State’s ugly budget fight runs into Amazon courtship
HARRISBURG — Mass transit system? Check. Big population center? Check. Top-notch universities? Check. Predictable state government with a top-notch credit rating?
Pennsylvania business boosters and economic development professionals couldn’t help noticing this week that state government got slapped with another credit downgrade amid an ugly budget stalemate just as officials in the Philadelphia and Pittsburgh regions are polishing their resumes to try to land the golden goose: Amazon’s second headquarters.
Perhaps Amazon doesn’t care that Pennsylvania state government is prone to unpredictable fights over an entrenched post-recession deficit, as long as the right taxpayer-paid financial incentives are greased into law.
Perhaps Pennsylvania’s lousy credit rating is of no concern as long as it has low taxes. Perhaps Amazon will see the stalemate — the second in three budgets under Democratic Gov. Tom Wolf and this Republican-controlled Legislature — as hardly different from the gyrations of any state government.
“There’s a recognition of that, for sure, but we don’t feel like it is a unique enough situation to cause Amazon or any other observers to say, ‘Wow, what’s going on there?'” said Matt Cabrey, the executive director of Select Greater Philadelphia Council, which is collaborating with Philadelphia Mayor Jim Kenney’s administration in a pitch to Amazon.
Amazon declined to answer questions about it, while officials involved with the regional applications — including Pittsburgh Mayor Bill Peduto’s administration — downplayed the practical effect.
Dennis Davin, Wolf’s economic development secretary, said Amazon will look at Pennsylvania’s business environment, not its budget fisticuffs.
And while the stalemate and downgrade are not causing handwringing or panic among Pennsylvania’s business leaders, there is head-shaking, said Gene Barr, president of the Pennsylvania Chamber of Business and Industry. That’s because how Pennsylvania state government is viewed from the outside is crucial to attracting business investment, said Barr and others.
“That doesn’t spur economic development or investment, when you have such a credit downrating,” said Senate President Pro Tempore Joe Scarnati, R-Jefferson. “And that credit downrating affects not only state government, but municipal governments, school districts, and it raises the cost of business significantly.”
Bids are due to Amazon on Oct. 19. It plans to select a winner next year and construction could begin in 2019. The $5 billion price tag, projected over 15-17 years, would be the biggest-ever business investment in Pennsylvania, at least on par with Shell’s proposed construction of a petrochemical refinery in suburban Pittsburgh.
For Pennsylvania, the stakes may be higher than many other East Coast states.
An Amazon headquarters with up to 50,000 employees could revive the economy in one of the nation’s oldest states. It could also ease worrisome projections that show the growth of Pennsylvania’s retirement-age population ballooning in the coming decade, while its working-age population shrinks.
Should Amazon select a site in Pennsylvania, the Legislature will be called on to approve a package of economic incentives. One of Amazon’s requests in its eight-page request for proposals is a total value of financial incentives being offered, as well as the timelines necessary to secure the approvals of each incentive.
Davin said it should be an easy case to make to lawmakers that an Amazon campus in one part of Pennsylvania would benefit the whole state and produce revenue that makes up for whatever financial breaks the state delivers.
“It would take special legislation, and I think we will be in a good position to get everybody on board,” Davin said.
To be sure, the Legislature is willing to shell out for private business. In 2012, lawmakers approved an uncapped tax credit for 25 years to secure Shell’s commitment to a petrochemical refinery. The tax credit is a nickel per gallon of ethane used.
Meanwhile, the state footed well over $700 million in economic development incentives in the 2014-15 fiscal year, the Legislature’s Independent Fiscal Office reported.
Rep. Todd Stephens, R-Montgomery, who has pushed to squeeze out “corporate welfare,” said Pennsylvania has repeatedly failed to use it wisely.
Still, it would be terrific if Amazon picks Pennsylvania, Stephens said, and he would support the right kind of incentives.
“We would have to make sure that it would truly create lasting, family-sustaining jobs for Pennsylvanians,” Stephens said, “which has not been the case for most of our economic development programs in Pennsylvania.”