This morning (Feb. 25) I attended the annual meeting of the Oil Region Alliance as a representative of the city.
(I think I was the only Democrat there, which is not unusual for Venango County.)
Of course, the ORA was also in this morning’s paper with the announcement that the county intended to close this morning on the purchase of the West Unit from the Alliance. The deal has come under a great deal of criticism, as does the ORA on a somewhat regular basis.
Frankly, most of the criticism is not constructive and much of it unwarranted if not simply specious. My personal opinion is that more of the non-constructive criticism has to do with personalities and politics than the work of the economic development agency and that is not good for the county and our future.
I was not privy to the details when ORA purchased the West Unit and in turn leased it to the county, nor am I privy to all the background and details of the current deal selling the West Unit to the county.
My understanding is that the previous board of commissioners asked the ORA to structure a package to obtain the West Unit so that the county could centralize all its human service agencies. The county thought it would be able to cover the lease costs through state reimbursements, avoid the burden of owning the building and in turn the ORA would have an income stream.
However, circumstances changed with the decrease in state reimbursements and the county found the state funds would no longer cover the lease costs. It then determined it would be better to own the building. The ORA struck a deal to sell the West Unit to the county. The deal gives the ORA $1 million for the buy out of the county’s lease. A lot is being made of that, claiming it is a bad deal for county taxpayers.
But is it? As I understand it, the county still saves money in the long term, and just as importantly the ORA is left with some money to undertake economic development.
How exactly are we to do economic development if we are unwilling to pay for it? To me, the county deals, both the original one and this one, sound like a win-win – maybe not perfect, but better than anything else I’ve heard.
I understand there can be differing views of the deal between the county and the ORA, and of the agency itself.
Still, I’ve not heard the critics suggest a better way of funding economic development or any specifics of how to do a better job. I have heard a lot of potshots claiming the ORA is a failure. That’s not constructive criticism, but rather meaningless chatter.
The absolute most BS criticism I’ve heard was from a local businessman who said – and I paraphrase – “our unemployment has gone up under the ORA’s watch.” We are in the midst of the worst economic times since the Great Depression; just what would one expect?
ORA officials can point and did this morning to a number of very specific successes over the past year. Among them: Conair and WS Packaging (formerly Seneca Printing). Both companies could have been lost, but were kept here and are growing. They need to be given some credit for what they have done and continue to do.
I’m not beyond criticizing the ORA. I believe the leadership has too often been tone deaf and unable to grasp how some things they do individually or as an agency will be perceived and what the implications of that will be. High on my list of examples is ORA executives making personal political contributions to local candidates. That is bound to create political enemies. More importantly, the agency must strive to be absolutely politically neutral and perceptions play a huge role in that.
I have a real fear that the critics of the ORA/County deal will never let it go, that they won’t be able to say we lost, but let’s move on. That does not seem to be the way things are done in Venango County and we pay a price for that. (Think of the never ending threats of lawsuits whenever a decision is reached that some people don’t like)
The ORA is not perfect, but it is the economic development agency we have. Let’s work to strengthen it, not destroy it. If we criticize, let’s have workable suggestions for improvement in hand. We need everyone’s help.
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19 comments:
John, interesting blog. I am glad you decided to take on this issue. Does your opinion change when this framework is added?...
The ORA and the county just executed a deal in which county taxpayer dollars will pay 3.6 times the value of this building(total of 2.6M for mortgage + interest & the 1M buyout). On its best day, this building couldn't sell for 1M in this market. Since the ORA acquired the building they did not pay any money toward the mortgage, did not put up any of their own money and collected more than $500,000 in rent. In other words, in a matter of two years, the ORA spent $0 of their own cash, did not fully fix the building (even Commissioner Brooks acknowledges 1M in work is needed to be done), and earned 1.5M in windfall money (1M buyout + rent). Remember, this all occured behind closed doors...no one was offered a chance to improve upon this deal, it required a very questionnable exemption to be granted regarding the Vantage building in 2007, and even the legality of this deal is not exactly ironed out (I'm sure more will be told of this issue in the near future).
