Nov 6, 2015

Allentown's NIZ vs. The Real Local Economy

Economically, this area has become the Tale Of Two Cities. Every day we read of a new NIZ development in Allentown, but also of some company in the valley either closing or cutting back. On the front page we read about City Center Development Company building more apartments, but inside we learn that Kraft, Mack, Air Products and Brown Printing are having setbacks. Because this seems confusing to many, I have decided to provide some clarity.

On the front page we're  reading a J.B. Reilly wealth management report, it has nothing to do with us. There are no new office jobs, just jobs transferred from somewhere else. At first, the transferred jobs came from other towns in the area, like PennNational from Boyertown. More recently, jobs are just moving from other places in Allentown, like Buckno Lisicky from the Masonic Temple Building, and Morgan Stanley from the Frederick Building. The restaurants hoping to serve the transferred office workers are new, but there are too many, and they are withering on the vine, quicker than they open.

When you balance Reilly's private portfolio vs. the real economy, we seem to be heading toward a downturn. There is no comparison between a Kraft production job, and selling popcorn part time at the arena. But my friends,  don't allow me to depress you with reality, tonight is First Friday in Reillyville. Boogie on down to center city, and toast Reilly's City Center, you're paying for it.

Reilly's proposed Five City Center, on Hamilton to Walnut, between 7th and 8th Streets.


Anonymous said...

I can't understand why the continuation of this funding scheme continues on. Like you, I suspect this has NOTHING to do with market demand.

Recently, the new Butz building was announced in grand fashion. Shortly thereafter, a thought occurred. Directly across the street from the Butz complex is a similar size office structure about to be vacated!

The owners of the soon-to-be-empty Talen building claim it could remain empty for up to 10 years. They want taxpayer assistance to survive. Geez, a firm across the street was looking for more space! Someone should have introduced the two parties, it seems.

Fred Windish

Anonymous said...

To hell with the Masonic Temple, it's so ......yesterday.

Anonymous said...

We'll be there for a Phantoms game tonight...with our 3 year-old daughter.

Walking Hamilton Street after dark. A seemingly impossible notion a couple of years ago.

Keep railing against it, but there are people who will take advantage of the food and entertainment downtown.

michael molovinsky said...

fred@5:03, first the NIZ went after other towns, next it came after allentown, now itself. it created such an unlevel playing field, that even modern class A buildings can't compete with it.

anon@5:58, that historic, iconic building will never recover from losing that tenant.

serial antagonist@6:31, actually, City Center Development Company is taking advantage of you and all the other state taxpayers.

spencer said...

".....but there are too many, and they are withering on the vine, quicker than they open."

I'm not sure about Bell hall, or Centro, or Grain, but the Hamiltion is definately doing well usually serving lots of people...

Shula's seems to be doing OK, not great though.. what seems to be keeping them a float is getting large groups for corporate events.

Just wanted to share my observations from living in the area.

LVCI said...

Blue Collar production workers aren't going to find other jobs like Kraft's. It ain't gonna happen no matter what kind of smoke these local politicians are blowing.

When I retired from Kraft in 2006 my gross earnings for that year was $38,509 (w/o overtime). I wasn't a mechanic/line tech who could earn double of myself if he/she accumulated enough OT. Some may argue no wonder they left. Payroll isn't relative in-so-much as it only represented 13% of Kraft Lehigh Valley's entire budget.

In 2006 workers were manufacturing all the McDonald's cheese supplying the entire NE to the Mississippi along with producing 35 or more (2 ton) pallets per shift of deluxe and SS cheese. LV was the only plant producing A1 and Grey Poupon for the entire United States. Grinding & packaging tons of coffee per shift. Natural cut cheese lines and the redistribution of 20-30 trailer loads each and every shift from it's giant coolers and warehouse.


LVCI said...

As impressive as this may sound, today only a little over 1/3 of this one million SqFt building is in use..

Long gone before I left were the days of Parkay, Velveeta, natural sliced cheeses, portion control and salad dressings departments. (At one time we produced 300 quarts per minute of either mayo or miracle whip along with pourable dressings of all kinds)

Think about this... if Kraft/Heinz (a multibillion dollar operation) no longer has use for a building of this size (along with it's 6 giant coolers) who would?

Unless the building is divvied up into pierces, the days of this kind of well paying production will never ever been seen again no matter what anyone tries to tell you.

Let me tell you how this will go down. The employees will get a decent severance package, instructed how to go about collecting unemployment and sent down to CareerLink where they'll be steered to $10 an hour jobs if they're lucky enough to even get one.

