the information out— JaneSmith - A better question might be if the Philadelphia is getting its fair from the state. Considering the tax base of the region, and the fact that it is clearly the economic engine for the rest of the state, is it getting its fair share of capital spending? Oh, and stadiums are not necessarily "private" economic development project. The city of Philadelphia technically owns Citizen's Bank Park, even if all the money it generates goes to Ryan Howard et al.— bobcitydoc
- A better question might be if the Philadelphia is getting its fair from the state. Considering the tax base of the region, and the fact that it is clearly the economic engine for the rest of the state, is it getting its fair share of capital spending? Oh, and stadiums are not necessarily "private" economic development project. The city of Philadelphia technically owns Citizen's Bank Park, even if all the money it generates goes to Ryan Howard et al.— bobcitydoc
- Public money takes some of the risks out of private money investments in real estate ventures. A company, real estate investment group (to which many of us are invested and might not even know it), and an individual developer may not be able to invest in things such as upgraded sewage, electrical and communications infrastructure in order to complete what would otherwise be a viable development, particularly in far out suburbs and older, neglected parts of the city and inner suburbs. The state is not cutting Blatstein a check to pay for wings at Hooters. Any investor is able to get state and federal favorable loans for viable housing/community developement projects. Since most of us don't have the expertise/experience needed to plan and present such large community developement projects to Harrisburg and the tens of millions of dollars of private equity to make such projects work, we pool our money into REITs or into stocks of companies such as Toll Brothers in order to take part in such developements. Blatstein has worked the system with decent results, but if I see him buying rounds for the entire bar one night, I will get a little more suspicious.— gfstallin
- Blatstein is not deserving of public tax dollars to help him make more money. We should be investing in education and infrastructure to help build up our economy. We can't afford to give $100 million to a capitalist developer. Call Ed Rendell and Dwight Evans -- tell them we need better schools and services for our taxes. Northern Liberties was bring gentrified before Blatstein stepped in. The young families, the artists and the creation of Liberty Lands park made it an urban oasis before his dorm-style housing brought in the transient frat-boy element.— Bollocks
- No open and competitive bidding? That's not good for The Forgotten Taxpayer
— bobguzzardi - The Pennsylvania Constitution seems relevant but ignored. If this money is not for "municipal [ government ] improvement", then how is it that government money can be used at all?
Delegation of Certain Powers Prohibited
Section 31
The General Assembly shall not delegate to any special commission, private corporation or association, any power to make, supervise or interfere with any municipal improvement, money, property or effects, whether held in trust or otherwise, or to levy taxes or perform any municipal function whatever.— bobguzzardi - Another Constitutional provision of relevance:
Commonwealth Credit Not to Be Pledged
Section 8
The credit of the Commonwealth shall not be pledged or loaned to any individual, company, corporation or association nor shall the Commonwealth become a joint owner or stockholder in any company, corporation or association.
— bobguzzardi - SO WHY ARE OUR PANTIES IN SUCH A BUNCH BECAUSE SOMEONE IS CREATIVE ENOUGH TO WANT TO SEE JOB GROWTH IN OUR CITY? HATERS!
If you want to be complaining you should be complaining about real scandals costing taxpayer's trillions:
http://www.guardian.co.uk/business/2010/dec/02/us-federal-reserve-bailouts-multinationals— RightOn
