Position Paper on Plan to Revitalize PA's Mid-Sized and Smaller Cities, Boroughs and Townships

Introduction:

"The revitalization of Pennsylvania's mid-sized cities and smaller communities IS the revitalization of Pennsylvania."
-- Ed Rendell

Too many of Pennsylvania's mid-sized cities and smaller communities have not benefited from our state's recent economic successes and remain plagued by high unemployment and population loss, blight and brownfields. While there has been no shortage of resources or commitment in the Commonwealth to fund economic development efforts in recent years, little has been done to specifically foster meaningful redevelopment in our state's mid-sized cities and smaller communities. State redevelopment efforts in these key communities have been premised on the hope that modest endeavors will have a catalyst effect, and that revitalization of their downtowns, Main Streets and neighborhoods will occur almost serendipitously.

To achieve the level of revitalization many of our communities need, we can no longer tinker around the edges, shifting pots of money from one politically favored economic development program to another. By reforming the state's "one-size-fits-all" approach to economic development in communities as diverse as Oil City and Scranton, Williamsport and Pittsburgh, Erie and Easton, the "The Rendell Plan to Revitalize Pennsylvania's Mid-Sized and Smaller Cities, Boroughs and Townships" represents a new way of working with local leaders and new hope for our state's mid-sized and smaller communities.

And most of all, the "Rendell Plan" realizes that if we do not revitalize the infrastructure of our cities and make them attractive places for industrial, commercial and residential development, then no amount of incentives will persuade people or businesses to come back to our cities. The "Rendell Plan" recognizes that before we can have economic development, we must have community development.

As Governor, Ed Rendell will make the Commonwealth a full partner with local governments in revitalization plans and projects. He will substantially increase the Commonwealth's financial investment in urban redevelopment. He will encourage and assist regional redevelopment planning and provide predevelopment assistance to maximize impact-oriented concepts and designs. He will "corral" the scattered delivery system of state government to ensure that all departments and agencies distribute assistance based on common priorities and to maximum benefit. He will promote the unique and distinctive qualities of Pennsylvania's smaller communities, capitalizing on tourism opportunities, heritage conservation, downtown "Main Street" commerce, and the cultivation of small business. He will help smaller communities gain the technology and telecommunications infrastructure to effectively compete with larger cities. He will inventory and address legislative and other barriers to genuine revitalization -- including local tax reform, landlord/tenant laws, eminent domain, building codes and zoning.

In short, the "Rendell Plan" for the economic revitalization of Pennsylvania is predicated on renewed attention to our core communities. It is about a meaningful commitment of resources. It is about making the state an effective partner with local government in facilitating revitalization. And most of all, it is about an "urban agenda" permeating all aspects of state government.

The "Rendell Plan" is not intended to be a cure-all for the problems facing Pennsylvania's communities, but rather an essential starting point. The importance of a strong, growing and vibrant economy to the overall strength of a community can not be overstated. However, for our communities to revive and thrive, we must also improve the quality of education for our children, increase safety in our neighborhoods, and provide access to affordable health care for all Pennsylvanians. Truly rebuilding our communities will take all of that and more.

And that is how any economic development plan should be viewed -- not merely as a way to increase employment, but as a first step to revitalize Pennsylvania's communities. This revitalization will take planning, coordination and commitment. As Governor, Ed Rendell will seize the opportunity to make real and permanent change for the good of every community in Pennsylvania.

Forging a Genuine Partnership with Pennsylvania's Local Communities to Foster Economic Revitalization

"We must empower our local community leaders and recognize that what is good for our communities is good for the economy."
-- Ed Rendell

In 1996, Governor Ridge merged the Department of Community Affairs and the Department of Commerce to form a new single Department of Community and Economic Development (DCED). The fundamental premise behind this merger was that community development and economic development were inherently linked to the extent that economic policy or activity has a direct effect on community condition and, conversely, that community development (e.g. housing or infrastructure) has direct relevance to economic health.

Unfortunately, the theoretical linkage between economic and community development has not been realized to its full potential. Economic development, particularly in the form of business incentives, was the admitted top priority of the Ridge Administration. Community development was never successfully integrated into economic development policy and the bureaucratic division between the two disciplines remains vast.

Under Ed Rendell's leadership, this will change.

As Governor, Ed Rendell Will:
· Create a "Governor's Economic Development Cabinet" and Empower a Cabinet-Level Official to Oversee and Coordinate all Economic and Community Development-Related Programs and Agencies: As one of his first acts as Governor, Ed Rendell will create the "Governor's Economic Development Cabinet" which he will chair personally. This newly formed body, based on the successful models of the National Economic Council (NEC) formed by President Clinton in 1993 and the Economic Development Executive Committee formed by Rendell in 1994, will be comprised of State cabinet officials who have a role in the revitalization of the State's communities and economy [including the Department of Economic and Community Development (DCED), the Pennsylvania Department of Transportation (PennDOT), the Department of Conservation and Natural Resources (DCNR), the Department of Environmental Protection (DEP), Licensing & Inspection, the Executive Directors of the Pennsylvania Housing Finance Agency (PHFA) and PennVEST and the Historical and Museum Commission].

