More investigation required: The OneJet fiasco
A Pittsburgh Business Times investigation offers a fascinating look at the mechanics of the public subsidies lavished on now-bankrupt OneJet. And, in the process, it raises more troubling questions about yet another failed government attempt to command the economy.
As the lead of the exclusive Paul J. Gough story goes:
“While air-transport network OneJet was flying high and gathering millions of dollars of investments from individuals, the airline also was building a reputation for late payments and delinquencies on $2 million in public loans, starting more than two years before it eventually defaulted in October 2018.”
But what’s so striking about local and state efforts to pick airline winners and losers for Pittsburgh International Airport is the blinders worn by those handing out such corporate wealthfare.
To wit, even though OneJet had been habitually late in its repayments on a $500,000 loan to the Redevelopment Authority of Allegheny County (RAAC), the same agency gave it another loan, one for $1 million a year later, and OneJet continued the practice of making late payments.
The Business Times investigation also unearthed that the Pennsylvania Department of Community & Economic Development had to send nine delinquencies notices and “demand letter” before OneJet started paying back a $500,000 loan.
The Business Times says OneJet eventually made up its late payments and was current on its loan payments – until after it stopped flying in late August 2018. Of course, creditors forced it into Chapter 7 bankruptcy and that stiffed the county for just over $1 million and stiffed the state for nearly $416,000.
Additionally, terms of county loan required OneJet’s loan payments to be made through an automatic payment system. But that never happened.
Amazingly, the Business Times reports that OneJet’s payment issues “didn’t factor into the approval of OneJet’s second loan.”
Lance Chimka now heads the county’s economic development efforts. He was not with the redevelopment authority at the time the loans were made. But he told the newspaper “It’s in our interests if they succeed. We want all of our borrowers to succeed.”
But isn’t the first role of any such agency to protect the interests of taxpayers who were involuntarily turned into OneJet’s sugar daddy?
To be clear, according to the report, OneJet was current on repaying its first debt when the second loan request was made. And the county redevelopment agency did seek additional personal guarantees on the second loan.
The late-payment behavior persisted. And it is only because of those personal guarantors that some of the money is expected to be recovered.
As one would expect, Chimka defends his agency’s role in the OneJet mess:
“RAAC often invests where private institutions will not and is accustomed to assuming higher-risk profiles,” he told the Business Times. “Despite this unfortunate project, RAAC maintains healthy fund balances and will continue to invest in projects with regional economic benefit.”
Sad to say, OneJet’s “economic benefit” proved to be a mirage. And why should taxpayer dollars be treated so disrespectfully? If private institutions would not bankroll OneJet, why should taxpayers?
And if private institutions would not help OneJet, why wasn’t this a red flag for county officials? Or for state officials? What due diligence was done? Or was none done?
Given that some prominent private Pittsburghers also invested in OneJet, did county and state officials pony up money based on their recommendations? What due diligence did those private investors perform?
Using tax dollars to subsidize a private corporation is lousy public policy. But the OneJet fiasco hints of something far worse. The whole scenario is in dire need of a thorough public hearing.
And until everyone involved is forced to be held accountable, the public that was forced to subsidize this detritus should continue to demand answers.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).