PhillyDeals: Would Janney have really left city without deal?

Janney CEO Timothy C. Scheve.
Janney CEO Timothy C. Scheve.
Posted: October 20, 2011

Janney Montgomery Scott says it helped Pennsylvania and its towns and counties borrow $5 billion from investors for public projects over the last five years.

"If you'd give us more business, we'd be happy to increase that," chief executive Timothy C. Scheve cracked Wednesday to Gov. Corbett at a reception celebrating Janney's new headquarters at 1717 Arch St., owned by Brandywine Realty Trust. The move will happen next summer.

But Janney wanted more, besides fees for securing funding for the state's various projects. The company, based in Philadelphia for more than 100 years, made a show of shopping around for a new out-of-state headquarters as its Market Street lease neared expiration.

So Pennsylvania promised $11.5 million in grants to encourage Janney to keep its 550 relatively high-paid financial jobs in Philadelphia, clinching the deal.

Janney is owned by Penn Mutual Life Insurance Co., which posted profits of $85 million last year.

Would Janney really have abandoned Philadelphia, without those taxpayers' millions?

"It was a competitive process," Scheve said, when I asked. Delaware's rival offer, especially, "was very, very competitive," he added.

Janney's people "were great to work with, and they are always welcome in Delaware," confirmed that state's economic development chief, Alan Levin.

Delaware is eager to replace thousands of jobs cut by struggling Bank of America Corp.'s credit-card business in Wilmington. Hundreds more jobs were lost when Wilmington Trust Co.'s overly generous development-lending policy ran the onetime du Pont family bank into the ground, forcing its sale to M&T Bank.

Why did Corbett, a Republican who has felt obliged to cut college subsidies and services to poor people in order to balance the state budget, feel he had to give Janney millions, most of which was originally requested for Janney by his predecessor, Democrat Ed Rendell?

"It's a national competition" for companies and jobs, Corbett said.

"I tell [New Jersey's Gov.] Christie I'm going to steal all his jobs," Corbett said. "That's what makes this country great: We're not afraid to compete."

Even with taxpayers' money? Right, said Corbett: If states didn't have to compete for employers' favor, "we'd get fat and lazy."

I suggested Corbett at least ask Janney to take a haircut by cutting prices on its next few state general- obligation bond issues. He laughed.

State government's job nowadays "is to do one thing: Grow jobs, jobs, jobs," Corbett said. "We are making Pennsylvania a business-friendly state."

Servitude

Speaking of bond dealers, it's not just Harrisburg that's in trouble for borrowing too much.

The state's old industrial cities, including Philadelphia, Chester, and Pittsburgh, among others, have been under state financial supervision "for a long time now," notes State Rep. Chris Ross (R., Kennett), head of the Urban Affairs Committee.

Even Bucks County's triple-A credit rating is in danger due to the general slump, Moody's Investor Service said Tuesday, after downgrading a couple of upstate counties by multiple notches in recent weeks.

Four General Assembly committees are scheduled to meet in Harrisburg on Thursday to review Act 47, the 1980s law that governs the typical state intervention in municipal-financing meltdowns.

Critics of the state's multiple governments and its property-based local-tax regime say the various crises point to a need for major restructuring of how Pennsylvania pays for local government.

Mark Schwartz, a Bryn Mawr lawyer, is representing Harrisburg City Council in its attempt to seek federal bankruptcy reorganization in defiance of state mandates. The way Schwartz sees it, Pennsylvania's political and business establishments keep poor towns in perpetual debt by pushing expensive public projects.

Act 47 doesn't fix the problem, he argues - it keeps towns borrowing and "in servitude" under state supervision. The property tax that towns rely on for local funding and public schools "makes no sense" for old urban centers where property values have fallen. Schwartz says cities have reason to fear new laws that would amount to a power grab.

But Harrisburg is an especially dysfunctional case, Corbett told me.

The governor agrees that financial pressure is pushing other cities to find ways to cut costs, especially pension obligations, and to consider merging services with suburbs and counties. But he doubts voters, or the political parties, are ready for a major restructuring of local government finance.

It takes a very long time to get legislative agreement for even basic changes in the way taxes are collected and apportioned, said Jason Brehouse, legal counsel to State Rep. Jane Earll (R., Erie), head of the Community, Economic and Recreational Development Committee. "People say: 'We're part of a global world. Can our local municipalities keep pace?' And then they'll praise local government [and defend its independence]," Brehous said.

"It's easy to talk about [reform], but for political and practical reasons, it becomes a lot harder."


Contact columnist Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or @PhillyJoeD on Twitter.

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