Feb 2, 2012

Bernie's City Hall Lesson

Although Bernie O'Hare has observed from the audience on many occasions, last night he ventured to the podium. It was his intention to give Allentown City Council a well thought out lesson on why they should table the vote approving the NIZ board members. O'Hare cited no less than three irrefutable conflicts of interest, and one direct violation of the codified ordinance. After all nine members were approved, through 52 yes votes, Bernie instead had learned a lesson; Allentown City Council never lets lack of due diligence, or technical aspects of the law, get in the way of moving the Mayor's agenda forward. There was some concern that new member Frank Concannon has missed all the meetings. They might just as well get a puppet and raise it's hand yes every vote; What's the difference with this Council.


Anonymous said...

Michael, up to this point I have read your posts with great admiration for the care you have taken in studying the issues. However, when you got up to speak at the City Council meeting last night you totally dropped the ball. How could you put yourself in a position where you make an assertion that was unanimously refuted even by the most skeptical members of the board? Nothing in the legislation permits property taxes to be used for the NIZ financing mechanism, not sure why you'd beat that dead horse. It would have been a better use of your time pointing out the conflicts of interest inherent in the appointments.

michael molovinsky said...

anon 4:13, that's a fair question. i knew that o'hare was going to question the appointments, and that he was informed on that issue. i was told by "someone in the know", that the bonds would only be underwritten with the understanding that taxes could be used if necessary. when the bonds are issued, we will see if they are general obligation (meaning taxes can be used), or revenue (meaning they cannot be used). i think it was apparent that council knows very little about this law. contrary to pat browne's assertion that the law is very clear. so far, the main beneficiaries have been picked even before guidelines were established. you have more faith in what was said last night than I do.
there are no skeptical members of council. the ordinance itself passed 6 to 0, and the board members received 52 yes votes, one no, and one abstention. as usual, the only skeptical people were the taxpayers, on the other side of the dais.
in a town like allentown where taxes stay the same, but fees keep going up, we must also see what allentown budget money ends up assisting the arena. i do not believe that the sales tax and earned income can possibly pay the debt service on the $160 million dollar arena. in addition reilly will total out at $70million and butz at $10. here again, we have been told that any shortfall will be at their expense; at that, i'm skeptical.

Anonymous said...

4:13 -

Allentown City Hall has given us little information in general, and has been particularly evasive about whether property taxes can be used to fund NIZ projects.

Molovinsky's question, which forced an answer on the record (and could later be used in court), may have been the most valuable thing accomplished last night for the taxpayers of Allentown.

michael molovinsky said...

anon 7:05, yes, i was glad to get that on the record, from no less than peter schweyer, jenn mann's (act 50 co-author) chief of staff. unless the act specifically prohibits the use of property tax, the citizens remain vulnerable.

John.Jay said...

I don ' t understand , the legislation does specifically prohibit the use of property taxes . I have already had this conversation with Mr . O ' Hare
" The following shall be the amounts calculated and certified : . . . ( 9 ) [ e ] < b > except for a tax levied against real property and notwithstanding any other law , an amount equal to any tax imposed by the Commonwealth or any of its political subdivisions on a qualified business engaged in an activity within the neighborhood improvement zone . . . ." 72 P . S . 1604 - B ( b )( 9 ) ( emphasis added ). Is there another statute that allows for property taxes to be levied against ? if there is , it directly contradicts the specific NIZ enabling legislation and is probably , therefore , void . ( Specific statutes control over general ones ). However , if you can give a citation to the contradicting statute , I ' d like to review that .

michael molovinsky said...

john, would you kindly send me a link to the act, or sufficient access instructions, thanks

John.Jay said...


Anonymous said...

does that link work for anybody?

michael molovinsky said...

john jay is an attorney. as a layman, i interpret the legislation as john purports. it appears to me that the commonwealth will also apply all state income tax within the zone, toward the bond debt. john appears to be a supporter of the project. if others legally trained agree that local property taxes are absolutely immune from use remains to be determined. i have heard that at least one person familiar with municipal finance feels there is wiggle room to use city tax. at any rate, i appreciate john providing the link, and welcome more legal opinion.

John.Jay said...

I am compelled to say that I am not an attorney. I do not hold myself out as one and nothing that I say should be construed as legal advice. Anything I have said is merely my opinion as a lay observer. See Pa.R.P.C. 5.5(a), 5.5 (b)(2), 7.1, 7.5.

Guy Williams said...

Anon 4:13 In my view both Mike and Bernie were at their best last night.The biggest fear is that at some point the laws will be manipulated to use property taxes.Are we being set up for a possible future bailout?Fair question?Id beat that dead horse.

michael molovinsky said...


michael molovinsky said...

regardless of the property tax legality, it is still my contention that all taxes diverted to the arena and approved private development, will have to be made up one way or another by taxpayers. every unit of government will want to maintain their budgets, and will increase their tax rate accordingly. it's political double talk to imply that this project will not cost the taxpayers.

