Integrity and Transparency Reforms Needed in State Capital Debt Program, State Auditors Say

HARRISBURG – Legislation to reform a state funding program which critics say is overly abused, the Redevelopment Assistance Capital Program (RACP), got a new boost from an audit released today by the state Auditor General, according to the bill’s author, House Majority Leader Mike Turzai (R-Allegheny County), author of the bill.

The state audit found that from July 1, 2005, through June 30, 2011, more than 500 projects were funded and approximately $1.5 billion in state dollars was paid to local economic development authorities. According to the report, the state was unable to verify whether the money helped generate jobs or other touted benefits.

“Not all debt is bad, but the time has come to end funding political pet projects through borrowed money,” Turzai said. “The state audit confirms it. These capital projects deserve public scrutiny and careful evaluation, and my legislation makes that happen.”

RACP provides a list of private or public economic development or infrastructure projects, funded by borrowed money, from which the governor can select recipients of that borrowed money.

House Bill 2175, which passed the House by a vote of 184-9, would put new controls in place to curtail mounting levels of public debt for projects funded by RACP as well as make the process more transparent and accountable.

Turzai’s legislation would reduce the RACP debt ceiling, initially to $3.5 billion and then incrementally until it reaches $1.5 billion. The bill does not eliminate the economic development grant program, but redefines it and makes it financially viable.

The legislation redefines the program to finance buildings and related infrastructure projects with a total cost of $1 million or more that would generate or maintain substantial economic activity and have a substantial regional or multijurisdictional economic impact. Such projects could include roads, bridges, tunnels, waste disposal, storm water, sewage or water infrastructure, and bridges or roads when part of an economic development project.

Projects on the current itemization list that have not been authorized as of Dec. 31, 2011, would expire. To be awarded from any future itemization acts, a project must comply with all new RACP requirements.

Finally, the legislation would create a new stringent review and approval process within the Office of the Budget. The Budget Office would develop eligibility criteria and establish guidelines for the process.

The bill is awaiting action in the Senate.