Philadelphia + a Pipeline (or Two) = America’s Next Energy Hub

The PES refinery in South Philly. Photograph by Jonathan Barkat

The PES refinery in South Philly. Photograph by Jonathan Barkat

About 1,400 miles from Philadelphia, at the northern edge of the Louisiana bayou, lies a spaghetti junction of steel tubing called Henry Hub, where 13 natural-gas pipelines converge amid farmland and little else. The nearest town, Erath, population 2,100, is about four miles away.

Gas from all over the country flows through the Henry Hub. Even gas extracted from drill pads just 100 miles or so from Philadelphia — gas sucked from the almost unfathomably rich reserves of the Marcellus Shale — is often pumped to distant Louisiana before making the long, and expensive, return trip to homes and businesses in Philadelphia.

Apart from Henry Hub, this section of Louisiana is probably best known for the bizarre cautionary tale of extraction run amok at nearby Lake Peigneur. There, in 1980, an oil crew dug too deep, puncturing a hole in a working salt mine that lay beneath the lake bed. As water rushed into the mine, a swirling vortex formed on the lake surface, swallowing two drilling platforms and 11 barges. The suction reversed the flow of a canal leading to the Gulf of Mexico, and within a few hours, a shallow fishing hole had turned into a 1,300-foot-deep saltwater lake.
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John Grady Profile: The Dealer

PIDC president John Grady at the Navy Yard, whose revival he's helped mastermind. Photograph by Colin Lenton

PIDC president John Grady at the Navy Yard, whose revival he’s helped mastermind. Photograph by Colin Lenton

John Grady is trying to show me the waterfront. The Schuylkill is close, just a few hundred meters away, but there’s no street grid here on the river’s wild western shore, no bike trails, no sidewalks — nothing at all, really.

This is just about a mile southwest of the Penn and CHOP mega-medical complex, but those towers seem a world away. In this forgotten fragment of the city, up-jumped weeds form a forest canopy in long-abandoned lots. Roads end abruptly, melting into the overgrowth. Ivy has reached the top floor of the old city incinerator, climbing through the broken windows.

Grady — 47 years old, white, with the look and bearing of a stereotypical mid-career executive — seems just a bit out of place here. We pass discarded mattresses, a 1960s-era refrigerator, a pink toilet and a dead cat. Grady turns his silver Buick LaCrosse down a cobblestone road — it’s 49th Street — that’s usually closed to through traffic by a locked cyclone fence. Today, though, the gate is open, so Grady punches the gas, bumping the Buick across a CSX rail line and past the first two people we’ve seen in blocks — a couple of rail workers. One of them flips us off. Grady seems not to notice.

He’s too busy imagining an altogether different future for this squalid patch of overlooked urbanity. Grady looks and sees Philadelphia’s next “innovation district,” with some two to three million square feet of new offices and laboratories, a gleaming riverfront road, and recreational trails that would make this bastard stretch of the Schuylkill every bit the equal of the jogger-choked path to the north.

It all sounds fantastical, given the present-day landscape. But Grady is the president of the Philadelphia Industrial Development Corporation, a little-known but extraordinarily powerful joint venture between business and City Hall.

More than half a billion dollars in public and private grants and financing — for everything from small-business equipment loans to city and state subsidies for Comcast’s new skyscraper — is budgeted to pass through PIDC this year. And the organization has been at the center of most every mega project of the past 50 years: the Navy Yard, the Pennsylvania Convention Center, the Center City hotel boom and much more.

So when Grady dreams, it makes sense to listen. He notes that we’re just five minutes from the heart of University City by car, or by trolley. He tells me about the voracious expansion needs of nearby Penn, CHOP and Drexel, institutions that think about development in chunks of 10 and 20 years.

Grady has been selling cities for a long time. These days, there are more buyers out there. “When I graduated college in the late ’80s, the popular thing was to move to the suburbs. You went as far out as you needed to buy a house, and you put a fence around your house and you drove to work every day,” says Grady, who, as it happens, did none of those things. (He lives in East Falls.) “That paradigm has shifted dramatically for people, and relatively quickly.”

