Candidate: Development program could spur growth
When Allentown mayor and Democratic gubernatorial candidate Ed Pawlowski was in Altoona this week, his biggest campaign selling point was a development program he initiated in Allentown, with help from powerful state lawmakers from that area.
A statewide version of that “Neighborhood Improvement Zone” program – which he said has led to $1 billion in investment for Allentown – could help Altoona rise from its generations-long economic slump, officials hope.
Signed into law in July, the City Revitalization and Improvement Zone program allows cities to establish areas up to 130 acres where developers or the local authority that oversees each municipal program can build or rehabilitate facilities for tenants whose state and local taxes are then redirected for as long as 30 years to pay down construction debt.
“The focus of the program is to provide opportunity to spur new growth in cities that have struggled to attract development, helping to revive downtowns and create jobs for the residents in the regions,” states the program guidelines, published in October. “Vacant, desolate, underutilized or abandoned space will be developed, thereby creating jobs, increasing personal incomes, growing state and local tax revenues, reviving local economies and improving the lives of city residents and visitors.”
CRIZ isn’t your typical tax abatement initiative, according to state Sen. John H. Eichelberger Jr., R-Blair.
“It’s important in Altoona that this [will be] a transformational program,” he said.
Potentially, “it’s phenomenal,” said Patrick Miller, president of the Greater Altoona Economic Development Corp.
In Allentown, it has created a “major renaissance,” according to Pawlowski’s campaign literature.
It’s expected to create 4,000 new jobs there, and the development it has triggered includes a new arena that will be home to a minor league hockey team as well as a re-established brewery, Pawlowski told his audience in Altoona.
The NIZ, devised with the help of state Sen. Pat Browne, R-Lehigh, has enabled developers to create facilities and bring in businesses, because the diversion of virtually all state and local tax money generated by those businesses to pay off construction costs will enable developers to charge rent as low as $7 a square foot for Class A office space, Pawlowski said.
“You can’t beat it,” he said.
“The city is not on the hook for a single penny,” he added.
It’s like a Tax Increment Financing program “on steroids,” he said.
Allentown leveled a square block to provide the tract for its project, Eichelberger said.
That included eminent domain takings, Pawlowski said.
Before the NIZ began, the total assessed value of that block was several hundred thousand dollars, Eichelberger said.
Now it’s in the tens of millions, he said.
State taxes diverted through the program include corporate net income, sales and personal income tax.
Local taxes diverted through the program include business privilege, amusement, local services and earned income tax.
The governing body of the municipality participating in the CRIZ appoints some of the members of the authority that administers the program, while the state senator whose territory includes the municipality appoints the rest, according to Eichelberger.
The authority diverts tax revenue generated by projects.
Potentially, the city could use its existing Redevelopment Authority, if it got legal clearance, Miller said.
Developers who participate in CRIZ will generally work with a partner bank or investors to amass the money to build the projects, which need to be outlined in a municipality’s application to join the program, Miller said.
“You need an initial project that will generate a significant amount of state tax revenue,” Miller said.
Developers sign a contract with the local CRIZ authority setting out a payment schedule, Eichelberger said.
For the first seven years of a CRIZ, the authority can make up for low-revenue years – likely the early ones, before a plan is fully realized – with excess revenue from higher-revenue years, according to Eichelberger.
To ensure that a local zone won’t divert taxes that would have been paid anyway, only additional money beyond a baseline amount established before a zone is formed can go toward construction debt – although if a municipality razes everything at the beginning, it sets the baseline to zero, Miller said.
CRIZ, which operates under the state Department of Community and Economic Development, the state Department of Revenue and the governor’s Office of Budget, requires at least a 1-to-5 match of private to government funds.
Initially, the law allows for zones in two Pennsylvania cities, both with a population of at least 30,000, and a pilot zone in a borough or township.
The application period is closed for those.
The law allows for zones in two additional municipalities per year, beginning in 2016.
Altoona could apply for entry then, according to Eichelberger.
Eichelberger envisions a “themed” development plan, probably centered around an “anchor” manufacturing plant, with satellite suppliers, testing facilities and retail outlets.
That could happen, for example, if a firearms manufacturer comes to town, he said.
Such a setup wouldn’t necessarily work downtown, but there are areas in the city big enough, he said.
The former Bon Secours Holy Family Hospital property and the former Puritan mill property next to it could become a CRIZ, Miller suggested – noting that a zone doesn’t need to be one contiguous tract.
Designating the Bon Secours property a CRIZ would require decertifying it as a Keystone Opportunity Zone tax-abatement area, however, according to CRIZ guidelines, Miller said.
Property owners need to agree to such decertification, he said.
Local authorities will probably need to entertain project proposals in a public venue, although there may need to be confidentiality on real estate transactions, to prevent buyup of targeted land by those who would try to hold it hostage pending a project, according to Eichelberger.
The public character of the local authorities and the reporting requirements of the program would help ensure against corruption and abuse, according to Eichelberger and Miller.
The local CRIZ authorities will not have the power of eminent domain, Eichelberger said.
The Lehigh Valley region – where Allentown is located – benefits from being a “hot” area, and its NIZ has drawn investors from New York City and Philadelphia, Miller said.
It’s too early to tell whether a CRIZ here would likewise draw out-of-town investors, Miller said.
“It’s a complicated program,” Miller said.
Officials need to look at it “very carefully,” he stated.
Mirror Staff Writer William Kibler is at 949-7038.