Developer stands to reap millions from state capital budget

Philadelphia developer Bart Blatstein is poised to receive just shy of $100 million in state funds to help bankroll several development projects - including $25 million to refurbish an office building that he is trying to buy from the state.

The financing help for Blatstein's projects is included in the state's capital budget, which the legislature is expected to send to Gov. Rendell later this month.

Although Rendell still has the ultimate say over who gets funding, the inclusion of money for a well-known and successful private developer such as Blatstein has reignited criticism that the capital budget is turning into a cash machine for the wealthy and politically connected.

And there is little accountability - the identities of lawmakers who propose projects are not made public.

"I'm deeply disturbed by the state's recent trend of financing for-profit entities," said Rep. Michael O'Brien (D., Phila.), whose district includes two of Blatstein's projects that could get capital dollars.

O'Brien said he did not think it a good use of capital dollars, particularly amid the state's recession-ravaged economy that has led to steep cuts in social-service programs and funding for libraries and state parks.

Blatstein said his projects would create jobs, generate tax revenue, and help sustain revitalization in many city neighborhoods.

Aside from money to rehab the State Office Building at Broad and Spring Garden Streets, Blatstein is on tap to get $45 million to open a 45-room hotel with a banquet facility next to the Piazza at Schmidts in Northern Liberties and $25 million to build an 86-suite, boutique hotel at Second and Poplar Streets, also in Northern Liberties.

The State Office Building project would get $25 million from the capital budget. Blatstein wants to redevelop the office tower into a residential space and has been negotiating for months with the state to buy it for $23 million.

"These are shovel-ready projects that are going to create lots of jobs and tax revenue and keep everything going in developing neighborhoods," Blatstein said.

Rendell spokesman Gary Tuma said Rendell would look at Blatstein's projects once the capital budget bill reached his desk and decide then whether to fund them.

The capital budget generally contains money that the state borrows to improve public infrastructure or for projects that have some other public benefit, including ones that create jobs and stimulate the economy.

This year, portions of the capital budget have come under scrutiny for containing projects that do not appear to fall under that definition.

The governor generated weeks of negative headlines for designating $20 million for a new library on the campus of Philadelphia University named for U.S. Sen. Arlen Specter and a new policy center in Johnstown named for the late U.S. Rep. John Murtha.

Rendell also routed $9 million for the Ardmore Transit Center being developed by another big name in Philadelphia real estate: Carl Dranoff.

Blatstein's projects are included in a wish list compiled by the House when it passed a capital budget bill in the summer. That bill is now in the Senate and could be approved in the next few weeks. It contains hundreds of millions of dollars in projects, including $20 million for an upscale hotel and spa with a golf course in Chester County by private developer Albert M. Greenfield III.

Only a small portion of that will eventually get funded by Rendell.

Rep. Curt Schroder (R., Chester) said he voted against the capitol budget because "the danger is that the process becomes political - and that the projects that get the most attention are those with the best and highest-paid lobbyists."

It is unclear who in the legislature is sponsoring Blatstein because the capital budget process is cloaked in secrecy.

Generally, lawmakers insert projects into the capital budget, but the document does not identify who sponsors what project. The budget includes only the scantiest details on what each project is - sometimes, the only information available is an address and a one-sentence description of the overall nature of a project.

In Tuesday's interview, Blatstein would not identify his sponsor.

O'Brien said he wasn't the sponsor. Rep. Babette Josephs (D., Phila.), whose district includes one of the projects, said she wasn't, either.

Sen. Larry Farnese (D., Phila.) said he also was not the sponsor and was under the impression the Governor's Office had inserted the project. Tuma said it had not.

Regardless, Farnese said, he wants Blatstein to get the money because he has "a proven track record of success" and a long list of development projects that have helped revitalize city neighborhoods.

"This is going to be an economic boost to the city," Farnese said of the projects.

Blatstein is credited with helping to turn Northern Liberties into a destination neighborhood with hip restaurants, cafes, and galleries.

His company, Tower Investments, is developing a $30 million retail complex in the neighborhood, anchored by a Pathmark supermarket. Blatstein has said he intends to follow up over the next several years with additional projects, including high-rise apartment towers, townhouses, and a one-acre green park.

He is also the developer of the Piazza at Schmidts, the upscale commercial development bounded by shops, entertainment, and fancy residences.