East Penn School Board Monday became the first of three local governing bodies to approve a tax increment financing plan for construction of the proposed Hamilton Crossings shopping center in Lower Macungie Twp., Lehigh Co.

The school board also gave initial approval for a proposed no-tax increase school district budget for 2013-14, with final adoption scheduled for June 24. School board members weren't sure, but they believe this will be the first time school taxes won’t increase in at least a decade.

While the $130-million budget was approved unanimously, the vote for the Hamilton Crossings TIF passed 6-2, with one abstention.

Dissenting voters Lynn Donches and Julian Stolz unsuccessfully tried to table, then postpone, the TIF vote before voting no.

Board member Michael Policano abstained, saying he was still on the fence. Policano also voted to table or defer the TIF vote.

Developers of the $140-million Hamilton Crossings project, which will be anchored by a Target and the Lehigh Valley’s first and only Costco, maintain they cannot do the project unless they get TIF financing to help pay for public infrastructure improvements.

The TIF financing plan won’t happen unless all three local taxing bodies agree to it.

Lehigh County commissioners are scheduled to vote on the plan on May 22. If they approve it, Lower Macungie commissioners will vote on June 6.

The school district, township and county must all agree to give up 50 percent of increased property taxes from the shopping center for up to 20 years.

If Hamilton Crossings is built, East Penn will get almost $600,000 a year in increased property tax revenues for up to 20 years and $1.2 million annually after that, explained school board member Ken Bacher.

The tax revenue the three municipalities would agree to give up for 20 years will be used to help finance road, storm water and other improvements at the 63-acre shopping center site, located on both sides of Krocks Road between Route 222 and Hamilton Boulevard.

Hamilton Crossings developers plan to begin construction before the end of summer and have their upscale shopping center completed by the autumn of 2014.

At Monday night’s school board meeting, a lawyer representing owners of the nearby Trexler Mall and Trexlertown Plaza shopping centers along Hamilton Boulevard threatened a lawsuit against East Penn if it made the “arbitrary and unfair decision” to support the Hamilton Crossings TIF.

“The school board has no authority to pick winners and losers in the local economy,” argued Atty. Jonathan Hugg, who represents Cedar Realty Trust, Inc. “This market is simply not big enough to support both Cedar’s shopping centers and the proposed Hamilton Crossings.”

By approving the TIF, Hugg told the board: “You will be financing with public funds the destruction of Cedar’s shopping centers that Cedar recently renovated with private funds.”

Hugg said Cedar invested more than $30 million to redevelop its two shopping centers in the last three years. He said the company made that investment for the community without any government subsidy or handout. “This investment measurably increased tax revenues. By providing TIF assistance to the developers of Hamilton Crossings, the school board will effectively penalize Cedar for not coming hat in hand to ask the school district to fund Cedar’s private development.”

Hugg also accused Hamilton Crossings’ developers of raiding his client’s shopping centers, saying they have approached businesses leasing space in Trexler Mall and Trexlertown Plaza about moving to Hamilton Crossings.

TIF helps taxpayers?

“I don’t believe this is the best deal for the taxpayer—I’m not going to support this,” said Donches of the TIF.

But board vice president Alan Earnshaw said increased tax revenue from the new shopping center will minimize or even eliminate future tax increases in East Penn. He said there could even be a tax decrease because of the TIF.

“I can’t guarantee it will stop tax increases, but it sure as heck will slow them down,” said board president Charles Ballard.

Earnshaw also pointed out: “We are not destroying farmland for development.”

Because the property has poor soil containing iron ore mining waste, it is not used for farming, said developer Tim Harrison.

While board member Samuel Rhodes said he is not a big fan of shopping center development, and he believes the state’s TIF program is intended more for generating urban redevelopment, he added: “My fiduciary responsibility is to the school district. This is going to help taxpayers and the school district. I would be remiss if I missed this opportunity to help us fund our public schools in East Penn.”

Stolz said his colleagues on the board “are all dazzled by this found bag of money.”