Defending bond issue for Sun Co.

To the editor:

Three times in the past two weeks, The Bond Buyer has reported on the Pennsylvania Economic Development Financing Authority, the state's main bond financing vehicle for business development, which I chair.

The Bond Buyer has chosen not to report that PEDFA has been the conduit for more than $1 billion in taxable and tax-exempt financing for Pennsylvania business in the past six years, and that these transactions have been completed with not a hint of impropriety.

What you have reported is that PEDFA has been subject to criticism of its policies in two areas -- and that these criticisms have led us to postpone approval of a waste water treatment project the Sun Co. is developing in southeastern Pennsylvania.

The concerns identified in your reports of Nov. 14 and Nov. 18 are unfounded and, in any event, have played no role in our consideration of the Sun project.

On Nov. 14, The Bond Buyer quoted several sources as saying that the election of a Republican governor in Pennsylvania could mean an emphasis on lower business taxes rather than economic development financing as a means to stimulating business growth.

The Sun project, for which my agency has been asked to authorize $100 million in tax-exempt financing, was singled out as an example of the kind of project where a large and resourceful firm is receiving "corporate welfare," in effect as payment to offset an onerous government-generated cost structure.

While Pennsylvania has won praise on Wall Street for controlling the costs of government at the same time that we have operated a highly successful economic development program, I recognize that this issue of how to balance these two priorities continues to be a subject of debate in Washington and in state capitals across the nation.

However, this debate has nothing to do with our decision on whether to allocate tax-exempt authority on the Sun project. Your readers should know that:

* Under the U.S. Tax Code, the federal government authorizes each state to allocate a set amount of tax-exempt bond financing authority, based on state population. This allocation does not implicate state funds, the general obligation credit of the state, or the credit of any authority.

It therefore would not lower the cost of government in Pennsylvania -- and, indeed, would be incomprehensible -- for the "new governor to reduce [PEDFA's] bonding power," as your Nov. 14 article suggests.

* The Sun project would be eligible for bond allocation as an "exempt facility" with environmental benefits that fit squarely within the public purposes identified in federal law. These projects tend to be capital-intensive in nature; to decide as a matter of policy not to undertake them with large corporations would exclude many of the best-qualified developers.

* The investment banker who reportedly "helped develop" PEDFA in fact was replaced as senior manager as a result of his and his firm's inability to launch the program successfully. Had your reporter followed up on PEDFA staff's request to work with our press office, she would have learned this before quoting this individual's assessment of how well PEDFA has served its original purpose.

Then, on Nov. 18, The Bond Buyer reported that, in the aftermath of a legislative directive enacted last year, PEDFA has not included minority underwriters and other professionals in its bond issues.

Gov. Casey has insisted that minority- and woman-owned firms be involved in every commonwealth bond deal in his administration, and this has been our practice.

As I explained in that article, however, PEDFA issues are not state bond deals in this sense, because it is the business borrowers' credit at stake, not ours, and because our customers have the option of working with local Industrial Development Authorities if PEDFA's costs are out of market.

Even if one does not accept our explanations on either of these subjects, there is absolutely no basis for the suggestion, made in your Nov. 22 edition, that either the "corporate welfare" issue or the minority participation issue is affecting our decision process on the Sun Oil project.

We will make our allocation decisions as we always have -- on the merits, and not based on a tempest largely of your publication's own making.

Andrew T. Greenberg Secretary of Commerce Commonwealth of Pennsylvania

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