FUMO CALLS FOR STUDY OF GRANT PROCESS IN WAKE OF KVAERNER AUDIT
August 9, 2000 --
Auditor General Robert Casey Jr.'s investigation of the Kvaerner Shipyard deal raises serious questions
about the Ridge Administration's handling of economic development money,
and the grant process should come under close scrutiny by the General
Assembly, state Senator Vincent J. Fumo (D-Philadelphia) said today.
the Democratic chairman of the Senate Appropriations Committee, recalled
that the commonwealth's contract with Kvaerner was negotiated in deep
secrecy, with the Legislature being given little opportunity to review the
details before being asked to vote upon the $400-plus million package.
Casey's audit, released today, revealed that Pennsylvania taxpayers have paid
for wasteful and extravagant spending at the former Naval Shipyard, while
receiving virtually no guarantee of long-term economic or job-creation
the General Assembly been able to thoroughly review this deal, to ask
questions and to offer suggestions, many of these problems could have been
avoided," Fumo said. "Given
the obvious weakness of this administration's decision's
making process on economic development projects, there must be greater
Legislative oversight of any future deal.
"The administration's lack of 'due diligence'
to determine the likelihood of Kvaerner's success is especially troubling on a project of this magnitude,"
Another aspect of Casey's audit that particularly disturbed Fumo was the
lack of cooperation from the Philadelphia Shipyard Development
Corporation, the group of Ridge appointees overseeing shipyard funding.
Casey's auditors had difficulty obtaining documents, while PSDC frequently
took the position that taxpayers were not entitled to information about
"Secrecy contributed to the problems with this deal from the beginning,
and they are still trying to withhold information,"
Fumo said. "Of course, that's no surprise, considering the weak return on the public's
investment and the nature of some of the outrageous expenditures by
Kvaerner executives. I can see why they would not want this to become
public, and I commend the auditor general for uncovering the truth."
Fumo, in whose district the Shipyard is located, voted for the economic
development appropriation, but raised concerns at the time about the lack
of information provided to lawmakers. On Oct. 22, 1997 when the Kvaerner
deal was first announced, Fumo told the Philadelphia Daily News: "It's nice to have any jobs in Philadelphia, and it's
in my district. But I remain cautiously optimistic that it will produce
what they say it will produce."
Fumo went on to explain the cause of his caution to the newspaper,
pointing out that no public hearings had been held to discuss the grant
proposal. He also noted discrepancies between various reports about the
number of jobs to be created and the size of Kvaerner's financial stake in
the project. As discussed in the auditor general's
report, Kvaerner was required to make almost no commitment of capital in
return for extremely generous public subsidies.
The public dollars now amount to $429 million, while
Kvaerner, under the amendments agreed
to in 1999, is able to defer any expenditure until after shipyard
construction is complete.
A"It has to raise eyebrows when the taxpayers are assuming all of the risk
for a business venture and the company is assuming none of it,"
The administration simply negotiated a very bad deal,
AI call upon the Republican majorities running the House and Senate to
vow that from now on, thorough and deliberative Legislative hearings will
be held before we vote on any major economic development expenditure
proposed by the Ridge Administration," Fumo said. "We
can't just run these projects through routine committee meetings and
rubber stamp this administration's
think the Legislature has to study the entire grant process to make sure
that taxpayers are getting a good return on their investment."
also expressed continued concern over the uncertain future of Kvaerner's shipbuilding operation, in light of the commonwealth having to assume
additional responsibility of $62 million for cost overruns beyond those in
the original agreement.
Copyright 2000 Sen. Vincent J. Fumo