Rendell will also appoint a Director of Economic and Community Development. The Director, who will report directly to the Governor and have the authority to intercede and consult with cabinet agencies on all matters of economic and community development policy, program development and administration, will serve as Vice-Chair of the "Economic Development Cabinet."

As rehabilitation of the Commonwealth's urban areas is an integral part of rebuilding the state's economy, Rendell will additionally create a new Special Assistant for Urban Affairs who will serve as a member of the new "Economic Development Cabinet." This individual will be specifically charged with coordinating state efforts to rehabilitate blighted urban areas, ensuring that the urban priority is addressed - from funding decisions to the location of public buildings and facilities.

· Implement a Multi-Agency "Single Statewide Application for Financial Assistance": Pennsylvania's economic and community development efforts remain badly fractured, scattered across multiple agencies, tens of programs and scores of different funding sources. Elected officials are compelled to trek from agency to agency, hat in hand, searching for a series of small grants and loans to fund their development projects.

Recently, the Department of Community and Economic Development (DCED) implemented a Single Application process for all of its community and economic development financial assistance programs. This welcome process change was designed to break down the bureaucratic silos within DCED, and to award funding based on merit rather than for successful "grantsmanship."

As Governor, Ed Rendell will expand the Single Application process to include other agencies of state government in order to coordinate eligibility requirements and funding cycles - and to assure that common priorities are realized to their maximum effect. Municipal applicants will have the opportunity to apply for project financing from agencies and departments across government by using a "Single Statewide Application for Financial Assistance" administered by DCED. The new state-wide application, with rolling application deadlines, will effectively create "pools" of available funding for redevelopment from what had been "pockets".

· Provide Technical Assistance to Local Communities to Help Plan and Implement Redevelopment Projects: Local governments (whether county, city, borough or township) are the lead players in Pennsylvania's economic revitalization. To assist their redevelopment, the Commonwealth must ensure that local officials have the technical expertise to develop and implement meaningful revitalization programs.

Under Ed Rendell's leadership, the Commonwealth, through the Center for Local Government Services and in cooperation with local government associations like the County Commissioners Association, the League of Cities, the Boroughs Association and the Association of Township Supervisors, will provide extensive educational and technical assistance to local governments -- to inventory the range of revitalization tools in order to develop and execute meaningful local revitalization initiatives. Ed Rendell will ensure that the Center for Local Government is staffed with fully-trained economic development specialists, including the addition of development professionals from the private sector.

· Create the Pennsylvania "Anchor Partner" Program: Many of Pennsylvania's towns are defined by the presence of a leading "citizen" partner in local community and economic development initiatives -- the local university, the local hospital, or a major corporate employer. These large institutions often serve as the largest local employer and just as frequently as the most significant local benefactor. However, these major employers are not always effectively integrated into the development plans of the community.

As Governor, Ed Rendell will create the "Anchor Partner" program to formalize this relationship and facilitate meaningful dialogue, consensus-building, and genuine community-wide initiatives.

Providing Targeted Redevelopment Funds for
Mid-Sized and Smaller Cities, Boroughs and Townships

"Our cities are in need of repair. In order to attract and retain businesses, we must rebuild our communities' infrastructure."
-- Ed Rendell

Even with improved performance and coordination of Pennsylvania's economic development efforts, the Commonwealth's mid-sized and smaller cities, boroughs and townships will continue to need specific, targeted financial assistance. Many of Pennsylvania's mid-sized and smaller communities, due to their size, do not qualify for direct assistance from the Federal government and oftentimes do not have the initial capital necessary to undertake meaningful revitalization activities.

Unless we help cities become vital, vibrant places where people want to live and work, all the economic development assistance in the world isn't going to turn them around. If we do not address the systemic infrastructure problems many of these communities face - endemic blight, tracts of the most desirable property unusable for development, and inadequate housing supplies - these communities will remain unattractive to developers.

Under Ed Rendell's leadership, this will change.

As Governor, Ed Rendell will:

Provide $50 Million for a New "Remodel Pennsylvania" Program: In recent years, state government has done little to foster meaningful redevelopment in the mid-sized and smaller cities, boroughs and townships of the Commonwealth. Unlike Philadelphia and Pittsburgh, these smaller communities do not enjoy the benefit of large federal block grant assistance to use as leverage for substantial undertakings. Simply put, the state has not committed sufficient resources for the type of redevelopment that can make our communities more attractive for business and residential growth.