What piqued my interest in this deal was that I believe the 1.5M could be used far more effectively in this county than funding the ORA and their 1M+ overhead annual expenses. A quick glance at the ORA's operating financial documents should suggest why this much money was necessary in 2010 all of the sudden. The Human Services funding was not, actually, decreased...the county couldn't afford the $10,000/month increase in rent. It could still presently afford the rent before this increase. The proof is that the debt service on this newly executed deal is within 10% of that value. I would have hoped the ORA could have found it in their hearts to delay the rent increase or work more closely with the county to create a better deal. Sure the 3.6M buyout is better than the 8-9M lease terms, but that original lease never should have been entered into (it was boldly opposed then, but again, executed behind closed doors). Again, I stand by my statement that this deal was improving upon garbage with garbage. I want the ORA to succeed, as I want business & prosperity here. But, I do not believe the ORA should use multiple opportunities to funnel money from the county through real estate. The untold story here is the decrease in MH/MR services that will be required to afford this buyout (the extra 1M). Who knows how many social service consumers will no longer have service? I see the county in tremendous need of efficient and effective regrowth and development efforts. I firmly believe the excessive 1.6M (buyout + overvalued mortgage) could be invested or used to greater result than what occurred this week.
Because these deals were conducted exclusively behind closed doors among insiders (they all sit on each other's boards, etc...), perhaps a lawsuit is the only way to actually bring certain facts to the public's attention. Lawsuits make provisions for depositions & testimony. I guarantee you the major players in this deal have yet to be honest in public, as they are not required to do so at this point.
Overall I disagree with you that this deal is as simple, straightforward and beneficial as your blog makes it seem. Again I stress...the deal saved 5-6M from the lease. Even then, this deal was overvalued by 1.6M...what is so wrong with selling the building for what it is actually worth (not based on a very questionnable and non-current appraisal)...1M? If you were to study the ORA financial outlook since 2007, you will gain some insight as to why they found it impossible to actually sell it for what it is worth...perhaps you should consider the larger issue here. While it was an improved deal for the county (I agree with you), it certainly is not the most ethical option.
PS: on your final point...
Yes, the ORA is the only economic development agency we have. This is taken from their 2009 budget published on their own website:
2009 OVERALL BUDGET:
$3,593,130.00
MONEY SPENT CONCERNING ECONOMIC DEVELOPMENT:
$74,000.00 (2% of budget)
MONEY FOR STAFF SALARIES:
$945,147.46 (12.77 times spent on actual economic development)
Again, I challenge you and the taxpayers to think in terms of efficiency.
Food for thought, eh?
Mike,
You certainly provide food for thought, although as I'm sure you know there will be different interpretations of the data.
I’ll see if the ORA will provide a response and give their take.
It is also fundamentally important to note that the ORA structured the original deal at the request of the county and the same with the new purchase deal.
In regard your second post, I would argue that you cannot separate salaries from economic development. It takes people to do economic development and you have to pay them. Also, the ORA is not just the economic development agency but also the tourist promotion agency and the Oil Heritage Region, all of which is reflected in the overall budget and salary figures.
I’m still not sure whether combining everything under one roof was the right thing to do or not, but I do know the county/community was under a great deal of pressure to do so.
Furthermore, it would take a lot more information to make sense of any agency’s budgetary line-items. We don’t know, or at least I don’t, specifically what is or is not included in the economic development figure. Without knowing that, it has little meaning.
I give you a lot of credit for detailing your opposition and making thoughtful and cogent argument. Many of the opponents and critics have not.
However, I still feel a lot of the criticism of the ORA is not justified.
"This is taken from their 2009 budget published on their own website"
Would you please tell me where you found this information on the ORA website? I looked public reports and didn't find it there.
Thanks!!
