Commonwealth Financing Authority's $2.3B in state projects examined
HARRISBURG — An obscure state authority established nearly a decade ago to jump-start the state's economy has grown into an agency that has spent more than $2.3 billion on a range of programs and now faces scrutiny in doling out millions of dollars in transportation-related projects.
The Commonwealth Financing Authority, an independent body under the Department of Community and Economic Development, is “the most important state entity that no one knows about,” said Eric Epstein, co-founder of reform group Rock the Capital. “It is not just another authority, board or commission. The CFA is the oil that lubricates the political engine that makes Harrisburg run.”
The authority approves grants and loans designed to stimulate job growth. It uses several pots of state money, including revolving loan funds and fees from natural gas drilling. Unique among state agencies in structure and scope, the CFA has a seven-member board of four legislative appointees and secretaries of DCED, the Office of the Budget and Department of Banking.
Project approval requires five affirmative votes, four of which must come from legislative appointees.
The CFA's latest assignment is to distribute $40 million in transportation funds in 2014-15 and up to $65 million in 2017-18, part of a multibillion-dollar plan lawmakers passed in the fall. Critics say the grants are a version of “walking-around money,” or WAMs, but supporters say CFA projects are publicly vetted, unlike the old WAMs that leaders secretly doled out for lawmakers' pet projects.
The agency and its legislative supporters point to transparent operations. The CFA has an Internet presence through DCED that shows awards, annual reports, board member biographies and meeting dates, six of which are scheduled for 2014.
But the website has no links to agendas, minutes or project votes. The agency's openness will become an issue because defenders claim its transparency is one of the things separating it from WAMs, millions of which were funneled through DCED.
Steve Kratz, a DCED spokesman, said department staff members receive applications and review them before they're considered for a vote.
“The CFA board then meets to consider the qualified applications that meet the guidelines of the program being applied for,” Kratz said.
Individual lawmakers can write letters of support to enclose with applications, said Scott Dunkelberger, CFA executive director. But those are not part of the official scoring system, he said.
Since its founding in 2004, the CFA has approved nearly $1.2 billion in grants, loans, guarantees and investments from 15 programs. Collectively, these yielded matching private investments of $2.8 billion, authority records show. An additional $1.2 billion in CFA awards came from four other programs, including those funded through gambling-related funds and Marcellus shale gas drilling fees.
Most of the awards, Dunkelberger said, require reimbursement.
At its last meeting of 2013, the authority sent $2.2 million to Westmoreland County to expand public sewage service to industrial sites and residential communities. An $800,000 award went to Lawrenceville Technology Center for building water and sewer infrastructure, and Development Capital Investors, a sister company of real estate developers PenTrust in Robinson, received $4.8 million toward building the Homewood Suites by Hilton hotel in the Strip District.
Nathan Benefield, director of policy analysis for the Harrisburg-based Commonwealth Foundation, said few voters understand the CFA's operations, which he considers a version of corporate welfare.
The authority “is like the minotaur from Greek mythology — half man, half beast, surrounded by a labyrinth that is nearly impossible to navigate,” he said.
State Sen. Jim Ferlo, D-Highland Park, a critic of the transportation bill because he claimed it contained WAMs, said the CFA has a high standard for approving projects, many of which have gone to the Urban Redevelopment Authority of Pittsburgh, of which he is board treasurer.
“It's a competitive process,” Ferlo said. “You're not just going to throw money.”
Downtown Pittsburgh-based developer and political operative John Verbanac, an authority member representing Senate Republicans, said he takes his “fiduciary responsibility very seriously.”
On the board for about a year, he said he has not observed much political jockeying over projects.
“You will see some spirited debate on policy, rather than individual projects,” Verbanac said. There are projects that don't make it to the board level, he said, and the board holds some pending more detail.
As for the notion that legislative appointees do the bidding of a leader, Verbanac said: “It's certainly not true in my case. I've always found that (assertion) a little cheap.”
Stephen Miskin, a spokesman for House Republicans, said anyone who thinks their appointee, Michael Karp, rubber-stamps caucus priorities “has no clue.”
The authority was forged in a 2004 deal when former Democratic Gov. Ed Rendell wanted Republicans controlling the legislature to approve his $2 billion “economic stimulus” plan. Republicans were not sure Rendell “would give deference to legislative considerations,” said Stephen MacNett, former general counsel for the Senate GOP. What emerged was a $1 billion plan funneled through the CFA.
The former governor said he was concerned at the time that politics could bog down the authority, but by and large, he said, it hasn't. He acknowledged the authority's scope “probably” has grown well beyond its intended purpose.
Rendell contends the CFA helped keep the state unemployment rate below the national rate: “It was the only way to vote the stimulus package in. Stimulus worked brilliantly.”
Though critics such as Epstein say the jury is still out on CFA, Anthony May, a former aide to the late Democratic Gov. Robert P. Casey, said the political structure of the board “hasn't been detrimental, on balance. On balance (the authority) has been a good thing,” he said.
Brad Bumsted and Melissa Daniels are Trib Total Media staff writers.