Nov 22, 2013

When Business Paid The Freight

Believe it or not, there was a time not so long ago, that businesses actually paid their own way. They did not expect, nor did they receive, any incentives from government. In this recent election, the County Commissioner's rejection of the TIF for Costco was an issue used by their opponents. We have come so far down the path of subsidies, that those who dare to oppose these giveaways, are accused of costing the community jobs, and taxes for the future. Over the years, Allentown gave out dozens of KOZ's that never produced one dime or benefit for the taxpayers. For example, the former Cata garment building on Linden Street was given a KOZ when it became a self storage facility. It was then purchased by the city for the arena, and is now part of the NIZ. Between the KOZ and the NIZ, the taxpayers are shortchanged for 41 years. It could even be longer, if down this road the NIZ turns into XYZ. All these programs have a very real cost to the taxpayers. The government units must make up this lost revenue in other ways, either by fees or taxes. When you buy a ticket for the new arena, what's it really costing you?

photo: Hamilton Street in 1956, before KOZ, NIZ, TIF, and CRIZ

10 comments:

Anonymous said...

I wish people could understand the simple fact that government giveaways like TIF's, KOZ's, NIZ's and their ilk do not create jobs. At best they move jobs to a targeted area. At worst, the actually cost jobs by skewing the market.

One recent applicant for a KOZ was quoted that he needed the tax break because he couldn't compete with the NIZ. In addition, he had to change his preferred commercial project to residential for the same reason.

Unfortunately, until people wake up and realize that tax giveaways only benefit those directly involved and the politicians supported by them, we'll continue to see more of these proposals.

S_Alderfer said...

Michael, I won't argue with you about your KOZ and NIZ points. However, there are a couple of extenuating conditions, in my opinion, that differentiate the proposed Costco/Hamilton Crossings project in Lower Macungie from the Allentown projects that you mentioned.

First, the land targeted for the Hamilton Crossings project has a large area of mining spoils left from when an iron mine operated at that location over 100 years ago. The mine spoils are the consistency of a slurry and cannot be built on without proper geotechnical stabilization. That adds cost to the project. Presumably, the selling price of the land reflects the geotechnical issues, however the average developer will be wary of the geotechnical issues even with a reduced selling price. The location, however, is not a pristine farm field, so there is an advantage in encouraging development of this land to help curtail sprawl on the margins of the more populated areas of the Lehigh Valley.

Second, most of the land involved in the Hamilton Crossings project is owned by the Diocese of Allentown, which is exempt from paying property taxes. So until a viable developer comes along and does something with that land, the county and school district will continue to see ZERO tax revenue from these parcels. The proposed TIF would allow a 50% reduction in the full tax rate for 20 years, after which time the full tax revenue would be owed to the taxing bodies. It the old bird in the hand being worth more than two in the bush. Personally, I'd prefer to accept 50% of the tax revenue starting next year rather than wait indefinitely for a developer to agree to remediate and then develop the property and pay 100% of the millage rate.

I think that government incentives like this must be evaluated on a case by case basis so that we only give concessions to the projects that offer the most payback to the public good rather than only offering short term gains in building permits and construction jobs.

michael molovinsky said...

scott, thanks for your well informed comment. i'm not knowledgeable enough on those particulars of hamilton crossings to directly reply, but i have noticed that the developer is still proceeding with various steps necessary to build the project. likewise, i note that when walmart wanted to tap the northern lehigh county market, they endured one obstacle after another for that market niche. i suspect that the developer and costco are similarly motivated to enter the lucrative western lehigh market.

Anonymous said...

I'm not sure how much of the Hamilton Crossings property the Diocese of Allentown owns (if any), but I am pretty sure it is not "most'; and surely not the part that has the questionable junk underground. That's from Eastern Industries.
As a long-time proponant of Rep. Jack Kemp's Enterprise Zones, I don't think he had in mind properties in wealthy communities.

And let's not forget that the long-awaited 'by-pass' will now become a virtual parking lot as thousands of cars daily roll into the shopping center. Perhaps they'll add a few more traffic lights to the by-pass?

Anonymous said...

Michael,

A little off-topic, but do you have any information about that 'train engine' in the photo?

As a child, I think I marched behind that thing in a Bethlehem Halloween Parade. Memories of that day have lingered in my mind.

Your photos have been wonderful!

michael molovinsky said...

@2:43, i do not have info on the but notice that it had the flags of local carriers. i will make some inquires.

Anonymous said...

How much will the NIZ cost me? That is easy to figure out. Even using liberal numbers. Let's say the NIZ goes for a $1B. There are 12.76M PA citizens.... $1B/12.76M divided by 30 years equals $2.61 a year... I am ok with that.

michael molovinsky said...

ok with that@4:35, in the real world there's interest on a mortgage. for 30 years the total cost will be 2.5 the principal. the bonds payed about 5%. your real contribution will start next week, with $.28 a gallon at the pump.

Anonymous said...

OK. Let's say with fees the NIZ costs $2B, which is an amount that is not anywhere where willit would be... It would be $5.22 a year... Still ok with that

Anonymous said...

@4:35: I'm usually fond of 'running the numbers' like you've done in your post. Sounds reasonable, huh? but that that $2.61 per year times hundreds of similar government special favors, corporate welfare programs in every county in he state. etc, etc. Then before you know it ...it's real money.

At least we motorists will get something tangible for our gas taxes. Should have tied it to the price of gas long ago. Now we live withthe jane baker problem: hold off needed increases until the time comes that you must by 73%.

Finally, the train look like a fair attempt at an Alco FA much like the ones used on the PRR and LVRR.