Without large doses of the oxygen and new nutrients of private investment and job retention and creation, many of our small cities are dying on the vine. To counter-act the competitive disadvantages of high property tax rates, concentrated poverty, and physical barriers to entry, a balanced, healthy menu of targeted incentives and decentralized flexibility and options are needed to jumpstart local economies.
These incentives also are needed to help make our cores more viable and attractive so that shared services and boundary changes – long-term, systemic changes -- are increasingly seen as being in the enlightened self-interest of metropolitan areas. Four of these first five proposals are new or original for Pennsylvania.
(1) CORE Corridors: long term, low interest loans, property tax exemptions, environmental indemnification, and broad-based tax credits for CORE (“Comprehensive Opportunities for REvitalization”) -- locally designated under-utilized and interconnected tail and water corridors and industrial sites.
Rhode Island, Colorado, California, and Maryland have extensive, successful programs that target fallow urban areas for major private development and job creation through comprehensive problem solving and incentives. Our smaller cities’ abandoned and contaminated sites have virtually no chance of becoming assets and creating jobs unless the state provides comprehensive, targeted, one-stop assistance. Not only is Pennsylvania’s former enterprise zone program dormant, but its timeline was short (i.e., 7 years) and its focus was mostly on planning rather than making the numbers work for private development to works its magic.
Rhode Island, Colorado, California, and Maryland have extensive, successful programs that target fallow urban areas for major private development and job creation through comprehensive problem solving and incentives. Our smaller cities’ abandoned and contaminated sites have virtually no chance of becoming assets and creating jobs unless the state provides comprehensive, targeted, one-stop assistance. Not only is Pennsylvania’s former enterprise zone program dormant, but its timeline was short (i.e., 7 years) and its focus was mostly on planning rather than making the numbers work for private development to works its magic.
Focusing on census tracts of disproportionate poverty and blight, a radically revamped Commonwealth Enterprise Zone program is needed, with an emphasis on invasive surgery in the form of 100%, ten year tax exemptions for city, school district, and county taxes for the value of improvements to properties in the zone to bring to bring abandoned sites and buildings back to life.
Accompanying the property tax exemption centerpiece of the program should be short-term environmental lawsuit indemnification or immunity so private developers can purchase the property without fearing liability and can finish remediation over time, ten year tax employer tax credits for new employees, ten year employer tax credits for job training of disadvantaged or out-of-work citizens in these zones, and ten year employee and resident tax credits for those who work or move into these zones.
Accompanying the property tax exemption centerpiece of the program should be short-term environmental lawsuit indemnification or immunity so private developers can purchase the property without fearing liability and can finish remediation over time, ten year tax employer tax credits for new employees, ten year employer tax credits for job training of disadvantaged or out-of-work citizens in these zones, and ten year employee and resident tax credits for those who work or move into these zones.
Such an aggressive state legislation and program are needed to override what is often the common pooling problem between three different local taxing entities that may not always agree on a bright-line, ten year, 100% exemption – likely the only incentive that make the private numbers work for development to occur in many of these distressed areas. This would be a performance-based exemption, and different than the successful, but somewhat controversial Keystone Opportunity Zone ("KOZ") program, which provided for 100%, ten year exemptions for the owners of properties within KOZs, regardless of whether improvements were made or not.
Under CORE, which is more of a KOZ-light and based on performance, the tax exemptions would not decrease the revenues to local taxing bodies because property taxes would still be required on the base value of participating properties before improvements are made. Under KOZ, property owners were not required to pay property taxes on the base value of the buildings and lands. Further, but-for this program and holistic tax exemptions of property taxes from all three taxing bodies, the new development would not occur.
Currently, such a bill has not even been introduced for discussion in the legislature.
(2) REV: "Revitalize for Equity and Value” Program: double value cap for 20 years. Despite adequate population density and market demand, the City of York does not have a fully occupied, shiny retail strip with a full-service grocery store. Although it would make sense in almost any other state, it does not have a hotel, convention center, and private parking garage next to the popular York Fairgrounds and Toyota Arena, which attract year-round crowds. Although York has several clean and green sites ready for multi-million-dollar investments, the only major projects (i.e., over ten million dollars) that have occurred in the last 20 years are ones heavily subsidized by the state and/or local governments. It’s simply a matter of numbers.
