Emmaus borough council is considering adopting a multi-year tax break program to bring more economic development to the community.
Before it proceeds, council must determine what properties in town are eligible to be included in the state LERTA program for commercial or residential development.
Nothing will happen unless two other municipal bodies that also collect real estate taxes – East Penn School District and Lehigh County –formally agree to join the Emmaus program.
LERTA stands for Local Economic Revitalization Tax Assistance.
The program allows those who develop eligible properties to avoid paying full real estate taxes for up to 10 years. It is designed to redevelop properties in areas classified as under-utilized, blighted and/or brown fields –“something that needs some form of incentive,” said Howard Lieberman, a consultant who may be hired by council to help initiate the program.
The goal is to spur major new development on those properties that ultimately should generate much more real estate tax revenue for governing bodies for decades.
More than 100 properties in Emmaus potentially could be included in the LERTA program, estimated Teri Madison, executive director of Emmaus Main Street Partners. She indicated most of them are just south of the railroad tracks that run through the town.
Main Street Partners is encouraging borough council to adopt the program.
Lieberman, who is managing partner of Business & Community Financing Solutions in Whitehall, serves on Main Street Partners’ business development committee.
Nathan Brown, who chairs council’s development committee, called the LERTA program “a great tool to have in our toolbox of economic development.”
On Tuesday night, council unanimously voted to move forward with pursuing the LERTA program.
Although he voted for the motion, council member Brian Holtzhafer first questioned why council needed a motion to essentially gather information, saying it typically does not do that. “I’m a little concerned that we’re plowing into something I know nothing about yet,” said Holtzhafer.
Council member Wesley Barrett said Tuesday’s vote was just to get the ball rolling.
Lieberman said a commitment to move forward is needed to get the school board to the table to begin conversations about LERTA. Borough manager Shane Pepe said the school board won’t do anything without such a commitment by council.
Another vote will have to be taken by council -- possibly in late October --to approve a formal LERTA resolution and a map clearly delineating what properties are within the LERTA zone or zones. Those documents have not yet been prepared, although borough administrators have developed a preliminary map showing areas of Emmaus that might be eligible for LERTA.
Lieberman told council he expects Lehigh County commissioners will be the biggest hurdle faced in getting the Emmaus LERTA approved. Many of those nine commissioners are fiscally very conservative and might not be inclined to give up any tax revenue. Lieberman said county officials have told him they won’t consider an Emmaus LERTA program until after it is formally approved by both the borough and school board.
Lieberman hopes to be hired by the borough, at a cost of at least $6,835, to make the LERTA program a reality in Emmaus. The borough is the only of the three government bodies that will pay that fee. Lieberman said he didn’t know about the school district, but did not think the county will be interested in sharing that cost.
Council member Michael Waddell questioned why the borough has to hire Lieberman: “Why can’t we have the borough manager do this? I’m sure there is an advantage to having someone with your expertise do it, but could someone else do it?”
Lieberman said someone else could do it internally, but it is time consuming, partially because it involves working with the school district and county.
Waddell acknowledged that if even one developer comes in because of LERTA, the increased value of that property will more than make up for the consultant’s fee.
Lieberman explained LERTA at the Aug. 20 council meeting.
Real estates taxes increase when major development or redevelopment occurs, because the value of that property increases. But Lieberman said the LERTA tax abatement program phases in those tax increases gradually, over up to 10 years, rather than the owner of that development being hit with “a tremendous tax increase” all at once. “This is an incremental increase.”
Lieberman explained the normal tax increase would be substantial if a developer invested $1 million to improve a property purchased for $100,000. But under a 10-year LERTA program, real estate taxes would only increase by 10 percent a year.
“LERTA provides a developer with improved cash flow during years 1 through 10 by reducing the amount of real estate tax it has to pay,” said Lieberman. “That money hopefully gets rolled into a project and makes it an incentive to develop in Emmaus, as opposed to the three major cities in the area that have a lot of these development tools.”
“What’s important to remember is the municipality is not going to give up any taxes,” said Lieberman, who explained taxes being collected on a property today will continue to be collected.
He explained in the first year, only that base tax would be paid. In the second year, a property owner would pay the base tax plus 10 percent. In the third year the base tax plus 20 percent would be paid. By the 11th year, the owner would pay the full amount of real estate taxes.