In another city — one with a more robust business culture, with bolder builders, with more capital and fewer built-in obstacles to development — it might be a maverick developer or some far-sighted technology company looking to reclaim the riverside wilds. But this is Philadelphia, where it took 83 years for someone to find the stones to erect a building taller than City Hall. As much as any organization, it’s been PIDC and its roster of powerful leaders, past and present, that has filled this visionary vacuum.

Grady has served as PIDC’s president for just three years. But he has already emerged as one of the city’s leading problem-solvers. I think of him as the unflappable traffic cop in the hectic three-way intersection of government, business and the nonprofit sector.

And in this town, for better or worse, that’s where a lot of the action is.

BY FEBRUARY 1994, there was little hope left for the Navy Yard, which had been building ships and employing vast numbers of Philadelphians for more than a century. The politicians were dragging the imminent closure out as long as they could, and another 19 months would pass before the base was formally shuttered and, ultimately, 7,000 civilians would lose their well-paying jobs.

In preparation, leading regional economists, architects and urban planners met at the University of Pennsylvania to ponder what else might be done with the 1,425-acre site. Some suggested it would serve best as a prison. Others proposed turning it into marshland. The most likely scenario, many of the academics agreed, was that the yard would simply rot, lying fallow until some distant future when a market might exist for so much riverfront land.

John Grady had a different view. He was no Pollyanna, having grown up in Olney and worked in Camden prior to joining PIDC. But Grady, like most economic-development professionals, is allergic to the notion that cities must surrender to adverse market forces, particularly when the stakes are as high as they were for the Navy Yard.

The son of two educators, Grady became fixated on the central necessity of jobs while taking an undergraduate seminar at La Salle University. The course — taught by John Raines, the celebrated Temple professor who early this year revealed himself as one of the eight anti-war activists who burgled an FBI office in Media in 1971 — focused on the ethical value of work. “It showed what it means to people, to communities,” Grady says now. “It was about how work sustains us on many different levels.”

Straight out of school, Grady took a position with Camden’s waterfront economic development agency before moving over to PIDC in 1998. Ever since, Grady has been the point man on the massive conversion of the Navy Yard, which really should be considered one of the most successful urban reclamation projects in recent U.S. history. When the Navy (mostly) moved out, it fell to PIDC to coordinate the integration of the yard into the city. There was no zoning, no street grid, no sanitary connection to the city’s sewer supply, no post-office addresses.

Now the Navy Yard has all that, plus office and manufacturing facilities for 143 companies employing more than 11,000 workers. It’s home to behemoths like Urban Outfitters and the U.S. headquarters of GlaxoSmithKline. It’s become a favored destination for fast-expanding homegrown businesses like motorcycle-gear retailers RevZilla.com, which in the past could well have ended up out on Route 202, or in some other suburban destination.

Critics of the Navy Yard generally charge that it cannibalizes Center City, stealing away tenants that otherwise would be renting office space in skyscrapers. But Grady has little patience for this complaint, and he makes a good case. Consider Urban Outfitters. Floors in an anonymous office tower would have been all wrong for such a company. Richard Hayne wanted a campus environment, with distinct buildings for the company’s different brands and the ability to expand over time. Similarly, Glaxo wanted a radically new kind of office, one with as few walls as possible and more worker mobility — a poor match for the stock in Center City.

As remarkable as the Navy Yard’s reinvention already is, it’s nowhere near complete. On a summer afternoon, with airplanes roaring overhead and the sun reflecting off the immensely wide stretch of the Delaware River that frames the Navy Yard, Grady showed me a bit of what’s yet to come.

There’s the seven-acre park under construction in the yard’s office district, designed by the same landscape architecture firm that designed New York’s High Line park. There’s the Penn State engineering campus, also under construction, and two vast loft-style warehouse buildings on Kitty Hawk Avenue that could become the Navy Yard’s first residential developments. “Ultimately, what we’re doing is we’re building out a whole new neighborhood,” says Grady.

Projects as enormous as the Navy Yard, projects that require massive new infrastructure investment and comprehensive planning, are, I would argue, well served by an organization like PIDC.

Founded in 1958, during the first term of reform mayor Richardson Dilworth, PIDC was created to try and staunch the city’s bleeding of industrial jobs, and to serve as something of a hedge against the government-driven urban renewal policies that held sway in Philadelphia and many other big cities in the post-World War II-era.

