Lehigh Valley’s economic development impresses Silicon Valley leadership

Ranking second in the U.S. in 2022 for new economic development projects among mid-sized regions helps make the Lehigh Valley a unique and inspirational story, according to U.S. Rep. Ro Khanna, D-Calif. 

The Philadelphia native and Silicon Valley congressman visited the Lehigh Valley recently to learn more about its economic transformation, and its developing of a diverse manufacturing sector making food and beverages, technology, medical equipment, and consumer goods. 

Khanna said in a release that he could “feel the prosperity within like a minute of coming into a town compared to other places.” 

Having authored books on the importance of U.S. manufacturing in relation to the economy and the need to create additional jobs in technology, Khanna is seeking to develop a national strategy for economic development. He joined in a 90-minute roundtable discussion on June 28 held in Bethlehem’s Lehigh Valley Economic Development Corp. (LVEDC). The discussion was part of Khanna’s three-day tour of Pennsylvania and Ohio. 

Citing the Lehigh Valley’s economic development, Khanna said it’s important to find how to have the same kind of economic strategy in other parts of the country. 

Rep. Susan Wild, D-Allentown/Bethlehem/Easton/Bangor, joined Khanna and leaders from business, education, labor, municipal government, regional organizations, and workforce development. The group spoke about the factors making the Lehigh Valley economy a prosperous one, and what they needed from the federal government to grow manufacturing and technology jobs. 

“I just am so proud of this area, and just how advanced we are, and how we are just really lighting the world on fire, if you ask me, when it comes to manufacturing and tech and that kind of thing,” Wild said. 

The roundtable discussion noted the correlation between economic prosperity and quality of life. A collective $8.4 billion in annual output from the region is generated by more than 750 manufacturers. That total amounts to 18% of the Gross Domestic Product (GDP) in the region. Manufacturing on a national level represents 12% of the GDP. 

Don Cunningham, president and CEO of LVEDC, said the Lehigh Valley sees economic development as a collaboration involving the public and private sectors. He said the region benefits from its close location to Philadelphia and New York City and pointed out its growing population and career and education system. 

Probably our biggest challenges today are the ramifications of success 20, 25 years ago,” Cunningham said. 

Population growth and increased business and development has led to added traffic and a demand for housing that increases prices. Wild said there are companies that would be interested in the Lehigh Valley but may be concerned about the lack of housing. 

Khanna and Wild were asked by officials from B. Braun Medical and Tyber Medical to pass legislation rescinding a tax code change that took effect in 2022. As it now stands, the cost of development must be deducted over five years, rather than being deductible in total immediately. 

“So, we spend the money all in one year to develop new products, grow and gain, and now it is not deductible, and it’s only deductible one-fifth a year. Well, that’s creating massive tax bills for us,” said Damien Sibilla, chief financial officer at Tyber Medical in Bethlehem.

To focus on ensuring that regions have an adequate and skilled workforce, Cunningham said economic development strategies must evolve, with help from policymakers. He noted that some states, cities, and regions have gotten creative and developed financial incentives for people who relocate for employment.

Cunningham said immigration policy is critical when it comes to building a labor pool.

“Every economic boom in American history has been fueled by immigration,” Cunningham said. “It seems to me, the only thing we talk about in the U.S. is the southern border and illegal immigration. We don’t talk about a broader immigration policy.”

Participants in the roundtable were: Khanna; Wild; Cunningham; Sibilla, Chief Financial Officer at Tyber Medical; Matt Tuerk, Mayor of Allentown; Sunny Ghai, Upper Macungie Township supervisor and business leader; Dan McCarthy, Lehigh Valley Partnership Secretary and LVEDC Board Member; Michael Cacace, Vice President of Corporate Tax at B. Braun Medical; Angelo Valletta, President and CEO of Ben Franklin Technology Partners of Northeastern Pennsylvania;  Paul Anthony, business manager and financial secretary of IBEW Local Union #375 and LVEDC Board Member; Andy Hammer, Executive Director of the SkillsUSA Council for the Lehigh Valley; and Karianne Gelinas, Vice President of Regional Partnerships & Talent.

Supporters, detractors debate former governor’s complicated legacy

Governor Josh Shapiro was just minutes into his inaugural speech on Tuesday, Jan. 17, when he turned to address the outgoing chief executive, Gov. Tom Wolf. 

“Thanks to his leadership,” Shapiro stated, “we now find ourselves in the strongest financial shape in the history of the Commonwealth of Pennsylvania, allowing us to make critical investments for tomorrow.” 

Supporters of Wolf likely found Shapiro’s praise for his predecessor providing a moment of warmth on a day otherwise chilled by wintry wind and leaden skies. The President & CEO of Lehigh Valley Economic Development Corp., Don Cunningham, believed Wolf’s greatest contribution to the state’s businesses and economy to be the reduction of the corporate net income tax from 9.99% to 4.99% by 2031. 

