PHOENIXVILLE AREA SCHOOL DISTRICT

OISTRICT ADMI NISTRANOH OFFICE

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PHOENIXT,ITLE PA 1g{TO

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BUT{ESS OFFICE FAX

10.03370?

March

28,2016

Dennis M. Davin, Secretary, DCED, and Chair, Commonwealth Financing Authority

Robin L. Weissman, Secretary, Department of Banking and Securities
Randy Albright, Secretary, Office of the Budget
Michael Karp, President, University City Housing Company
Austin J. Burke, Director, Greater Scranton Chamber of Commerce
John J. Verbanac, President, Summa Development
Marc Little, President, Minority & Women Educational Labor Agency
c/o Scott Dunkelberger, Executive Director, Commonwealth FinancingAuthority
Mr. Scott Dunkelberger, Executive Director
Commonwealth Financing Authority
DCED

400 North Street, Plaza Level

Com monwealth Keystone Bu ilding

Harrisburg, PA L7t2O
Re:

for 2015-16 Fiscal Year Suspension of MTF Grant "No Construction Start Rule"
Dear Ladies and Gentlemen
We are writing to you on behalf of Phoenixville Area School District. We're writing to Mr. Davin in
his capacity as Secretary of DCED. We're writingto Mr. Davin and allothers in your capacity as a
member of the Commonwealth Financing Authority. We request that Mr. Dunkelberger distribute
cop,s to each member of the CFA.

The District requests your consideration of this issue of great importance to the District, District

taxpayers,andDistrictstudents. Westressthatthisissueisuniquetothe2015-16Commonwealth
and District fiscal year. Because of the unique circumstances of the long running budget impasse,
this issue is not a precedent for any future fiscal year.
Background lnformation.
L Multimodal Transportation Fund. The MTF program provides grants to encourage economic

a safe and reliable transportation system for Pennsylvania

residents. We understand that although the delay in awards was related to the 2O75-L6
budget, in fact the funds for the MTF program are not part of the 201-5-16 budget and
related appropriations. lnstead, the MTF funds are funds accumulated from Act 89
transportation fees and that $57,000,000 is the approximate amount projected to be
available for 2Ot5-L6 projects.
development and ensure

484-927-5000

2.

Phoenixville Aoolication. Phoenixville submitted its application (lD# 2OL5O729O82O)

timely prior to the July 3t,2OL5 application deadline. The program application materials
indicated that the application would be considered at the November LO,2075 CFA board
meeting.
The application requests a $3 million grant to be applied towards roadway improvements
on Pothouse Road and PA Route 29 (the "road project"). The total cost of the road project
is estimated at $4,611,382. The road project is related to Phoenixville's construction of a
new Early Learning Center - Elementary School (the "school project"). The school project
is currently under construction, and the school is scheduled to open in August 2OI7.

The road project is essential to the school project - both in terms of safe and reliable
transportation, and also as a result of Township and PennDOT requirements.
We understand the CFA staff has determined that the road project is eligible for an MTF
grant. We also note that the road project is very similar to multiple other projects which

were included under 2Ot4-15 and 2Ot5-I6 PennDOT Multimodal Transportation Fund
Awards.

This project not only fits squarely with the goals of the MTF program in terms of economic
development and safe and reliable transpoftation, but it is uniquely deserving of an MTF

grant because it will benefit taxpayers in a large geographic area-well beyond the
boundaries of Phoenixville Area School District. The project is highway improvement work
that benefits motorists in the entire northern Chester County area and the cost should not
be carried by solely School District taxpayers. This specific road work was identified by
PennDOT as needing to be done over thirty years ago. To put that burden solely on local
School District taxpayers, for road improvements benefiting half of Chester County, would
be unfair. So the School District is confident the CFA will see the merit in awarding an MTF
grant for this impoftant road project.

3.

The Problem. The problem that has occurred for Phoenixville is fivefold. First, the CFA
Board canceled its November board meeting, its January board meeting, and its March
board meeting, with the resultthatthe board has not approved any applications duringthe
current fiscal year. Second, we understand that the CFA has historically followed a "no
construction start rule" pursuant to which commencement of construction work prior to
receiving CFA approval for a requested grant will result in a project being ineligible. Third,
although Phoenixville has already delayed commencement of the road project, there are
multiple compelling reasons why commencement of the road project cannot be further
delayed beyond April 15, 2OL6. Further delay in the road project is not possible without
serious adverse effects and substantial extra costs. Fourth, since the March CFA meeting
was canceled and, it does seem likely that the CFA will meet and make a decision on
Phoenixville's application prior to the time when Phoenixville must start construction on the
road project. Fifth, of course this means in turn that unless the "no construction start rule"
is waived for the 2OL5-L6 fiscal year, a project with important economic safety, and
transportation impacts will not be funded - with serious adverse effects on Phoenixville,
Phoenixville's taxpayers, and Phoenixville's students.

Phoenixville's Request.

Solelyforthe 2015-16 fiscalyear, Phoenixville requeststhatthe "no construction start rule"

be suspended, and that when grants are awarded the CFA award and fund grants lor 2OL516 without regard to whether construction starts before the grant award date. This request
is consistent with the long standing standard practice relating to delayed budget adoption
under which the delayed budget adoption appropriations are always made retroactive to
the beginning of the fiscal year - in this case July 1,,2075.