From the start, business was the ever so slightly more senior partner at PIDC, with one more representative than City Hall on the organization’s board of directors. But PIDC power struggles between the Chamber of Commerce and City Hall are exceedingly rare, and as a practical matter, a lot of the organization’s clout has rested with its succession of long-serving presidents (including Grady) and with Walt D’Alessio, who has acted as PIDC’s chairman since 1982.

At its best, PIDC combines government’s focus on the public good with private-sector flexibility and competence at executing complex tasks. With a staff of 62 and an annual operating budget of about $10 million (virtually none of which is taxpayer money), PIDC has resources that dwarf those of the city’s Commerce Department. Grady’s salary, for instance, is $230,000 a year, more than Mayor Nutter earns. Grady also has a free hand to run the organization as he likes, unbound by civil service rules or union contractual restrictions.

Ostensibly, City Hall sets policy and PIDC executes. The reality is that the two entities “operate as a seamless organization,” says deputy mayor and Commerce director Alan Greenberger. “They’re not shy about making recommendations about policy, and we’re not shy to weigh in on transactions.”

Bill Hankowsky, one of Grady’s predecessors at PIDC and now the president and CEO of Liberty Property Trust, likened his old job to “translating to government how business works, and translating for business how government works.”

That training worked out well for Hankowsky, obviously, and for D’Alessio, the former senior managing director of NorthMarq Capital. Indeed, PIDC alumni are all over any roster of Philadelphia power players, past and present. There’s Joseph M. Egan, the onetime Republican mayoral candidate, who preceded Hankowsky as PIDC president in the late 1980s; John Gattuso, a onetime PIDC staffer who’s now a big wheel at Liberty Property Trust; Charles Pizzi, former PIDC board member and Tasty Baking CEO; and so on.

Grady chalks this up to PIDC’s appeal to those “who want to roll up their sleeves and make a positive contribution,” and tells me the organization “attracts a lot of people early in their careers who have an interest in development, in building businesses.”

That’s self-evidently true. It’s also mildly disturbing that in Philadelphia, mastering the intersection of business and government is seen as such a building block to success. The men — and they are almost all men — who rise to the top of the economic and power heap in Philadelphia typically aren’t audacious entrepreneurs or market-creating pioneers. They are, more commonly, those who have learned how best to work with City Hall.

PHILADELPHIA IS HARDLY alone in its reliance on an entity like PIDC. Economic development organizations and programs abound across the country. Some are public, some are private, some are a mix of the two, but at their core, these programs and agencies all exist to create or save jobs and revitalize communities. And who can argue with that?

I’ll try.

At their worst and most venal, economic development organizations are little more than filling stations for politically connected developers and businesses, offering grants, tax breaks, dubious real-estate deals and low-interest loans for City Hall’s favorite sons. Some have become the playthings of powerful political figures: Think of Vince Fumo and Citizen’s Alliance for Better Neighborhoods, or Jerry Mondesire’s Next Generation CDC.

A more common failing is the well-intended organization or government economic development program that ends up squandering public money, or signing away tax revenue, or building boondoggles. Consider all the minor-league baseball stadiums built with public funds, the niche museums that nobody visits, the massive tax breaks offered to companies simply to move their operations across a county line. (Just this summer, Camden and New Jersey traded away $82 million in tax credits to snag the sad little plum of a new Philadelphia 76ers practice facility.)

The rationale for these sorts of giveaways is pretty simple: Without them, the jobs would go elsewhere. For low-income cities like Camden and Philadelphia, the need for jobs has been so acute, for so long, that the impulse to give away the store when wooing companies can be overwhelming.

But it’s an urge that Philadelphia, at least, should start to fight. The notion that we can’t compete with other cities or the suburbs just doesn’t hold up as well as it used to, given the spike in educated millennials living in the city, and that our population is growing again after decades of decline.

“This is internalized oppression. It’s like you’ve been told for so many years that you’re worthless that you begin to believe it about yourself,” says Greg LeRoy, executive director of Good Jobs First, a progressive Washington, D.C.-based nonprofit. “A lot of public officials in cities like Philly have internalized these beliefs, and that sets them up to be weak negotiators.”