Jodi,
On the far left of the ORA's home page is a list of subjects in a blue shaded area. Second from the bottom is public reports. On that page are a number of PDF files. The one listed 2009 Program of Work includes the agency's budget outline.
As with all agency budgets, it is easy to draw conclusions that may or may not be accurate. In my former life I had to look at a lot of budgets and always had to ask a lot of questions in order to understand what I was seeing.
This subject caused me to take a look at the ORA's listing of information and documents on its Web site. I only wish other organizations put up as much data and were as transparent. If nothing else, the ORA deserves a lot of credit for putting up as much as it does, including its 990.
Agreed on that last point, John.
I find it less than ingenuous that the blogger failed to mention that Heritage developement costs were 1,834,982 which is part of economic developement, or marketing valued at 262,586.
Alot of things go into the economic developement of the area, and to target one aspect is inane.
As John stated payroll must also be counted, any company in the world pays employees to get the job done, and their bottom line reflects that.
There are a litnay of grants that are applied for that make up that 3 million dollar number and should be remembered also.
I applaud your fervor but look at the whole picture.
Of course I understand that Heritage and Marketing can play a role in economically developing an area. I was very aware of those figures when I posted my original response, so please don't think me ill-prepared or naive. However, as you encouraged me to do, take a look at the big picture and study what those heritage & marketing projects actually were, and then answer me this question: did they contribute in the least to any economic development? I would argue a hearty "no they did not."
I also agree that companies require a certain amount of payroll to operate. I, myself, spend a substantial sum on my own company's payroll. What I contest, though, is the extremely high % spent on payroll, benefits, staff development, travel, and education in respect to the actual body of work accomplished. In other words, Mr. or Mrs. Anonymous, I am contesting that there are many companies or groups out there that could produce equal or better results using less than 30% staff expenses. In fact, according to industry standards, 15-20% is reasonable for economic development. In any case, for an area that ranks in the bottom 25% of Pennsylvania's economic output (by county), I consider myself to have the right to dispute a handful of six-figured salaries that are partially furnished with taxpayer money.
Speaking of funding, I also was well aware that the ORA receives grant money as part of the 3M operating revenues. That still does not cause me to alter my original challenge with respect to the 1M cash payment. Perhaps you aren't aware of this fact, but today the Commissioners requested all Venango County Human Service Agencies (CYS, Aging, MH/MR) to reduce their budget by 12%. I have heard that this will involve severe cutbacks to services especially in the Area Agency on Aging that are provided to local seniors. I am stunned that the county seems to have 1M cash to buy out a questionnable lease (I could furnish you about 20 items that may or may not be legal in that document), yet is willing to sacrifice services that are performing at a bare minimum as it is. I believe the ORA has demonstrated its true colors, agreeing to a deal that would require budget cuts to free the money. I am thrilled when they receive grants and other funds. I want them to succeed for many personal reasons. However, I don't find it useful or ethical to obtain taxpayer money through the clever guise of real estate. That is an entirely different ballgame than receiving grants, and it sets the county back another step or two in improving the quality of life for its citizens.
Again, thank you for pointing out those numbers. Rest assured that I am well aware of those figures, but maintain my position of disapproval and disgust regardless of them.
Thanks for wading into the water on this one John! I would tend to agree with Mr. Thomas that staff salaries appear to be heavy at the ORA. How many people does it take to do economic development? I also know firsthand that many accomplishments Randy takes credit for are not truly attributed to ORA (if at all) and that also tarnishes his credibility.
Regarding the West Unit, Randy made the comment in the paper that the County could not afford the lease payment if the HVAC system had been updated to work adequately and they knew going in that it wouldn't be. That to me is truly absurd. Who negotiates a lease and purchase of a building knowing they HVAC system is shot but DOES IT ANYWAY? And then tells the tenants "oh well it's an old building and old buildings are cold". They should have stopped the whole idea right there. I believe they (former commissioners) were set on finding a funding source for the ORA that could not be pulled and securing employment after the election. Now the County is forced to fix it. I do not really fault Mr. Brooks for this mess, however I would not give ORA the $1M. Nor should they have assumed the loan. Generally, the buyer gets their own funding at current market rates.
