Innovation Philadelphia scrambling for new funds

After getting her copy of Mayor Nutter's budget and five-year plan last week, the executive vice president of Innovation Philadelphia - a regional economic-development office - had a familiar sinking feeling.

For Kelly Lee, it will be the third time in three years she has had to scramble to save the primarily city-funded agency from being zeroed out of the budget.

It has not been an easy sell, given the amorphous nature of the group's mission and the criticism it has faced for the size of its executives' salaries.

When Mayor Nutter presented his budget to City Council last Thursday, Innovation Philadelphia was not included. Founded in 2001, the office had been a favorite of former Mayor John Street and, at one point, had been headed by his longtime top adviser George Burrell.

"We've gone through this before," Lee said last week after seeing Nutter's budget. "The difference is that this is a new administration with a different agenda."

Then she added, "The good news is that their agenda is our agenda."

Lee said that when Andrew Altman, the city's new commerce director, starts work on March 3, Innovation Philadelphia will try to meet with him as well as with Nutter. Meantime, she said, she will develop a strategy with the board about the best way to make the group's case.

"At this point, we are going to talk to all the right people and hopefully be added to the budget," she said.

Even though the agency had been a favorite of Street's, he had not included it in his five-year plan he provided to City Council last year when introducing his budget for the current year.

"The idea was that city funding was going to go away. They clearly had noticed that it was going to happen," said Nutter's finance director, Rob Dubow, who also served in the Street administration.

Was is the operative word, because in June, at the last minute, Street championed the group's cause once again, working with Councilwoman Blondell Reynolds Brown to restore $2.5 million in funding to the program for this fiscal year, which began in July.

Lee said the agency's focus on economic and job growth was vital to the region. She has been invited to speak about the agency's latest effort - a study of the creative sector in Philadelphia - in Buffalo, Detroit and Sheffield, England, Lee said.

Next week, Innovation Philadelphia will hold a networking event for about 150 business and arts leaders at the Sole Food restaurant at the Loews Philadelphia hotel.

"It's kind of an M.B.A. meets the M.F.A., and how they need to work together," she said, referring to holders of master's degrees in business and fine arts.

In an interview last month, acting city commerce director Duane Bumb said the Nutter administration was looking to have the city handle more of its own business development activities in-house.

"Innovation Philadelphia does lots of good things," Bumb said. "We are cognizant of the fact that they have programs we need to protect."

But, he said, considering that the agency focuses on regional development, it needed to attract more regional funding.

In response, Lee said the organization had won a U.S. Department of Labor grant worth $5.1 million over three years to manage the Delaware Valley Innovation Network's workforce development efforts in Philadelphia and 13 surrounding counties in Pennsylvania, New Jersey and Delaware.

According to Innovation Philadelphia's most recent Internal Revenue Service filing, nearly $3.5 million in funding in 2006 came from the City of Philadelphia, with less than $350,000 coming from other government agencies.

In that year, Innovation Philadelphia reported that nearly 78 percent of its total spending - $1.87 million out of $2.4 million - went to "management and general" expenses. In comparison, $537,071 was spent on "program services," according to the filing.

Programming included grants to the Mid-Atlantic Angel Fund and CareerPhilly, which has held internship fairs to keep area college students in the city.

During 2006, Kelly said, Innovation Philadelphia paid salaries to overlapping chief executive officers - Richard Bendis, the group's founding chief executive and chairman, and Burrell, a politically connected Street appointee.

"Bendis helped with the transition," she said. He left in October 2006. Burrell began in June.

Burrell earned $225,000 a year until he stepped down in September, Lee said. She earns $165,000 a year. Bendis' compensation topped $410,000 in 2005, his last full year on the job.

She also said management costs look high because the group's accountants allocated all staff positions to management instead of including them in program costs, as some nonprofit groups do.

The group's acting chairman is Stephen M. Goodman, a partner at Morgan, Lewis & Bockius L.L.P. He replaced Rob McCord, a Montgomery County venture capitalist who resigned from the board to prepare to run for state treasurer in Pennsylvania.