LVCI said...

Regarding the use of property taxes if the NIZ should the NIZ come up short...

An entity collecting a local tax within the neighborhood improvement zone shall, within 30 days of the end of a fiscal quarter, submit all of the local taxes collected that are to be calculated under this subsection to the State Treasurer for transfer to the fund under subsection (d).

(1) An amount equal to all corporate net income tax, capital stock and franchise tax, personal income tax, business privilege tax, business privilege licensing fees and earned income tax related to the ownership and operation of a professional sports organization conducting professional athletic events at the facility or facility complex.

(9) Except for a tax levied against real property, an amount equal to any tax imposed by the Commonwealth or any of its political subdivisions on a qualified business engaged in an activity within the neighborhood improvement zone.

SENATE BILL No 907 (2011)
Section 1607-B Commonwealth Pledges
.. impair revenues to be paid under this article to the contracting authority necessary to pay debt service on bonds. Nothing in this section shall limit the authority of the Commonwealth or any government entity to change the rate, tax bases or any subject of any specific tax or repealing or enacting any tax.

I'm no trying to pretend to be a lawyer, but it appears to me property taxes are not authorized to be used by either bill.

HOWEVER: There's a whole plethora of other tax increasing alternative opportunities made available to them under Senate Bill No. 907... Nothing in this section shall limit the authority of the Commonwealth or any government entity to change the rate, tax bases or any subject of any specific tax or repealing or enacting any tax.

e.g.-- corporate net income tax, capital stock and franchise tax, personal income tax, business privilege tax, business privilege licensing fees and earned income tax.

Therefore by no means are we off the hook if I understand this correctly.

Anonymous said...

What no FDAA? Seems he/she is awfully quiet the morning. What a perfect opportunity FDAA had last night (since he/she attends all the council meetings) to introduce them self to you and Bernie and finally put to rest the accusations he/she is a paid stooge.

Anonymous said...

John Jay 8:39 -

I think a large part of the problem is that nobody could (or would) give an answer on this for a very long time.

I seem to remember a certain ASD School Board member (and head of the finance committee) asking for this information from those involved and he could not get a straight answer. I believe he even wrote a MC Opinion piece on it.

Let's hope that what was said last night is indeed the case. Still, the city, school district, county, and outside municipalities stand to lose greatly from the diversion of existing tax revenues from within the NIZ. Some of the city's largest employers (Morning Call, PP&L) are in the zone.

You would think that a detailed listing of all taxes by property and employer would have been prepared and presented PRIOR to anything moving forward. In addition, I'd like to see the revenue/expense projections for the arena, as well as property tax projections for the NIZ as it's built.

As a taxpayer, I'd like to have the facts to calculate my potential rate of return and determine whether the project is worth the risk.

You'd think our elected officials would want to do the same and make that case to the people they serve. That they don't have that information, or aren't willing to share it, makes me wonder why.

LVCI said...

It was asked why is the Sacred Heart Hospital included in the NIZ?

Well now we know why. It's because the hospital's employees are amongst the highest paid within the zone since EIT and the rest goes towards paying off these bonds.

Where is the makeup for the lost EIT revenue going to come from? I suppose the 35% increase in EIT was intended to offset those losses. If that is the case, then indeed workers are already starting to see tax increases involved for the costs of this project before it even gets off the ground.

Cheerleaders will tell us it will pay off in the end. The end comes in about 30 years. At my age it's more then likely I'll never live long enough to see that day. Don't come to me in between then and now if this thing doesn't pan out by hammering me on my property taxes if city revenues start coming up short on lost EIT's, etc.

So yes, indirectly this does affect property taxes. A good portion of the city's budget is generated by a mix of EIT, licenses, fees, etc. If the city runs into a deficit problem, property taxes are always on the table for use in it's "General Fund" needs..

If/when the budget has deficits there's a 100% chance it will come from a mix of all the revenue sources the city has at it's disposal. Surely property tax is one of them.

Anonymous said...

I praise the Council of Apparatchiks for having the courage to do what's right for the Chairman's magnificent $ 160.0 million dollar spending spree.

I formally recommend all Council members be awarded the Order of Pawlowski as they are genuine Heroes of the People's Democratic City With No Limits.


Anonymous said...

Retired ASD teacher here.

To my knowledge, there has never been an open display of the MATH that supports this project. A 30 year debt is a VERY big obligation.

Other than the Phantoms, the developers, how can ANYONE be convinced this is a worthy purchase?

The Mayor, the Morning Call, the City Council have FAILED local citizens.

I get this image of three monkeys.

"Hear no evil, see no evil, speak no evil."

Anonymous said...

Viktor, you're only including the arena at $160 million. Dear Leader Pawlowski desires to spend at least $600 million on the entire project.

Please increase your budget for 'Order of Pawlowski' plaques and commemorative desk pen sets.

Herb Brooks