I absolutely agree we need a lead economic development agency and my firm donates to it. I am not in anyway impressed with Randy's leadership though. For instance, they have been "working" on the Brody's Block in Oil City for over two years now. It is now for sale. Most agressive economic development agencies would have dealt with that mess months ago, or buy it now and get it down. No, they are now going to run the risk of another underfunded fool purchasing it and letting it sit for another 5 years.
Perhaps the ORA could take some of their West Unit windfall/tax payer dollars and buy the building and take it down rather than banking the funds for their future salaries.
The "saved or created" line Randy uses regarding jobs isn't anymore believable than when the President says it. I think you would find it very enlightening if you contacted his 2009 success story companines and asked them what the ORA did for them. I know two that would tell you "virtually nothing" as I know the owners personally.
Really any agency can use new blood and new ideas every 5-10 years. I think the ORA is at that point now. This West Unit mess is truly a huge and costly failure in leadership and planning.
Yes, excellent points about the Brody Building. I am aware of several estimates given to demolish the building (which would require new sidewalks as a result of the damage). The lowest bid is at $80,000. While I would be happy to personally purchase and remove the building, I am having a hard time wrapping my mind around the fact that it would cost me six figures. I think the city should actually issue a zoning violation or two, putting the current owners on the hook to repair or demolish. They, certainly, have the blame on this one. And if they can't afford to do so, perhaps the city would be interested in buying it for $500 at tax sale instead. I have no desire to 'bailout' this LLC who have done nothing to contribute to downtown Oil City. As a building owner, myself, I am offended at such an attitude. I work tirelessly to be sure my property interests contribute positively to this place.
I can say with certainty that the ORA has done a great deal to try to resolve the Brody Building situation to the benefit of the city. It is much more complicated than it would seem. For starters, and this hindered some city code efforts, etc., the real ownership had to be sorted out.
No one is in a position to buy it without having the money in hand to demolish, something the city does not have, nor did the ORA. (The lowest estimate I have heard for demolition is much higher than that Mike cited. That is not to discount his estimate, only that it is much, much lower than anything I have heard.)
A series of code violation citations is probably among the reasons it is now on the open market. Going back a couple of years, the city tried working with the (purported) owners to get them to do something with the building and correct the code deficiencies. It could be argued the city should have been more aggressive early on. The building has recently been cited and declared blighted. (That itself is a lengthy process) The city could force demolition, but would have to pick up the cost and then lien the property. It is doubtful the more than a tiny fraction of the costs would ever be recovered.
There has been some discussion of trying to sue property owners to collect the cost of demolition, but it appears that might not be successful in capturing the costs. I suspect this is something we will explore in more detail.
In all cases of blight, code enforcement, condemnation and demolition, state law places a lot of burdens and costs on municipalities. In contrast -- from what I understand -- in Ohio it is possible for municipalities to go from citations to demolition in 30 days.
In a nutshell, what I’m saying is don’t sell the ORAs or the city’s efforts short on the Brody Block. If it was as easy as the two previous posts seem to indicate, it would have been accomplished.
I do have to say again that when you look at the ORA staffing and salaries, remember there is much more there than an economic development agency. Be sure to include that in whatever case you make.
I understand and appreciate the criticism of jobs saved/created. That is true of every EDA in the country, and every state economic development program. Back when I was a reporter I regularly wrote about state economic development programs (loans, grants, etc.) that would enable companies to save or create X number of jobs. If all those jobs had been saved or created Pennsylvania’s population would have doubled. Still, what is the alternative; to do nothing and let a business go down?
John, I'm glad you asked!