PIDC has certainly had its own moments of weakness. It had a small financing role in the “Disney hole” at 8th and Market, and so far, with bookings dramatically off projections, the $786 million Convention Center expansion is looking more like an expensive folly than a boon to the city’s hospitality business. Then there are PIDC-assisted projects that could be reasonably argued either way: the subsidies for the stadium complex, incentives for Center City hotel construction, a low-interest loan to an on-the-ropes Tasty Baking.

When I put this critique of economic development to Rob Wonderling, president of the Chamber of Commerce and PIDC vice chairman, I can almost hear him shrugging over the phone. “What aspect of the free market is not subsidized?” he replies. “We’ve had incentives for a long time. They might have different names or flavors now, but we’ve always had them, whether you call it urban renewal or a tax incentive.”

GRADY, THANKFULLY, IS much more stingy. “If we worked our way out of existence, that’d be great,” he tells me at the Navy Yard. That’s highly unlikely to happen, of course, but it’s the right attitude.

And Grady seems to think we’re at a moment — with cities resurgent — where Philadelphia actually could become a place that needs PIDC just a little less. “Can we use this momentum to solve other problems?” he asks. “Can we use it to reenergize neighborhoods? Can we use it to put school systems on a different trajectory? Can we use it to continue to reinforce quality of life and the centrality of Philadelphia for this region?”

It’s good Grady thinks along those lines. Because while PIDC’s lasting prominence does Grady and his staff credit, it’s also an indictment of Philadelphia’s economic vitality and dynamism. The downside of relying so long and so extensively on an organization like PIDC is that it perpetuates the dependency of city businesses on City Hall. That’s a formula for a weak-kneed business culture, and it’s hard to see how that kind of dynamic creates more jobs than would a more independent, less risk-averse business class.

Grady, though, is a pragmatist. “I think it’d be great if we had a completely functioning market in Philadelphia,” he says. “In the meantime, we have to roll up our sleeves and intervene.”

Originally published as “The Dealer” in the September 2014 issue of Philadelphia magazine.

Another Warehouse Fire, Another Tax Delinquent

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The listed owner of the vacant warehouse at 2412 N. American Street where a four-alarm fire injured three people overnight owes $11,023.55 in back taxes on the property, and a total of about $20,500 on at least three other parcels in the city, a Philly Mag review of city records finds.

According to city records, the warehouse’s owner is Richard Paynter. The records — which on occasion can be incorrect — show that Paynter hasn’t paid taxes on the property since at least 2007.

There are no recent records of safety or maintenance violations at the site, but another lot owned by Paynter in West Philadelphia has racked up 13 violations in recent years.

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Mayoral Wild Card Ken Trujillo Enters Philadelphia Mayoral Race

ken trujillo mayor candidateKen Trujillo, who is perhaps the most interesting wild card in the reputed 2015 mayoral field, formally entered the race this morning with a press conference outside 440 N. Broad Street (headquarters of the School District of Philadelphia).

It was a fascinating press conference, for a couple of different reasons.

For one, Trujillo — who is considered the most pro-business candidate in the field — came out in support of a host of progressive causes, from universal preschool, to empowering the city’s new land bank, to doing away with stop-and-frisk, to restoring the school district to local control and abolishing the state-run School Reform Commission.

Taking a page from Bill de Blasio’s insurgent mayoral campaign in New York (which I think we can expect a lot of the candidates to ape), Trujillo warned of the growing gap between rich and poor in Philadelphia, and spoke at length of how the city is “failing our children.”

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Philadelphia Election 2015: Who Wants to Be Mayor?

Illustration by James Boyle

Illustration by James Boyle

Used to be that the mayoralty of Philadelphia was a job worth taking a risk for, a gig deserving of a little personal sacrifice. Frank Rizzo wanted a third term so badly that it just might have killed him. John Street, probably the most powerful Council president in the city’s modern history, surrendered that clout to run for mayor. And Michael Nutter was the longest of long shots when he gave up a steady paycheck and his Council seat in July 2006, nearly a year before the primary.

