EDITORIAL: Marcellus Shale Tax a must for Pennsylvania

DelCo Daily Times

For the last couple weeks, the Daily Times Editorial Board has been interviewing candidates for state and local offices. There hasn’t been a lot of happy news coming out of those sessions — particularly those with incumbent state legislators.

Republicans and Democrats alike say Pennsylvania is staring at a fiscal abyss in the next year. With an economy that barely has a heartbeat, it’s being projected that the state is looking at a deficit of anywhere from $3 to $5 billion.

Making the situation worse is the fact that the man who is most likely to become the next governor — Republican Tom Corbett — has flatly ruled out any new tax or tax increase to help fill that gap.

(Corbett this week did propose one revenue producer: Selling the state store system. But that’s an idea that’s been bandied about Harrisburg for decades, always with the same result: An ignominious death.)

There is another source of revenue that most lawmakers deem promising. That is a proposed tax on natural gas extraction in the Marcellus Shale region — a rock bed the size of Greece that lies about 6,000 feet beneath New York, Pennsylvania, West Virginia and Ohio. Since late 2008, gas drillers have crowded the area, which they believe could supply the entire country’s natural gas needs for up to two decades.

Almost all of the natural gas produced in the United States is subject to a severance tax, which produces a significant source of revenue for a wide variety of services — as well as dealing with the inevitable environmental problems the extraction process, called fracking, produces.

Pennsylvania is the only state in the nation that does not impose a severance tax of any kind. That, according to the Pennsylvania Budget and Policy Center, has led to a $100 million loss of potential revenues in the last year alone. The commonwealth is giving away, for free, a one-time resource to energy companies that gladly pay for it everywhere else in the nation, the center said in a report issued Thursday.

Now, $100 million is a drop in the state’s money pit. But it’s nothing to be ignored.

How likely is it that the state Legislature will do the right — and fiscally responsible — thing?

It’s not looking good at this point. Harrisburg Democrats, seeing riches, are proposing substantial tax penalties; Republicans, saying they fear a big tax will scare drillers away, want minimal levies. Gov. Ed Rendell, who knows Corbett opposes any extraction tax, has been trying to play the middleman and bring those parties together.

But Thursday, he said that process “clearly is dead” for this year and blamed GOP intransigence. A spokesman for Senate Republicans said they were surprised by his stance, and they are willing to continue talking.

Perhaps it will take the November election to get the process going again. If Corbett wins, as expected, that may spur responsible members of both parties to come to an agreement.

Clearly, the tax is the right thing to do. The prospect of drowning in $5 billion worth of red ink makes it the necessary thing to do, too.

Taxpayers Fund Building Amid the Slump

Philadelphia Inquirer

Much of the scant construction in Pennsylvania in the near future will be funded by taxpayers, including the projects crammed into the $1.6 billion "Public Improvement Projects, Transportation Assistance Projects and Redevelopment Assistance Capital Projects" signed by Gov. Rendell last week.

My colleague Suzette Parmley has written about the $10 million offered developer Robert Ambrosi for his conversion of the former Pincus Bros. clothing factory in Old City into a hotel, apartments, and stores.

Our Harrisburg staff detailed the state's plans to immortalize the political papers of lame-duck Sen. Arlen Specter and the late Pentagon contract specialist Rep. John Murtha.

There are a lot more like those packed into House Bill 2289.  

City projects include:

$20 million for the proposed American Revolution Center in Center City, plus $5 million for the Independence Visitor Center.

$15 million for "redevelopment" at the former Tasty Baking Co. at Fox and Roberts Streets bordering Nicetown and East Falls.

$10 million for projects, including the Specter library, at Philadelphia University in East Falls.

$10 million for a "research/education facility" at Drexel University.

$5 million for "mixed-use development" in South Philly's Grays Ferry section.

$5 million for Norris Square Civic Association's redevelopment project in North Philly.

$5 million for Aspira Inc., which has a long track record recruiting and supporting Latino students for college, to "develop" the former Cardinal Dougherty High School in Olney.

$3 million "for a new Community Legal Services building" to house antipoverty lawyers.

$750,000 for "campus expansion" at Philadelphia College of Osteopathic Medicine on City Avenue.

And in the suburbs:

$15 million for concrete construction at the Keystone Industrial Port Complex in Falls Township.

$10 million for "blight removal" and reconstruction at Chester's Union Square Neighborhood Revitalization District.

$7.5 million "for a mixed-use commercial/retail development" at Fornance, Wood, and Locust Streets in Norristown.

$5 million for "construction, renovation, and improvements in the Bucks County remodeling enterprise zone" in Bristol Township.

$5 million for "the retail development of a 35-acre site in Upper Darby."