If a developer wants to build a new $5 million retail mall in Metro York, and has three comparable sites available in Spring Garden Township (total tax rate – township and school district combined -- of 26.10 mills), Manchester Township (total of 22.41 mills), and the city, with a combined tax rate of 49.33 mills (29.54 of which is school tax), which municipality will drop out of the running? The answer is clear: Pennsylvania’s outdated reliance on property taxes for schools and governments means that the economics for private projects of this magnitude currently do not work in small cities without a combination of aggressive incentives.
This "Revitalize for Equity and Value” Program or "Double Value Cap For 20 Year" proposal would incent dramatic upgrades to core communities’ existing structures, including historic structures, long vacant retail structures (e.g., Woolworth), strip malls, historic hotels (e.g., the historic Yorktowne Hotel), and demo and rebuild mixed-use projects. It would do so by capping, for 20 years, the maximum increase in the assessed value at 200% of the existing assessed value of a structure at the time that upgrades began. By providing tax predictability and an even playing field with nearby municipalities, this program would incent major multi-million dollar projects and add scores of new private jobs, thus combating poverty, adding to the tax base, and curbing sprawl. The assessed value would be in effect for all municipal, city, and school district taxes, and all parcels with existing structures in the city will be eligible. Currently, such a bill has not even been introduced for discussion in the legislature.
(3) Comprehensive Carrots And Catalysts For Cultural Districts. The centerpiece of the Commonwealth Cultural District program would be a ten year, performance-based tax exemption for 100% of the assessed value of improvements for all local taxes for building improvements in the locally designated districts. Taxes on the base value of such buildings would still be paid in full to the three local taxing bodies – city, school district, and county.
Second, expanding upon the city’s novel Artist Homestead program, qualifying live-above-work artisans and artists could be given a $5,000 loan from the city’s redevelopment authority or other local body to close on their live-above-work residence, forgivable upon living and working there for five consecutive years.
Third, qualifying artists, broadly defined, including artist homesteaders, industrial artisans, arts retailers, culinary artists, architects, photographers, designers, and culinary artists would be granted state income tax credits or exonerations to bring districts to life and to build critical mass.
Fourth, the program would include exoneration of admissions taxes for entertainment, music, and other arts-related venues within designated arts or cultural districts.
Imagine if York’s fledgling Arts and Market District had such an aggressive, holistic, and geographically targeted incentive package for all properties, including Central Market, the Strand-Capitol, restaurants, and private residences as well as for designated artists, broadly defined and including qualifying market vendors.
Maryland and Rhode Island, among others, have seen dramatic improvements in strategically designated arts and entertainment districts, even in small downtowns. Again, Pennsylvania, which does not have a similar program and does not even have a bill introducing such a program, is behind the curve.
Such an aggressive state legislative and program are needed to override what is often the common pooling problem between three different local taxing entities that may not agree on a bright-line, ten year, 100% exemption – a clear, compelling incentive that will make the private numbers work for major development to occur in these areas. This would be a performance-based exemption, and different than the successful, but somewhat controversial Keystone Opportunity Zone ("KOZ") program, which provided for 100%, ten year exemptions for the owners of properties within KOZs, regardless of whether improvements were made or not. Also, KOZ property owners are not required to pay property taxes on the base value of the buildings and land before improvements.
Under the proposed Commonwealth Cultural District program, which is more of a KOZ light, the tax exemptions would not decrease the revenues to local taxing bodies because property taxes would still be required on the base value of all participating properties before improvements are made. Further, but-for this program and holistic tax exemptions of property taxes from all three local taxes bodies, the new development likely would not occur.
An urban development, strategic planning, and public relations consultant, Matthew Jackson is the author of The Crisis: A Plea From York Town To Save Our Cities And Towns.
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