Now, though, what you mostly hear from the field of potential 2015 candidates — a shifting array of names including city controller Alan Butkovitz, City Councilman Jim Kenney, city managing director Rich Negrin, State Senator Anthony Williams, former D.A. Lynne Abraham, attorney Kenneth Trujillo, former Nutter press secretary Doug Oliver, Frank Rizzo Jr. and three-time mayoral candidate Sam Katz — are all the reasons not to run, at least not yet. Some are waiting for Council president Darrell Clarke to decide if he’s in or out. Half the city’s political class is convinced Clarke is the best man for the job right now. Clarke himself seems considerably less certain.
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City Picking Up the Pace on Tax Collection

Photo | Jeff Fusco

Photo | Jeff Fusco

For the first time since Mayor Nutter took office, the City of Philadelphia made significant, measurable progress over the past 18 months in its long-running fight against the property tax delinquency epidemic.

The total debt owed the city and School District of Philadelphia in unpaid property taxes fell over the past year, edging down $10 million between April 2013 and April 2014, according to a Philadelphia magazine and PlanPhilly analysis of city tax data. The total number of property tax deadbeats declined as well, dipping about 1,400 over the same period.

To be sure, the gains are modest given the massive scale of property tax delinquency in Philadelphia; nearly 96,000 delinquent parcels and $512 million owed, figures that dwarf those in all other big cities except Detroit.

But it’s notable nonetheless that the city managed to stop — for a time at least — the spread of tax delinquency (the epidemic has grown quickly in most years of the Nutter administration), and more notable still that the city is now reducing the total amount owed.

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If Chaka Fattah Goes, Who Fills the Void?

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The city’s political class is abuzz with talk of potential replacements for U.S. Rep. Chaka Fattah, who could be politically finished after his former chief of staff Gregory Naylor pled guilty to diverting campaign funds for the personal use of “Elected Official A,” widely reported to be Fattah. Naylor’s plea memo, which can be read below, is a damning document, and many city political observers think it is only a matter of time before Fattah is indicted or resigns. (Fattah feels differently. After initial silence, he’s started to suggest the Feds have “crossed the line.”)

But set aside, for the moment, speculation about the next congressman from the second district of Pennsylvania.

If the Fattah organization goes down with the Congressman, it would represent a fundamental shift in the balance of power in city politics.

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And in the Second Round, Buzz Bissinger Selects Nick Foles

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In Philadelphia magazine’s July cover story, Buzz Bissinger wrote memorably of Eagles quarterback Nick Foles that, “unless he stops being chickenshit and goes into the middle, he will never guide the Eagles to the place that only tantalizes us.” He instructed Foles to “Sidle up to a bar on the road and order a slug of single malt, not a double shot of milk.” And,”Don’t ever publicly say again that your favorite movie is The Lion King.” Bissinger observed that “there’s still an aura of softness about him, no fire. Maybe it’s the hee-haw face.”

But Bissinger overlooked all that on Labor Day, when he selected Foles in the second round of his 12-team fantasy football league.

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“Wannabe” Anarchists Taunt Police in West Philly

A pack of what some are calling “trust fund anarchists” crashed a peaceful Ferguson rally in Clark Park Saturday evening, then tried (and failed) to goad the police into an overreaction by lobbing paint-filled balloons at a cop car, according to local news reports.

According to the West Philly Local, two of the protesters were arrested; a 20-year-old female and West Philadelphia resident, and a 25-year-old man from New York. From the Local:

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For Schools, “A Vortex of Political Hell”

Every so often, when Mayor Nutter opens his mouth, a little gem tumbles out that captures matters perfectly. Yesterday, it was a five carat diamond.

“We are caught in a vortex of political hell with no way out,” Nutter told reporters. Later, he mentioned ping pong.

At issue is the cigarette tax for city schools, which is a questionable policy on its own, but also the closest thing the district has right now to a lifeline. Yesterday morning, it looked like a lock. But that was before the State Senate voted to put its growing feud with the House of Representatives and the tender concerns of the tobacco lobby ahead of the School District of Philadelphia and its 191,000 students, adding a five-year sunset provision to the tax and putting its final passage at risk.

How did this happen? Didn’t the Senate approve the tax sunset-free on June 30?

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