$1.5 million for "an industrial facility project" at an unnamed site in Montgomery County.

Where'd we get the money for Pennsylvania concrete contractors and construction? We're borrowing it, from the regular sale of state bonds to private investors, Rendell spokesman Gary Tuma told me. Taxpayers will be financing these projects for decades, as they do with most of what governments build.

A lot of the projects require additional funds from private developers, Tuma said. Plus, the state Office of the Budget can impose conditions before releasing the money.

So maybe not all the projects will get built - this year, or ever. Some of the money will end up going to projects in next year's bill.

There is no all-wise Harrisburg agency picking economic winners. No "invisible hand" of the free market killing off the worst proposals.

This is a grassroots political process, if by grassroots you mean politically adept developers and private and community interests pushing legislators to let them get their hands into the public wallet.

Grabbing Pennsylvania public funds for your firm and your buddies, in the name of higher social goals, goes back to Ben Franklin and Robert Morris, as Charles Rappleye's new Morris biography reminds us.

From the public's perspective in these job-scarce times, the process is only tolerable if a lot of people are hired to build these projects, and run them, once they're done.

America's Warehouse

Besides tax-funded projects, almost the only action in Pennsylvania commercial real estate these days is out in the warehouse districts clustered along I-78 from Allentown down to Chambersburg, where the grandchildren of miners and steelworkers seek work pushing pallets and packing truck containers.

Pennsylvania's toll-free Interstate belt, along the inland truck route from New York to Washington, now ranks as America's Warehouse, the postindustrial home of places where stuff made somewhere else gets parked until East Coast consumers and businesses want it.

Check, for instance, the latest "industrial space" report from Philadelphia-based national landlord Liberty Property Trust.

So far this year, Liberty has leased three million square feet of warehouse space - that's as much as all the office space in Philadelphia's two Liberty Place towers, plus the Liberty-built Comcast Center - in the state's warehouse belt.

New tenants include companies such as Diversified Distribution Systems Inc. , of Minneapolis , which is moving from a smaller Baltimore facility into a nearly half-million-square-foot facility near Chambersburg in search of extra space and a "more advantageous labor market," as president Gary Langer told me.

We're now America's Warehouse? "You pretty much nailed it," says Liberty spokeswoman Jeanne A. Leonard.

Bill Shouldn't Uproot Families

The Gloucester County Times

Should New Jersey's public employees live in the state? State Sen. Donald Norcross, D-5, of Camden, thinks so, introducing a bill last week that would require all public employees who work in new Jersey to live in New Jersey.

The residency requirement would cover state, county, and municipal employees as well as public authorities, agencies and the educational system, including state colleges.

 "If you want a paycheck from New Jersey, you should live here and pay your taxes here," says Norcross, D-5 of Camden. "It is blatantly unfair for our public employees to collect salaries and benefits from the taxpayers of New Jersey while paying taxes to another state."

Philosophically, the measure makes sense. Some municipalities and counties in New Jersey already have residency requirements.

Practically, though, Norcross' bill needs more real-world consideration. In fact, it would be a better bill if it were prospective. That is, make a move to New Jersey a condition of employment for new hires, and for current public employees who change public-sector jobs.

Under the legislation as proposed, S-1730 would give current public employees who live out of state an overly generous 2 years to establish a principal residence in New Jersey. New employees would be required to establish New Jersey residency in just four months.

Allowing the extra time for current employees to make the move is necessary because of the distressed housing market, the senator explained: "I want to do this in a way that will not create any needless hardship."

Trouble is, requiring employees to uproot spouses and settled families can be a hardship in itself. We're talking about requirements that kids change schools, sports teams, etc., and that people sell their homes just to keep jobs they already have.

What about a couple living in, say, Bucks County Pennsylvania, where one partner already has a job in Pennsylvania with a residency requirement, and the other works for the State of New Jersey? The proposed rule would mean one partner would have to quit his or her job or they'd have to live separately.

It's doubtful that making families split up is what Norcross intended. Why not "grandfather" New Jersey workers who stay in their current jobs? And, split the difference on the move-in grace period for everyone else. Make it one year, enough time to get out of a rental lease, or to sell a house.

That still leaves the issue of tax justice. Norcross is right that public employees who stream across the bridge pay significantly less in property taxes, and may pay lower income taxes.

Our state's taxpayers should be able to get some benefit from "grandfathered" interstate commuters who take a public paycheck. If it's legal, what about a non-resident surcharge on these employees' health benefit contributions, or some kind of "payment in lieu of taxes"?

State workers are already being asked to make a number of sacrifices on behalf of a distressed state budget. A forced sale of their homes should not be one of them.