May 22, 2017

Speaker of the House, Honorable Mike Turzai

139 Main Capitol Building
PO Box 202028
Harrisburg, PA 17120-2028

Dear Speaker Turzai and Majority Leader Reed:

I am writing to respond to your letter from May 18, 2017. I regret that you sent this letter to me
without first contacting me because I could have given you information that would have
corrected many of the misstatements and inaccuracies in the letter.

To begin, the surplus was not $4 million. That was reported after a September 2016 press
conference in which we reported that was our current surplus but we expected other bills to come
in that would significantly reduce that amount. That is exactly what occurred and in November,
when the distribution occurred, the surplus was $2.1 million which was significantly less, as we
predicted. Of that $2.1 million surplus, $1.2 million was used to distribute money to various
nonprofits throughout the region. Your letter characterizes these as WAM-like grants and that
simply isnt correct. The money was only given to nonprofits who worked with us to make the
Convention such an incredible success. I have included a sheet that lists all of these donations
and why they were given.

You correctly categorize the remaining $900,000 as money that I decided to give out to our staff
and volunteers. First, you should understand that $129,000 went to volunteers and student
interns, many of whom worked for over 3 months, full-time and received absolutely no
compensation at all. Given how hard they had worked and under such adverse conditions, we felt
this would be a small way of thanking them for their efforts. As for the remaining money paid
out to our permanent staff, that money has been characterized inaccurately as bonuses. When
each one of our 11 longtime paid staff members was hired, I explained to them that we had no
way of knowing how much money we were going to be able to raise so that we had to
compensate them at far less than they were worth and far less than they could have made in the
private sector. I told them that if we succeeded in reaching our goal, and there was any unspent
money left over, we would try to give them deferred compensation.

Additionally, you seem unaware of the contract that the Host Committee signed with the State in
which the Commonwealth specifically laid out what the State funds could be used for. It says,
The Host Committee will use the funds to pay for the infrastructure necessary for the City of
Philadelphia to host the Convention including rental and build out of the Convention arena and
other facilities, transportation, communications and technology systems, necessary office space
and event security. As the audit report from JT Goldstein LLC confirms, the State grant was put
in a separate fund, where it could not be comingled with any other Host Committee revenue. It
was spent entirely in three categories:

- Venue license: $5,775,000

- Construction management: $2,465,195
- Construction: $1,759,805

Total: $10,000,000

The Commonwealth got exactly what it contracted. In fact, in January of this year, we received a
letter from the Compliance Monitoring Division of DCED which stated, Congratulations to you
and others involved in this project for the successful use of funds provided through the
Commonwealth of Pennsylvania. A copy of this letter is enclosed.

The legislature approved this contract and at no time, did it have any provisions saying that if the
Host Committee, through its own fundraising efforts, produced a surplus, would that surplus be
given back to the State. I assume this was done because, as is the case with the vast majority of
our economic development grants, the Commonwealth assumed that the benefits to it and its
citizens would far exceed the amount of the grant. That is exactly what happened here. An
independent report, set the economic impact of the Convention to the Greater Philadelphia
Region at $230 million. The amount of state and local sales tax that came directly from the DNC
was $11.1 million and that sum does not count the state income tax that came from the 1,536
jobs that were created by the Convention, the hotel tax that came from having virtually every
room in the region sold out, or the corporate income tax that was paid by companies due to their
Convention revenue. However, notwithstanding this, the legislature is free to require clawbacks
in all economic development grants it gives out, and perhaps you should contemplate doing this
in the future. You both may recall, that as part of the Economic Stimulus Package we enacted in
2003 which created tremendous economic growth throughout the Pennsylvania, the IFIP
Program (Infrastructure Finance Improving Program) required grantees to pay us back if the state
income tax their project generated over a ten-year period did not produce the funds given in the
initial grant.

You asked a few other specific questions about whether we consulted with Mayor Kenney,
Governor Wolf or the legislature before we decided how to use our surplus. You ask if we
worked with Superintendent Hite. We did work with the Superintendent and he was absolutely
delighted with the $750,000 donation. Mayor Kenney and the Members of the Philadelphia
delegation were at the press conference announcing this and some of our other donations.

Lastly, as to not having State funds to spend frivolously, I understand the Commonwealths
dilemma. A $3 billion deficit will only be bridged by making hard choices to both raise revenue
and take money out of the budget as we did when I became Governor and inherited a $2.4 billion
deficit from the prior administration. You may recall, that with your help, we were able to take
nearly $2 billion out of the cost of the operation of our government. The budget line for general
government operations was less in real dollars in my last year as Governor than it was in my
first. You may also recall that the Wall Street Journal commended us in 2010 saying that
Pennsylvania was one of only 9 states in the America that was fiscally stable. We were the
only state in the Northeast and Midwest to receive such designation. As for revenue, I would
suggest that it is time for Pennsylvania to join every other shale state in The Union and enact a
severance tax. Estimates are that this could produce as much as $500 million which would
certainly be helpful in dealing with your deficit.

So, thank you for your letter. I hope this has cleared up some of your questions. I have indicated
to Auditor General Eugene Depasquale my intention to totally cooperate in his investigation and
meet with his staff personally to answer any questions they may have.

Sincerely yours,

Ed Rendell