No NIZ is going to fix this for these workers. So yeah this is a big deal!

michael molovinsky said...

LVCI, thanks for your informed comments. i snickered this morning at gary day, gov. wolf and the other harrisburg fakers, talking about that $200,000 grant to kraft two years ago; as if kraft or heinz/kraft make decisions based on such waste of our taxdollars.

Anonymous said...

I am sure they will open a new state of the art plant in mexico.

Anonymous said...

Thank You L.V.C.I. Two Part 8:50am/8:51am....The real "blue collar" economy of the Lehigh Valley is in an upheaval of downsizing and in transition, that no "N.I.Z." or "C.R.I.Z." can fix or correct. Government needs to get out of the way, and let the "market place" correct itself (painfully perhaps) We still have great assets here, but the future of our Valley cities need to grow in other directions.
Just an "old man" making an observation here!
"The Old Allentown Curmudgeon" (Paul J. Fiske)

Anonymous said...

I went to the Hamilton twice, the whole scene was completely beat.
I don't see myself ever going back there again.
It couldn't have been less hip.

Anonymous said...

Take your own hipster millennial to the Hamilton, get back to us, let us know what they think.

Jamie Kelton said...

I'm not going to add to the comments about the Kraft Plant. They have been adequately expressed already by LVCI and I agree with them.

The buildings that have been constructed by City Center and the ones in the planning stages are a net plus for Allentown. I say that because they replaced old, worn-out buildings from the late Nineteenth and early Twentieth Century that were used for many years for business and commerce in Allentown; but they really did reach the end of their lifetime. I do wish that some of the architectural features were preserved, but in the end, the Weatherhold and Metzger building; the McCrorys building; what was there of Whelan's pharmacy were basically worn out.

There were a lot of promises made about what became the PPL Arena and the Renaissance Hotel and the Lehigh Valley Health. Most of it is pie in the sky but the buildings are there, they've been built, and in the end, they will provide some sort of basis for an adaptive re-use.

The First National Bank and other buildings along the 600 Block of Hamilton were also never going to be re-used. The Colonial Theater was a gravel lot next to the Old Courthouse is a lot better with the new building erected on it.

These new buildings likely aren't going to be used by the current tenants forever, especially after the questionable financing and leasing arrangements made by City Center Developers, but it will be sorted out and find some beneficial use.

The new buildings being planned between Walnut and Hamilton between Sixth and Ninth, look what they will be replacing... Old, worn out buildings, vacant parking lots that had buildings torn down over the years. In a few years, nearly all of the former Central Business District will have been replaced with Twenty-First Century buildings that will have new companies, or offices, or stores, or whatever eventually they are used for.

Those will be good things. It's what we use them for is what will be debated in the end. Allentown isn't going to go away, and this makeover I think is a good thing.

Anonymous said...

Im about to lose my job of 12 years at Kraft.
Is the Hamilton hiring?

Anonymous said...

@12:12pm and others

Buildings do not make a city. Older buildings can be made perfectly useful, but investment walked away 20 to 30 years ago. The new buildings certainly represent a major expenditure. Most of the cash left the city to outside suppliers and laborers. Urban policy that is based on only buildings will ultimately fail.

Abandoning people (something the market and racism/classism are very good at) results in a hollowed out city.

LVCI said...

Let's get back to talking about the NIZ. We now have dozens of shiny new buildings and some very rich developers. That aside let's get back to the basics.

(1) Are taxpayers of Allentown or the state financially better off?
(2) Are former workers outside of the LV benefiting from the move to Allentown?
(3) Will locals directly utilize or visit these buildings?
(4) Will this impact ASD in a negative or a positive way?
(5) How many who's jobs been moved now have to pay to park?
(6) Is a bigger city a better city?

Concerned Allentonian said...

(1) Are taxpayers of Allentown or the state financially better off?

Nothing is free. If the buildings are paid for by investors and private money, there still are street improvement and other costs paid for by the taxpayer. The NIZ buildings are paid for by the Commonwealth by a diversion of tax money generated inside the NIZ which would have gone to Harrisburg.

The question remains will the buildings generate additional economic activity to pay for themselves and increase revenue to the various government entities.

(2) Are former workers outside of the LV benefiting from the move to Allentown?

There certainly has been some movement of workers from outsize the NIZ to inside the NIZ. What benefits one hurts the other. Ideally, the new buildings of the NIZ should facilitate start-up new businesses that increase employment without decreasing it elsewhere. So far there is little evidence of that.

(3) Will locals directly utilize or visit these buildings?

