Commissioners kill idea of 10-year KOZ tax break for old Allentown factory

Lehigh County Commissioners shoot down KOZ

ALLENTOWN, Pa. - Lehigh County commissioners killed an attempt by Allentown officials to offer a 10-year tax break to developers who recreate an old factory site, ultimately producing more good-paying manufacturing jobs in the city.

The 15-acre property, at 600 S. 10th St. next to Little Lehigh Creek, is zoned for heavy industrial use.

The plan was to put it into a state Keystone Opportunity Zone – KOZ –that already exists along South 10th Street. Owners of properties in state-approved KOZs are exempt from paying taxes for 10 years, giving them a major financial incentive to redevelop those properties.

The intent is that, after a 10-year tax break, a redeveloped property will have much more value and generate much more tax revenue for local governments.

Commissioners listed several reasons for voting 6-2 against the site Wednesday night, including that the current owner -- a New York City company named 600 South Tenth Street Holding Company – owes back taxes on it.

Commissioner Vic Mazziotti opposed giving "a 10-year tax holiday" to owners delinquent in paying their real estate taxes.

The majority of commissioners argued that putting the property into the KOZ would increase its value, meaning those owners would benefit by selling it for more money.

They also said the owners are receiving offers to purchase the property without KOZ. "Trust the markets," said Commissioner Scott Ott. "Allow the markets to work."

Commissioner Michael Schware, who led the charge against the KOZ, suspected "cronyism" is behind the move to have the property included, "as a favor to the politically connected."

The proposal required the approval of the county, city and Allentown School Board.

The three local taxing bodies faced an Oct. 1 deadline to apply to the state Department of Community and Economic Development to include the property in a KOZ.

On Sept. 19, Allentown City Council voted 5-0 for approval. The school board intended to vote on the issue Thursday night.

In 2011, property taxes on the site were $10,000 for the county, $16,000 for the city and $40,000 for Allentown School District, said Brad Osborne, chairman of the commissioners.

"The Allentown School District stands to lose $40,000 annually on this deal," said Scott Armstrong, a member of the Allentown School Board. "We shouldn't approve this KOZ."

Armstrong said the financially-stressed district already is losing about $300,000 a year on the city's NIZ –"for a hole in the ground. And we didn't have a word to say."

Scott Unger, executive director of the Allentown Economic Development Corporation, also attended the commissioners meeting but did not speak. 

Although he also voted against the KOZ, Osborne said he sees "the potential of converting an abandoned and dilapidated property in Allentown to provide job-producing manufacturing supporting a couple hundred jobs, therefore families."

Schware said such proposals should come before commissioners only after they have been approved by the school district and, in this case, the city "so we can understand the local issues and concerns that surround the approval. That's not happening in this case."

Schware said it is insulting that the commissioners had received too little information about the proposal and too little time to make a decision.

He also said the commissioners should have heard from the property owners, but didn't. "The public deserves to know who all the players are. That's not happening here."

While Schware argued "the property remains viable for purchase on the open market," Commissioner Percy Dougherty, who voted in favor of the KOZ, said: "If the free market were allowed free rein here, this site probably will never be developed.

It has old dilapidated buildings on it. Also there are problems with contamination."

"There is no plan," said Schware, "only the blind hope that something will happen by granting the designation."

But Commissioner Daniel McCarthy said in 95 out of 100 cases, properties are put into KOZs without any specific redevelopment plan: "You don't know who the buyer is going to be, who the tenant is going to be or what the re-use is going to be when you pass a KOZ."

Schware wondered what county positions or services might have to be eliminated because of losing tax revenue for 10 years. He said it is not acceptable to pass "the cost of one person's tax holiday on to all county taxpayers."

McCarthy, who also voted for the KOZ, said the 10-year tax loss would not be significant enough that the county would have to cut back services or cut jobs. 

"When I meet with someone on a fixed income who is struggling to pay their own property taxes on their home, I should be able to look them in the eye and tell them exactly why I'm giving another taxpayer a 10-year tax holiday," said Schware.

Ott agreed, saying county residents who are unemployed and struggling to pay taxes so they can hold onto their homes are not getting any tax breaks.

"The stench of unfairness is redolent on this one," declared Ott. "I don't want to be part of that."

The factory most recently was the home of Allentown Metal Works. 

In 1905, Traylor Engineering & Manufacturing Co. purchased an abandoned foundry on the site, according to the Lehigh County Historical Society.

For decades, Traylor manufactured mining, milling, smelting and cement manufacturing machinery. The factory underwent large expansions during both World Wars.

In the 1970s, it was purchased by General American Transportation Corp., then became part of the Fuller Company of Catasauqua.

MCarthy said the huge vacant building probably will be demolished so a new industrial complex can be built on the site. 

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Allentown, PA 18102




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