As Governor, Ed Rendell will increase the Housing and Redevelopment Assistance appropriation to a level of funding more commensurate with need and with a priority on funding urban projects. Grant funding will be increased more than three-fold, from current levels of approximately $15 million to $50 million. Priority will be established for blight elimination activities, including site acquisition, demolition, rehabilitation, and new construction. Recognizing, as well, that prohibitive costs in the early-stages of project development (e.g. architectural, engineering, legal, etc.) often prevent projects from even getting to the drawing board, this program will offer assistance to local communities for project planning and predevelopment assistance loans. Also, the enabling statute itself, which is over 40 years old, will be re-examined, to determine whether it can be improved or needs to be replaced.

Create a $100 Million Revolving Loan Fund to Turn Blighted Property into Desirable Real Estate: The Commonwealth is littered with abandoned and blighted industrial properties and conservative estimates place the number of the state's brownfields at 450,000. While these properties are often situated in commercially desirable locations (such as riverfronts or on major thoroughfares), the prohibitive costs of demolition or environmental remediation make them unmarketable. While the tax forgiveness of Keystone Opportunity Zones (KOZ) is a powerful incentive, it is often not enough to justify the private investment in upfront site preparation costs. Without access to these key tracks of property, developers and business leaders will be compelled to push expansion further from cities' edges, expanding sprawl and endangering urban areas' resurgence.

As Governor, Ed Rendell will create a $100 million revolving loan guarantee fund (initially funded by an economic development bond) to spur redevelopment of these key sites. This initiative will allow redevelopment authorities or industrial development corporations to acquire appropriate sites and execute necessary demolition or remediation activities before a project to occupy the space is identified and financed and to perform the necessary site preparation to make the underlying real estate marketable. These loans will be secured by a Commonwealth lien dischargeable by the locality through the sale of the property, the revenues generated through tax increment financing or other financing mechanisms negotiated by the Commonwealth and the local authority. In order to be eligible for these loans, the Commonwealth must determine that future development of these properties will be commercially feasible.

Create a $100 Million Revolving Loan Fund to Encourage and Finance Increased Use of Tax Increment Financing (TIFs) in Redevelopment Projects: Tax increment financing, enabled by state statute, is a wonderful vehicle to generate substantial capital for redevelopment projects in blighted areas within our cities. However, TIFs remain grossly underutilized in the Commonwealth -- particularly in our smaller communities -- because they are complicated to assemble, and made even more daunting by the high transaction costs associated with bond financing usually necessary to take advantage of TIFs.

As Governor, Ed Rendell will create a $100 million revolving loan fund (also financed by an economic development bond) to encourage the use of TIFs in development projects. Loans will be made out of this revolving loan fund to local governments and/or county and local redevelopment authorities. These loans will be secured by the incremental tax revenues to be generated by the particular economic development project(s) to be supported by the loans (with an appropriate cushion for projected tax revenue shortfalls) and then repaid out of the actual incremental tax revenues. This process will drastically reduce the complexity of TIF financing and the associated transaction costs, thereby significantly improving access to this form of financing across the Commonwealth. A designated "Tax Increment Financing Specialist" will aggressively promote the TIF concept, and will provide education and technical assistance throughout the Commonwealth.

Utilize the $150 Million Increase of Private Activity "Volume Cap" for Urban Redevelopment: In recent years, a disproportionate share of the Commonwealth's $750 million allocation of private activity bond financing ("volume cap") has been used for industrial development -- usually in the suburban industrial park context.

As Governor, Ed Rendell will restore balance among the uses of this valuable development resource. In January 2002, the Commonwealth's annual volume cap allocation increased to $900 million. Without minimizing his commitment to current uses, Ed Rendell will target the $150 million allocation increase for specific use in urban development projects, including, commercial, industrial, and much needed residential projects. This profound and targeted commitment will encourage private investment and will stimulate a renewed sense of our cities as "sites of choice".

Secure $100 million in HUD 108 Funding for Small Communities: Pennsylvania's larger cities and counties have successfully utilized the HUD Section 108 Loan program to achieve substantial leveraging of Community Development Block Grant (CDBG) dollars. Simply, the HUD Program 108 allows CDBG entitlement communities to pledge future CDBG dollars in order to finance a substantial present redevelopment undertaking. Municipalities which are ineligible to receive CDBG funds directly from HUD receive a yearly allotment through the Commonwealth's Small Communities Program and do not have the same ability to utilize Section 108 directly, or to leverage their future CDBG allocations.

As an example of what the program can be used for, Pennsylvania is blessed to have an abundance of magnificent publicly owned structures that often serve as centerpieces of our communities - such as courthouses, city halls, and even jails. In spite of their irreplaceable historical, architectural and symbolic significance, costs for necessary repairs are often prohibitive. Funds provided under this initiative will allow municipalities to provide long overdue attention to such vital public infrastructure and their potential reuse for economic development.

