Meadville Tribune

State News

April 2, 2014

Popular program re-routing tax funds to improve cities

HARRISBURG — Gov. Tom Corbett announced at the end of 2013 that Bethlehem and Lancaster would be the first cities to use an economic development program designed to let businesses put money they would otherwise pay in state taxes toward downtown improvements.

Now, pretty much everyone wants in on the action.

Several bills circulating at the Capitol would open up improvement zones more quickly or allow smaller cities to participate. The program is now limited to cities with more than 30,000 people and cannot be expanded until 2015.

Sen. John Wozniak, D-Cambria County, wants to make the concept available to more cities the size of Johnstown.

“We need bulldozers” to redevelop some areas of the city, he said.

The improvement zones aim to entice businesses to come and invest in development with money they otherwise would pay to the state in income taxes, franchise taxes, sales taxes and taxes on equipment.

Bethlehem hopes to shift that money to various projects, the most ambitious being a plan to redevelop a portion of the former Bethlehem Steel site into a Bass Pro Shops store and a hotel and convention center. Another portion of the 1,600-acre steel works is already a slots casino.

Alicia Miller Karner, Bethlehem’s director of economic development, said the Sands Casino draws 8 million visitors a year. The outdoors store and convention center will attract 1 million more visitors, according to city projections, she said. A key component of the improvement zone strategy is that it can only be used to woo out-of-state business, Miller Karner said. Bass Pro Shops, for instance, has only one other Pennsylvania location.

In Lancaster, officials hope to use the improvement zone to redevelop more than a half-dozen abandoned and blighted properties, including a former rail yard, barrel works and empty hotel, according to a plan released by state Sen. Lloyd Smucker, R-Lancaster.

State Rep. Mark Longietti, D-Mercer County, said the Legislature shouldn’t pre-determine which communities can participate. His bill calls on the state Department of Community and Economic Development to award City Revitalization and Improvement Zones to 15 more cities between now and 2016. Additional designations would be divided among population categories, so smaller cities would have a chance.

Critics of this approach wonder if there will be enough bang for the buck to warrant zones in small cities.

Another bill — this one authored by state Sen. David Argall, R-Schuylkill — would create three more improvement zones this year and another two in 2015. His bill has not been formally introduced.

The program has already changed from its original form. Bethlehem qualified after the state lifted a population ceiling — originally barring cities with more than 70,000 residents. And, while the improvement zone legislation allows for tax relief in projects consuming up to 130 acres, Bethlehem divided that into about a dozen different projects.

Miller Karner said the projects there are expected to draw $580 million in investment, including 2,900 construction jobs and 4,000 permanent jobs. Some are already working through the approval process with local historic boards and planning agencies, she said.

A key part of Bethlehem’s strategy for getting the improvement zone designation was highlighting redevelopment efforts that were gearing up, even before the state announced the program, she said.

That raises questions for lawmakers.

State Rep. Chris Ross, R-Chester County, chairman of the House Commerce Committee, said at a hearing this week that lawmakers ought to consider whether the state is creating incentives in areas that would see growth anyway.

Wozniak said the state will have to determine how much tax revenue it can live without, as lawmakers push to expand the improvement zones.

John Finnerty reports from the CNHI Harrisburg Bureau for The Meadville Tribune and other Pennsylvania newspapers owned by Community Newspaper Holdings Inc. Email him at jfinnerty@cnhi.com and follow him on Twitter @cnhipa.

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