“It’s very significant for those of us to do economic development,” Cunningham said. “He proposed it in his budgets and finally got agreement from Senate Republicans. That’s what leaders do.” 

Not everyone on that gray inaugural day shared Shapiro’s sunny sentiments for Wolf’s impact on Pennsylvania’s businesses. State Senator Scott Martin (R-Berks/Lancaster) said there was “a lot of frustration” the past eight years. The reason being that many of Wolf’s policies were, said Martin, “counterproductive to Pennsylvania tapping into its full economic potential.” 

David N. Taylor, president & CEO of the Pennsylvania Manufacturer’s Association, cites the “deeply disturbing” practices of the Wolf Administration that he says have destroyed an untold number of businesses in Pennsylvania. 

“Governor Wolf, during his tenure, was markedly unhelpful to Pennsylvania’s business competitiveness,” Taylor said. “At every turn, he was pushing for more government, higher spending, and he did a number of specific things that were especially damaging to the economy.” 

One such thing, said Taylor, was the 2017 Tax Cuts and Job Act (TCJA), which changed the depreciation, deductions, tax credits, and tax items that affect business. 

“When the tax policy was changed at the federal level, that was the starting gun for the process of American companies considering where to bring those overseas earnings to reinvest in America,” Taylor said. “Pennsylvania was the only state to say ‘no’.”  

Another point of contention was the additional tax on the production of natural gas in Pennsylvania that Taylor said Wolf called for in his annual budget addresses. 

“Even though he was never going to get that, the fact that you had the sitting governor calling for it rendered our investment environment uncertain,” Taylor said. “If you want to go back and look at when the rigs stopped coming in or when did they start leaving, 2015 was that turning point.” 

Jon Anzur, vice president of public affairs for the PA Chamber, called Wolf’s record on working with the business community “a mixed bag.” 

At the beginning of Wolf’s first term, he had what Anzur said was “a very adversarial” relationship with the business community. The issue at the heart of the impasse were business-related, a tax-and-spend approach not in line with the business community. 

“As Wolf went along,” said Anzur, “rather than treat the business community as an adversary, he treated it as a partner.” 

Supporters of the Wolf Administration point to what they see as life-changing investments in the people of Pennsylvania and the building of a business-friendly climate via the following actions: 

  • Collaborated with 430 companies to create and retain close to 194,000 jobs. 
  • Diversified state contracting so that diverse, small, and veteran businesses comprise 20% of Pennsylvania’s contractors. 
  • Eliminated the Capital Stock and Franchise Tax. 
  • Launched Manufacturing PA to link job training to career pathways. 
  • Partnered with the private sector to address the worker shortage. 
  • Placed Pennsylvania on track to a Corporate Net Income Tax rate of 4.99%. 
  • Reformed Occupational licensure to cut red tape, help workers, and strengthen the workforce. 
  • Distributed grants to help more than 10,000 small businesses and the hospitality industry survive the pandemic. 

“He did some things that were very focused on what we need to do to grow the economy,” Cunningham said. 

At the same time, Wolf’s handling of COVID-19 came under criticism. A state audit called the business waiver program confusing and inconsistent, declaring that it created for Pennsylvania companies an unfair playing field. 

Martin agreed. “Direct competitors, even in my own district, one would get a waiver to stay open and their direct competitor would not,” he said. 

Taylor recalled Wolf’s shutting down of businesses being done without the okay of those whose livelihoods were affected by the decision. 

“There was no outreach to say, ‘How will this play out in the real world?’” Taylor said. “You would think any leader would want to have the most comprehensive overview information as to how will this play out… Governor Wolf didn’t reach out to anyone.” 

Like many politicians, Wolf leaves behind a legacy that is complicated and conflicting. Supporters say it abounds with innovative programs, people-driven policies, and investments aimed at creating a more prosperous Pennsylvania. The Rainy Day Fund, dangerously low when Wolf took office, now stands at an historic $5 billion, and his administration secured a $5.3 billion budget surplus, albeit aided with federal funding. Still, Wolf is the first governor since 1987 to hand his successor a surplus. 

Critics call Wolf’s business policies catastrophic and see the former governor, in Taylor’s words, “hurling down thunderbolts from on high” during the pandemic, preventing citizens and their enterprises from adapting to the circumstances, forcing them to “sit back, do nothing, and watch their business die.” 

Martin likewise believed Wolf’s policies made the pandemic worse, and that Pennsylvania’s businesses have not fully recovered. 

“Businesses continue to struggle and some no longer exist because of the policies he put in place,” said Martin. “It had a lasting impact.” 

Cunningham noted that Wolf was operating in real time and trying to find the balance between keeping people safe and keeping businesses open. 

Good and bad, Wolf’s two terms provided what Anzur termed “an evolution in office,” the former governor finding “common ground to move the ball forward for Pennsylvania.”