The alternative is to redirect those monies to small businesses and entrepenuers who will be able to invest and make it grow. Any economic development agency's agenda is admirable, I agree. But those agendas have historically done very little to actually create jobs, build businesses or develop products. In this West Unit scenario, I know many people and companies that could turn that 1,000,000 into 5,000,000 or more...not to mention all while building the area's resources and impacting quality of life. That's my point exactly! :)
(the system is eating itself alive)
"No one is in a position to buy it without having the money in hand to demolish, something the city does not have, nor did the ORA"
I would say that it is more a matter of priorities. For instance, yes, a new swimming pool is nice to have, however someone might consider a thriving downtown a better use of CDBG money. I never used the new pool once but I am downtown nearly everyday for some reason, if not just driving through.
Are you aware of what the ORA is spending on the "Overlook Park"? How many residents do they really expect to walk up there and sit to look at McDonald's golden arches?
It's not just a matter of priorities, it's a matter of leadership and critical decision making. It also boils down to a keen ability to get access to funds. With the billions in stimulus money available the ORA should have had numerous "shovel ready" (Brody's ?)projects to pitch.
I also certainly hope Mr. Thomas is inaccurate in his statement that the lease payment was only slightly higher than the County's new loan payment. If that is true, that deal was no more than a shady shell game - no money in, no money down & net $1 million! That really is criminal.
I just don't see the scrutiny regarding what the ORA is truly accomplishing from an economic development aspect. All it will take is a few board members to break from the pack and ask for real facts and figures then determine if the County is really getting the most for the tax payer's dollar. It really appears to be a lot of "smoke in mirrors" and "picking of low hanging fruit". I think all that fruit is picked and now they are just looking up to the sky and hoping something drops. Eventually, someone with some influence is going to ask where all the money is going and "heritage development" is not going to pass muster.
I would add that I am sure the employees at the ORA are working hard and doing their best. It's more a matter of effective leadership that appears to be lacking. The West Unit debacle can't be excused.
(Great blog - btw!)
The pool was before my time on council so I can't speak to a lot of the specifics. However, you must remember that the new pool was also a result of a significant community fund-raising effort that was not city-government led. I don't know off the top of my head how much CDBG money went into the pool.
It is imporant to note that CDBG money can only be used for projects that meet specific criteria. A lot of things are off the table, including many downtown possibilities.
That is a good point about board members challenging and asking questions. That should be the case with any organization, and often is not.
Again, I must say that from where I sit, the ORA is doing some positive things and has had some success. It's far from perfect, but it's operating better than some others I've watched over the years.
John, just to provide some concrete figures in response to the recent post above:
County lease payment (through Feb 2010, taken directly from my copy of the lease): $33,240 (office space) & $3,153.58 (common space) for a total of $36,393.58 per month.
Current mortgage amortization (taken directly from the DCED filings): $14,457.03 (mortgage payment) & $18,416.37 (sinking payment for 1M buyout & 767,971.97 balloon payment on Feb 1, 2018) for a total of $32,873.40.
Difference=$3,520.18 (-9.6%)
"Current mortgage amortization (taken directly from the DCED filings): $14,457.03 (mortgage payment) & $18,416.37 (sinking payment for 1M buyout & 767,971.97 balloon payment on Feb 1, 2018) for a total of $32,873.40.
Difference=$3,520.18 (-9.6%)"
Something definitely isn't adding up here. It appears the purchase only makes sense and truly benefits the County if you pull out the payment on the $1 million. Otherwise the reduction in the monthly payment is nominal.
I find it hard to believe the County couldn't come up with an additional $3,500 a month. I can believe that the ORA couldn't and more than likely couldn't make the loan payment and concocted this new plan to have the County bail them out.
Thank you Mr. Thomas for making this clear. Now, as you stated John, perhaps the ORA could address it. I am sure they will point to the savings the County will see over the term of the old lease. That really doesn't make sense, however, because you could argue that it would have made more sense for the County to buy the building to begin with and not enter into the bogus lease at all.
