Solobay among legislators using per diems for mortgage
A fairly common, if unnoticed, practice for state politicians is to own a second property in Harrisburg to use for lodging during their frequent trips to the capital.
Normally, the decision to purchase a property would be a sound real estate decision. However, many governmental watchdog groups argue it becomes a more complicated issue when these same politicians continue to earn per diem reimbursements for travel and lodging.
In December 2011, state Rep. Paul Costa, D-Wilkins Township, filed notice with the state regarding the creation of a limited liability company. Vandaleh Real Estate Associates LLC was created with the Harrisburg address of property that was at the time owned by Costa, former Rep. Michael Diven, state Sen. Tim Solobay, D-Canonsburg, and Sen. John Yudichak, D-Luzerne.
In August 2012, the four men transferred the property, located at 1616 Green St., to the LLC for the sum of $1.
Vandaleh Industries was the name of a made-up company character George Costanza invented in an episode of the ’90s television sitcom “Seinfeld” in order to qualify for unemployment.
Yudichak, one of the original owners of the house, said he dissolved his interest after leaving the House for the Senate a couple of years ago.
“I made no profit and took no financial gain from the limited time I was in the partnership,” Yudichak said of the real estate agreement. He said the LLC was created, at least in part, as a way for him to end his ownership in the property.
“I always looked at it as simply renting,” Yudichak said. “I never looked at it as ownership.”
Yudichak said he now turns in receipts with his reimbursement paperwork, even though that is not required under state law. Both Solobay and Yudichak said the property was handed down to their group of legislators from politicians who were the previous owners.
Solobay earned nearly $30,000 in per diem reimbursement payments between December 2011 and December 2012. This sum does include travel and lodging expenses, as well as food stipends. At least two conferences, in State College and Philadelphia, required lodging out of the Harrisburg area.
Like Yudichak, Solobay said he considered the arrangement similar to a rental agreement.
“I gotta sleep somewhere,” Solobay said. “It’s just a living arrangement where we’re at.”
Solobay said at this point, he and Costa are the only two using the residence and that at no point was anybody in the partnership in it to make money. Diven recently ended his ownership share.
There is nothing illegal in the practice of politicians owning a second property in Harrisburg. While the state has rules against legislators whose main residences are within a 50-mile radius of the capital receiving per diem travel reimbursement, there are no restrictions barring politicians from receiving payments if they own a second house in the area.
But that hasn’t kept some governmental watchdog groups from speaking out against the practice.
“Per diems are abused by many legislators and do not require accountability,” said Eric Epsein, co-founder of Rock the Capital, a government reform group created in 2005. “The purpose of per diems is to offset expenses, not underwrite investments.”
Solobay listed “Vandaly Enterprise” as a source of income on his statement of financial interests starting in 2006, but is unclear whether he made any money from the endeavor.
“I think it’s a break-even venture,” Solobay said, “based on our filing with federal income tax each year.”
He defended the practice of ownership with reimbursement.
“We have to have somewhere to live,” Solobay said. “This gives us the flexibility of not having to check in and check out (of a hotel), and we’re able to leave our things down there.”
Pennsylvania’s out-of-session per diem reimbursement, which covers business conducted in the months of June, July and August, is $185 per day, putting it behind only Alaska in the National Conference of State Legislatures’ ranking of highest per diem reimbursements. At $158, Pennsylvania’s rate for the rest of the year is ranked seventh highest.
Some opponents of the practice said it’s not the fact that legislators get reimbursed while owning property they have a problem with, but rather the secrecy of it. Politicians could “rent” rooms from other politicians who owned residences near Harrisburg, just as many do now, but the submission of receipts would give taxpayers an opportunity to know just how much money these transactions generated.
“Nobody expects legislators not to be reimbursed for actual travel costs,” said Barry Kauffman, executive director of the nonprofit group Common Cause. “However, we believe it is imperative that the reimbursement be based exclusively on the submission of receipts.”
Jessop Community Federal Credit Union