There is evidence that the buildings are being utilized by locals that were not before. However, the NIZ is still too new yet to determine to what extent that increase is and once the "newness" wears off, if that utilization is significant over several years.

(4) Will this impact ASD in a negative or a positive way?

It depends on the utilization and assessed value of the buildings. Too soon to tell yet.

(5) How many who's jobs been moved now have to pay to park?

Also too soon to tell yet. Also there is a conflict between what is reported by the media, and what is seen by the people. Reports of large numbers of vehicles parked in the NIZ are not verified by evidence such as traffic jams or reports that lots are half-empty.

(6) Is a bigger city a better city?

Allentown really hasn't grown since the 1940s when it reached 100,000 in population. Now are the suburban townships growing? That is a yes. Are those who commute from the townships to the NIZ to work increasing? That is unclear.

Added: Is Allentown better off economically with the NIZ?

Probably eventually yes. Today, it's still an open question. One thing is that the buildings aren't going to be torn down. They're here and likely more will be built until the money spigot is shut off by Harrisburg. Will they be 'ghost' buildings that are basically empty when completed? Your guess is as good as anyone's.

Anonymous said...

I find a new architecture stunningly uncreative

Anonymous said...

The NIZ is a "build it they will come" scheme. This is how the government tries to positively effect the economy. The end result is no new jobs just relocations. This thinking flies in the face of basic economics, it is a statism strategy, the brain child of politicians, sitting comfortably in Harrisburg, who think they have all the answers.
Lord help us.

Scott Armstrong

Dreaming of Justice said...

It's stunningly soulless architecture, that's for sure. Ive sampled one new restaurant, which had a very loud crowd but food wise wasn't so great. The entrees were about 20 to 30 a plate. Not out of line for a town with robust jobs but glaringly decadent for many who live in down town. I'm not a barfly type so I won't be back. I'll try some of the others I'm sure, at some point. People around here go to strip mall restaurants, and those are all the same: italian, chinese, burgers, diners. There's very little else. Innovative dining can be experienced in Bethlehem, that's where I typically go. Mourning the past downtown is understandable, but where's that going to take us? Might as well try and patronize what restaurants you can, in the NIZ, chances are in a few years, none of them will be open.

Anonymous said...

The amount of state tax revenue already spent/dedicated to be spent on the NIZ venture is astounding. Particularly so, if one understands virtually no NEW tax revenue to the Commonwealth has been attracted.

Surely Allentown 'looks' better, but at what price to every state taxpayer footing the bill?

This scheme is a perfect example of government's careless use of taxpayer funds. It's as if your legislators are playing a game of Monopoly with pretend currency. Even more incredible, there appears to be no outrage from legislators serving citizens from distant locations.

Our state is involved in a protracted budget battle. Everyone is clamoring for more revenue. In the end, they'll get it. Higher taxes and fees just ahead. Count on it!

We would all be better served if our government officials 'plugged a few holes' first. Taxpayers can't afford the kind of gift-giving that is happening here.

Fred Windish

michael molovinsky said...

fred@6:42, indeed you are correct, the revenue going to reilly's debt service will have to be made up by the state taxpayers, no department is cutting because of reilly's windfall. i believe that in the future, the NIZ will be a case study in government, law and other courses. what brown accomplished for reilly is unprecedented. as for outrage from other legislators; harrisburg is populated by self servers, usually elected for life. brown will be well taken care of for his deed, and is probably the envy of his peers, for that expectation.

Anonymous said...

I hope they raise the gas tax again. I hate being numbrr two

Robert Trotner said...

I think your description of the Millionaire Improvement Zone (MIZ) as,soulless is very apt. I had the same sensation. Bright lights and neon signs remind me too much of the glitzy '50s and has been, in my opinion, out of fashion for that long.

Robert Trotner said...

Fred, you are always exactly on point. Now we have the spectre of PPL asking for a state bailout because Talen is screwing the NIZ by threatening to leave it. This stuff is totally out of line imo.

Anonymous said...

"Unless the building is divvied up into pierces, the days of this kind of well paying production will never ever been seen again no matter what anyone tries to tell you.
Let me tell you how this will go down. The employees will get a decent severance package, instructed how to go about collecting unemployment and sent down to CareerLink where they'll be steered to $10 an hour jobs if they're lucky enough to even get one."
Sadly, this writer is correct.

Visited one of the more beautiful corporate parks this week. Almost every building had empty space with for rent signs posted outside and yet more corporate offices to be built. For what?

michael molovinsky said...

@9:59, there was no shortage of office space in the allentown or the valley. every tenant that reilly got was at the expense of another existing building. what is good for reilly is actually bad for the lehigh valley.