It's hard for me to see who wins in this other than the ORA. The County is stuck with an inefficient, overpriced, building they have to now repair and a modestly reduced monthly payment.
They could and should have done what the ORA did when they could no longer afford the rent in the Transit Building in Oil City. Found a nicer, cheaper building (one the Oil City CDC, I believe, GAVE them) and moved out.
I appreciate another avenue to get information on important Venango County issues. The local paper can only tell us so much and needs to be P.C. in a lot of situations. The only drawback to this is that it unfortunately doesn't carry as much weight as the paper and tends to get overlooked. That will change more and more over time.
I think what is missing from the last poster's analysis is that the orginal county/ORA deal was intended at the time to be a win/win. I view the latest in somewhat the same light.
The savings to the county might be minimal, but it is savings and the ORA has some operating capital.
There must be a way to fund economic development.
I appreciate you and others will have a different perspective. Some good points have been made and certainly enough has been said to get people to think about the issues, and I hope others that arise in the future.
I think the subject has been well covered and I'll try to get up a new post and move on to something else so as not to kick a dead horse.
John, I wish to make a final point here, taking into account today's news about the ORA's request for $10,000 from Cranberry Township.
This organization just walked away with $1,000,000 30 days ago and now they have the nerve to request $10,000 more taxpayer dollars.
I've been considering this for several hours this morning and have come to the conclusion that a whistle must be blown. I believe Cranberry Township should use the money for economic development, yes:
They could give it as a rent subsidy to stores at the mall (which is failing fast). They could invest it with a nice compound return. They could use it to tear down some of those trailers in that abandoned park. They could improve the curb appeal on their highways. They could put on one heck-of-a fundraiser for their firehall. They could donate it to the Cranberry Festival. They could use it as seed money to challenge Cranberry HS students to think entrepreneurally and create something new. They could use it to improve the skating rink for their teens and families. They could add amentities to the bike trail head in rockland. They could create a retail-oriented recruitment video. They could create a commerce website. They could launch a new festival. They could create a scholarship fund. They could put it toward the sewer project to lower bills.
True economic development is being able to turn 10K into 25K. Then 60K. Then 150K and so forth. It isn't spending 10K to nurture an organization that claims to have such a wonderful orchard of resources, yet bears little fruit. Give me 10K and I'll get you 100K in a year. Give me 100K and I'll get you 1.5M in a year. We need a huge attitude shift here at home.
Mike,
It took me a while to get your comments up. I've been busy and away and there was some hesitancy on my part only because I'm ready for this conversation to end because I think we've pretty much worn it out.
I suspect we are going to continue to view the ORA and local economic development differently. I know we differ on the West Unit deal. I continue to view it as a way to provide the ORA with some long-term financial support, which is how I viewed the original lease deal, while still having a benefit to the county.
Personally, I believe Cranberry – the wealthiest of the county’s municipalities – should step up and fund the regional EDA at the same rate as the other major municipalities. Economic development needs to be done at a county level otherwise you never have the critical mass of resources and you end up competing among yourselves – eating one another if you will. I think the best way to fund economic development would be at the county level and not municipality-by-municipality donations. That is not fair, uniform nor functional in the long term.
My feelings about that have nothing to do with the ORA – good, bad or indifferent – but have everything to do with what I see as the great fragmentation and lack of cooperation and collaboration resulting from Pennsylvania’s outdated municipal structures. We all need to be on the same page with the same game plan, which really is food for another blog.
Interestingly, some of your ideas are quite similar to what the ORA is doing. An example relates to the bike trails and the completion of the missing link from Oil City to Rynd Farm. It is under the ORA’s umbrella that is being done.
Although I don’t share it, I do understand your take on the ORA, but don’t let that blind you to doing things on a county or regional scale and the need for everyone to step up to the plate to see that succeed.
So, although it might not be fair, as the blogger I get to have the last word on this particular subject and declare it closed
john
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