A Fresh Perspective

A Fresh Perspective

On the road to economic Development with Representative Adam Harris

Adam-Harris

PACB President/CEO Nick DiFrancesco (ND): As Chairman of the House Commerce Committee you sit on the front lines of driving economic growth in the Commonwealth. What is your philosophy for the committee? What are some of the important pieces of legislation you have worked on this cycle?

State Representative Adam Harris (AH): First and foremost I wanted to take the committee on the road to see how our state investments benefit the Commonwealth. We toured our regional Ben Franklin Technology Development Centers and met with numerous manufacturers and entrepreneurs from across the state. During budget season these investments are simply numbers on a spreadsheet but I really wanted to get our members out to see the positive impacts they make. State funded economic development is a double edged sword, however. You want to make sure you are making targeted investments that pay off for the taxpayers and create jobs, but you don’t want to invest public money in areas where private investment is more than capable of meeting the needs.

One very interesting issue we stumbled upon while working on updating the State’s Money Transmitters law was whether to include virtual currency, such as Bitcoin, in the law. The issue of virtual currency sparked a very healthy discussion about its long term stability and whether it should be treated as a currency or a commodity. Ultimately we decided to leave virtual currency out of the law but I’m sure this will be an issue that will need to be addressed at some point in the future if virtual currency continues to grow in popularity.

My counterpart, Chairman Curtis Thomas, and I worked together on an update of Title 15, more commonly known as the state’s business entity law. This legislation modernizes Pennsylvania’s law on partnerships and limited liability companies. With the help of the Pennsylvania Bar Association’s Title 15 committee we were able to update the law to ensure that our business laws were not only as modern as possible, but that they also were in alignment with uniform language that is used throughout the country.

In addition, we passed legislation that would provide a waiver of any state business fees for veterans or service-disabled veterans who start a business in Pennsylvania. Veterans experience an unemployment rate that is nearly 25% higher than the general population. This legislation, known as the Start Ups for Soldiers Act, passed the House unanimously and is awaiting action in the Senate.

ND: You started off your career as a legislative analyst for the House Commerce Committee. What are some of the changes you’ve seen over the years in terms of Pennsylvania’s economic development and business climate? What are some of the trends you are seeing now?

AH: Pennsylvania has drastically scaled back our investment in economic development. Our budget is about one-third of what it was a decade ago. We are learning to do more with less, but I do worry that we are falling behind some of our competitor states, particularly states like New York that have embarked on a very aggressive marketing campaign aimed at attracting new businesses.

One major positive step forward was the elimination of the Capital Stock and Franchise Tax (CSFT). This tax was gradually phased out over the past decade and our current business tax structure now makes us much more attractive to companies looking to relocate or start here in Pennsylvania. I’m pleased to hear that Governor Wolf is also interested in looking at adjusting our Corporate Net Income Tax (CNI) rate. At 9.99% our rate is one of the highest in the nation and is a major impediment to new job creation in our state.

ND: From poor ratings from Moody’s Investor Service to Standard and Poor’s, the budget impasse was not kind to Pennsylvania’s economic outlook. What are your thoughts on Pennsylvania’s economic health in the near future?

AH: The bi-partisan budget agreement that was reached this year has helped calm some of the fears of rating agencies. We showed a willingness to work together and crafted a budget that more adequately funds our mandated programs and can pay our financial obligations going forward. However, our looming pension debt continues to be a drag on our financial ratings. I am hopeful that this Fall we can work together to craft a proposal that will curb our long term pension obligations while putting us on pace to begin paying down our unfunded liability. Any type of meaningful compromise will most certainly contain both a curtailment of future benefits for new employees as well as a dedicated funding stream to pay down the debt we have already accrued.

ND: Community banks are said to provide about 50% of all small business loans across the country. What role do you think community banks play in shaping the future of economic development in the state?

AH: Community banks are the backbone of many small communities. They are respected and trusted because of their long record of community service and proven stability through tough economic times. Many first time homeowners or entrepreneurs feel confident in utilizing the services of community banks because they can make a personal connection with the person handling their financial requests. That is the type of individual attention that you just won’t get with some larger banks or online lenders. While consolidation is a growing concern for small and medium sized banks, I still see a very vibrant future for community banks across the country. We need to ensure that the regulatory environment continues to give community banks the ability to compete and survive in this highly competitive industry.

ND: Can you tell us more about City Revitalization and Improvement Zones (CRIZ)?

AH: The City Revitalization and Improvement Zone (CRIZ) program was established by Act 52 of 2013 to spur new growth in cities that have struggled to attract development. The goal is to help cities revive underutilized or vacant downtown areas. A CRIZ is an area of up to 130 acres comprised of parcels designated by an authority. First, a tax baseline is determined for the parcel – which simply means determining the amount of taxes this area generated before it became a CRIZ. Then, State and local taxes collected within a CRIZ that exceed this pre-CRIZ tax baseline will be retained by the local authority and used to repay debt service incurred by the authority. The authority can borrow money for economic development projects while giving the assurance to lenders that this revenue stream will be available to repay the debt. This unique tool is currently being used in Bethlehem, Tamaqua, York and Lancaster cities. Any future CRIZ zone would need to be authorized by the legislature and the Governor.

The Commerce Committee was able to tour the Bethlehem CRIZ and speak to local leaders about the program’s effectiveness. Through these discussions we identified several problems with the original law and drafted some corrective language that was included in the 2016-17 budget agreement. These changes will hopefully allow the CRIZ program to be an even more effective tool in the coming years.

ND: Having come off of a tumultuous budget season what are your thoughts on what lies ahead for the Pennsylvania legislature for the remainder of the cycle and moving into 2017?

AH: I believe we have good momentum heading into the Fall of 2016 and early 2017. The tone of the negotiations this budget cycle was much more cordial and you didn’t see either side resorting to divisive rhetoric in the press.

The Governor has made an effort to periodically reach out to members of the legislature to get our feedback on his initiatives and also to determine which issues are of the greatest importance to us. While we won’t always agree I don’t foresee another long budget stalemate in our immediate future.

ND: You have a very busy schedule as a legislator. Can you tell us what you like to do in your spare time?

AH: I’ve been playing in an ice hockey league once or twice a week for about the past 20 years. If you aren’t careful politics can begin to dominate nearly every aspect of your life. I really enjoy having something to look forward to every week that has absolutely nothing to do with my job. I’ve been able to meet lots of people from the area which allows me to keep a nice balance between work and having a private (non-political) life.