To remedy this inequity, as Governor, Ed Rendell will create a $100 million HUD 108 loan pool modeled after Philadelphia's successful and nationally acclaimed pool. Pennsylvania will pledge as security for this loan pool future CDBG dollars targeted for the state's Small Communities Program, funds which are passed through to Pennsylvania's mid-sized and smaller cities. This revolving economic and community development loan pool will be accessible by Pennsylvania's small communities for impact-oriented projects. With access to this additional funding, small communities will be able to consider more serious plans for the elimination of slums and blight and for more ambitious redevelopment. Consistent with the HUD 108 program, loans out of the pool will be secured by a subordinated lien on the project itself. In the end, however, future CDBG allocations out of the Small Communities Program to the local applying jurisdiction will provide the ultimate security for each loan.

Provide $5 Million in Additional Funding for the "Main Street Program": Beyond Philadelphia and Pittsburgh, so many of Pennsylvania cities and its larger boroughs and townships are defined by their downtowns and by signature Main Streets. These downtowns and Main Streets - the key to small business development and tourism - are often marred by endemic blight and need specific assistance to revitalize.

As Governor, Ed Rendell will provide $7.5 million for the state's Main Street program to help rebuild these key downtown areas. In addition to continuing the Main Street Manager and façade-improvement components of the program, these funds will be used to finance hard construction and substantial redevelopment within central business districts, to implement a cooperative marketing campaign (to promote living, visiting and investing in our downtowns), and to help municipalities plan revitalization strategies. He will promote the unique and distinctive qualities of Pennsylvania's smaller communities -- capitalizing on tourism opportunities, downtown "Main Street" commerce, and the cultivation of small business.

Provide $2.5 million for a New "Elm Street Program": While we attend to revitalizing our central business districts, we cannot ignore the ring of residential areas that surround the commercial cores of our cities, towns and villages. The success of any revitalization effort must include an attempt to address the housing, commercial and infrastructure needs of our neighborhoods.

As Governor, Ed Rendell will provide $2.5 million for a new "Elm Street Program" to address the deterioration experienced by many of our neighborhoods.

Triple Funding for PHFA's Homeownership Choice Program: Developing affordable housing is an integral part of reviving downtowns. The Pennsylvania Housing Finance Agency (PHFA) has successfully demonstrated a powerful program which integrates affordable housing and new construction into larger urban revitalization plans. PHFA's innovative Homeownership Choice Program has succeeded in promoting more comprehensive, mixed-use development projects throughout the Commonwealth -- utilizing the basic premise that new, attractive and affordable homeownership opportunity, coupled with mixed-use commercial and industrial development, can measurably contribute to urban revival.

As Governor, Ed Rendell will augment PHFA's $5 million commitment to the Homeownership Choice Program with an additional $10 million in state funding.

Provide $50 million for Technology and Telecommunications Infrastructure: The businesses located in our downtowns are vitally important to Pennsylvania's local and regional economies, and moreover, have tremendous unrealized potential to tap into the global economy. Having access to reliable and affordable telecommunications systems has become a prerequisite of doing business in the "New Economy."

As Governor, Ed Rendell will provide $50 million to help local communities develop the infrastructure necessary to support their downtown businesses.

· Lift the cap on capitol redevelopment assistance by $500 million: Capital redevelopment assistance has proved to be a tremendously impactful economic development aid for important projects throughout the state. The Ridge administration lifted the cap to make available $500 million in 1998, however, the vast majority of those funds were committed to projects in Philadelphia and Pittsburgh which has helped to spur significant growth in our Commonwealth's two largest cities.

As Governor, Ed Rendell will move immediately to raise the cap an additional $500 million and commit a majority of these funds to Pennsylvania's small and mid-size towns and cities. Because capital redevelopment assistance funds must be matched, this will produce nearly a billion dollars for the revitalization of these areas.

Source of Funds

The "Rendell Plan" will have more than $2 billion of total economic development impact on the state. These investments in Pennsylvania's future are vital to the revitalization of the Commonwealth's mid-sized and smaller cities, boroughs, and townships. Like most good investments they will ultimately return dividends many times greater than the initial dollars invested. But these investments are also very affordable.

Some of the above investments (the "volume cap" increase and the HUD 108 loan program) have no cost at all to the general operating budget as they leverage already existing capacity.

Others (the TIF revolving loan fund, the infrastructure loan fund, and the increase in the Capital Redevelopment Assistance bonds) are all bond-funded, so the initial cost is relatively small and the final cost represents only a fraction of the financial impact of the programs.

Only the "Remodel Pennsylvania" and the "Main Street", "Elm Street" and "Homeownership Choice" programs require annual operating budget support, at a cost of only $55 million.