Restore PA bill introduced, but devil is in the details (Severance tax attached)

Not many across the state would argue with the idea that we have infrastructure challenges — broadband internet deficiencies, blight, and transportation issues, among others.

Gov. Tom Wolf previously announced the Restore Pennsylvania initiative aimed at addressing those issues.

The legislation for that initiative was introduced this week.

And while the administration touts the benefits and called for the General Assembly to pass it quickly, there’s at least one giant legislative stumbling block in that path — the proposal would, at the core, be funded by a severance tax on natural gas production.

Administration officials participated in a conference call on Tuesday coordinated by the Pennsylvania Newspaper Association of which the Times Observer is a member.

Those participating included Wolf’s Deputy Chief of Staff Sam Robinson, Secretary of Intergovernmental Affairs Eric Gutshall, and Deputy Secretary of Policy and Planning Erin Smith.

Gutshall said that an “overwhelming amount of positive feedback” has been received from a wealth of municipalities of all sizes, state-wide associations, and a host of other organizations in addition to a rally in the Capitol rotunda.

“The message from all of these communities and individuals is that they need help with infrastructure,” he said, saying the program would give “more tools in the toolbox (on issues) that have been plaguing communities for a long time. The legislature needs to pass Restore Pennsylvania today. It’s not something we can wait for. They need funding today to be able to address these problems.”

Robinson said that the legislation was introduced with “very strong support in both chambers” and highlighted the “bipartisan nature of legislation (which is) not something we always see in Harrisburg.”

According to the Pennsylvania Capital-Star, 16 of the 99 co-sponsors in the 203-member House of Representatives are Republicans while 25 senators — including four Republicans and one Democrat breaking from the proposal.

Robinson said that Restore Pennsylvania centers on $4.5 billion worth of “a high-impact infrastructure that will be driven out to all corners of the Commonwealth” broken into 11 categories.

The categories include broadband internet, flood mitigation, disaster response, green infrastructure, blight demolition and redevelopment, stormwater infrastructure, brownfield clean-up, contaminant remediation, business development, energy efficiency and transportation infrastructure, according to a report from the Pennsylvania Capital-Star.

That will include funds, Robinson said, for “targeted investments in state-owned roads… sort of neglected back roads in Pennsylvania, the more rural, less traveled roads that get less attention from the state.”

He explained that some of the categories will only have one funding program while others will have multiple. Some will be developed while existing programs are included in the proposal.

A seven-person board would be created to make decisions on what categories would be funded at what levels. Robinson said the funding

Robinson said the plan is “not (to) drive out $4.5 billion all in one go.” He said 1/4th of the funds would be sold to the bond market and then invested and he spoke about the importance of being flexible in how the categories are funded from year to year based on needs across the state.

“Many of the funding areas have existing programs that have been doing good work,” he said. “In other areas, we are creating new programs.”

He indicated the allocations would be a competitive process with efforts to ensure that “we’re having agencies that are respecting regional diversity (to) make sure funding is spread across the state.”

But like any proposal, the devil is in the details.

And the devil, in this case, is the funding mechanism — a severance tax on natural gas and a multi-billion bond issue on the front end.

“The governor identified the severance tax as the best way to pay for this initiative,” Robinson said. “The governor is not closed off to a conversation on that subject” but believes “a severance tax is overdue.

“We believe it’s a smart way to fund it.”

The state would then take out a bond, potentially with a 20-year payback, to get the money in hand. “We want to be able to push these projects out tomorrow,” Robinson said, rather than waiting 20 years.

Press Secretary J.J. Abbott said the bond debt would e “paid solely from the proceeds of the severance tax. (We are) going to operate as if the best time to do this is yesterday.”

A severance tax hasn’t been successful in the General Assembly before but officials believe this time is different because the revenue is dedicated to specific purposes such as blighted buildings, flood levees and other items that are very publicly visible as opposed to just additional revenue for the general fund.

Robinson also noted that Pennsylvania produces just 21 percent less natural gas than Texas but Texas receives 700 percent more revenue from impact fees.

“(We) believe these companies should pay a fair share so (we) can invest back in Pennsylvania, spreading that impact more broadly across the state.”

Officials said the severance tax rate would fluctuate based on the market prices for natural gas.

Robinson said their proposed timing would be to collect the tax effective June 15, 2020.

“Given the groundswell of support,” he said, “we really want to see the legislature move forward as quickly as possible.”