Wednesday, June 17, 2009

Keystone Opportunity Zones

It sounds like a good idea. Forgo taxes for a period of time on a piece of blighted land with the hope of enticing somebody to build something on it that will create jobs and eventually the parcel will be put back on the tax rolls. If only it worked that way.

I would like to see an accounting of the program to judge if it is worth it. I'm sure that there are some success stories like Schiel's Supermarket but what about the dead weight?

In 2005 The Times -Leader did a series on the program that questioned it's effectiveness. I can't link to the articles now because the local papers want to be paid for reading old news but I dug into my archives to give you some highlights.

I did some math using the TL numbers for Wilkes-Barre. I may be wrong but I come up with $3.7 million in tax breaks since 1999 that has produced a net 640 jobs.

These items caught my attention:

Half of the KOZ properties in the city are owned by the city itself or government-related agencies. Many are dilapidated or abandoned properties that haven't attracted investors, even with their tax-free status. Others such as City Hall, Public Square Park and police headquarters make little sense as targets for developers.

Thirteen property owners who were granted KOZ status, and have enjoyed about $37,000 in relief from municipal property taxes, have reported no new investment or jobs since joining the program, according to applications filed with the state.

Some of the other gems that were included in the original KOZ were Coughlin High School and Hollenback Park. Lowe's Restaurant on W. Market St was also designated a KOZ and at the time everyone involved said that it had nothing to do with the political connections of the owner but that is another story. I wondered about including a high school and public square on a list that would never be developed and I got my answer.

"If a property is already designated as a Keystone Opportunity Zone but cannot be developed due to developing restrictions or environmental issues or other issues, the state is providing an opportunity for that property to be decertified as a Keystone Opportunity Zone property and for an equivalent or lesser amount of acreage to be swapped into the program in the same municipality."

It sounds like bait and switch.

Some members of the Wilkes-Barre Area School Board objected to being told that they had to approve the swap with little time to consider it.

Lynn Evans asked why they waited until the last minute to present the district with the resolution. Board member Theresa McGuire told city officials they almost always come to the school board at the last minute for approval. While the resolutions are typically items the board would agree with, she doesn't appreciate being handed a resolution and told to act immediately.

The Scranton City Council has had enough.

Scranton KOZ issue is about to boil over

"The last thing we need is more people not paying taxes in our city," school Director Chris Phillips said....Almost a third of the KOZ requests on council's agenda belong to companies of businessman Louis DeNaples.

In Luzerne County

“What was supposed to be a 10-year program for blighted land is now permanent,” Drew Magill said the program’s expansions and extensions have snowballed.

Wilkes-Barre property owner Walter Griffith said KOZ properties rely on police and other government services without paying for them.

Extension requests include:
• 100 parcels in Wilkes-Barre.
• About 150 acres by the Hazleton Municipal Airport owned by Hazleton.
• 135.12 acres in Nanticoke and Hanover Township.

KOZ's are not the only "revitalization" tool out there. A program called Local Economic Revitalization Tax Assistance (LERTA) actually makes more sense because a project has to be a going concern.

Then there is just writing off the past due taxes owed.

This is also from 2005

Wilkes-Barre Mayor Tom Leighton said his desk is stacked with developers willing to revitalize the former Old River Road Bakery, Radnor Building on South Washington Street, Academy Street Market and First National Bank building on Public Square. Outstanding taxes are the only obstacle, he said.

So what is happening with those properties?

Many people in Luzerne County have seen their property taxes go through the roof because of the recent reassessment and ask "is this fair?"


D.B. Echo said...

I've long had a policy of linking to newspaper stories rather than doing lengthy quotes. With the loss of access to archived articles, that policy has changed.

David Madeira said...


Be careful. You keep up this line of thought and you'll join me in arguing for elimination of all business taxes.