Explanation for Request.

L. Proiect Benefit. The Phoenixville road project is precisely the type of project for which the
MTF fund was established. The MTF program provides grants to encourage economic

development and ensure a safe and reliable transportation system for Pennsylvania
residents. Thus, the road project is precisely the type of project the MTF fund is designed
to encourage and support.

2.

Soecial Circumstances in Prolonged Budet lmpasse Year. This is a highly unusual

situation. As of the date of writing this letter, adoptron of a budget for the 2015-16 fiscal
year is 8 months overdue. This is unprecedented in the Pennsylvania history, and most
likely will never occur again. Neither Phoenixville nor other project applicants bear any
responsibility or fault for the budget impasse. Phoenixville, rts taxpayers, and its students
- just like other local governments and their constituencies - are innocent victims of the
budget impasse. Although Phoenixville and other local governments, have so far survived
the budget impasse, albeit with significant sacrifice, denying worthy grant applications as a
result of the "no construction start rule" would be a double whammy and extremely unfair
to Phoenixville and other local governments. Neither DCED nor the CFA, nor any other
responsible government official should want this result.

3.

2015. As noted above, solely for the

requests that the "no construction start rule" be
suspended, and that the CFA follow long standing practice with respect to delayed budged
option - by awarding and funding grants for 201'5-16 without regard to whether
construction starts before the grant award date. This request is consistent with the
standard practice relatingtodelayed budgetadoption underwhich delayed bud$etadoption
appropriations are always made retroactive to the beginning of the fiscal year - in this case
July t,2OI5. The 2015-16 partial budget of proved December 29,2Ot5 was retroactive
to July 1,,2OL5. Similarly, House Bill 1801 recently approved by the House and the Senate
and which the Governor has announced he will allow to become effective will make the final
20!5-1-.6 budget act retroactive to July I,2OL5. Moreover, any future and final budget
legislation will do the same.
201-5-16 State Budget will be Retroactive to July 1.

2}t5-t6 fiscal year, Phoenixville

lf every other aspect of the 2015-16 budget is retroactive to July 1-, 2OL5, why would MTF
grants be any different? The simple answer is that it would be extremely unfair and contrary
to the policy behind the MTF grants to have a rule for MTF grants different from the rule
applicable to all other state appropriations. When a final budget is approved for the 2Ot516 fiscal year, any and all MTF grants approved in connection with the 2015-16 budget
should be retroactive to July 7,2OL5 - just like all other aspects of budget.

4.

We understand the
general rationale that underlies the "no construction start rule" is that if a government body
starts construction before receiving a grant award, this suggests the government body has
adequate funds for the project from other sources, and therefore does not need the grant.
Although this might be true in normal times, this rationale does not hold water in the unique

circumstances of a budget impasse that is prolonged for more than 8 months. lf thls
rationale were applled to eneral approprlations for sclrools, all Pennsylvanla scools
would lnfact now be closed.

Of course, although struggling and facing many challenges and sacrifices, all Pennsylvania
schools remain open. This has occurred by use of fund balances and other reserve funds,
bank and bond borrowings, and cutting or delaying expenses that can be cut or delayed. lt
certainly does not mean that schools do not need the education appropriation to help fund

the expenses for the last 8 months. Moreover, no one has given even the slightest

suggestion that the general budget and related education appropriations will not be
retroactive to July 1-,2OL5.
The same is true of Phoenixville's MTF grant. lf Phoenixville starts construction in April,
Phoenixville will manage to get by with expenses that will start to be paid in May or June by use of fund balances and other reserve funds, bank or bond borrowings and cutting or
delaying expenses that can be cut or delayed. Just as with basic education and other
needed state education funding, this ceftainly does not mean that Phoenixville does not
need the grant funds.
lf the Phoenixville MTF grant is notfunded because of the "no construction start rule" orfor
any other reason, this will unfairly impose a significant financial hardship on School District
taxpayers. ln the absence of the grant, the School District will need to borrow on a dollar for
dollar basis the entire cost, and this entire amount together with interest will need to be
paid back by the School District and its taxpayers. As noted above, this particular road work
was identified by PennDOT as needing to be done over thirty years ago, and it is highway

improvement work that will benefit motorists in the entire northern Chester County area.
So it would not be proper to conclude that because the School District has been compelled
to proceed prior to a grant award that the School District has adequate funds for the project
from other sources, and therefore does not need the grant.
C,onclusion.
For All of the reasons explained above, we request that the "no construction start rule" be

suspended for the unique 2OL5-L6 fiscal year, at least with respect to the Phoenixville
project and perhaps also with respect to all other projects. This action can and should be
taken at or before the next CFA meeting since the final 2015-16 budget will then be in
place. This very limited action can be taken by an executive order signed by Mr. Davin as
DCED Secretary, or alternatively by formal vote and action by the entire CFA board.
Thank you for your careful consideration of this important request.
Phoen i<ville Area School District

Phoenixville Area School District

^D,u'/'/'l$t
By:

Dr. Alan D

CCK:rmb:15

By:

perintendent

Dr. Daniel Cushing, Board President