Luzerne County Council hears developer feedback on tax break ordinance

While noting a few concerns, Penn’s Northeast President and CEO John Augustine expressed general support for Luzerne County Council’s proposed new tax break ordinance.

The ordinance would set eligibility requirements for all developers seeking county real estate tax breaks, including reporting on job creation and wages, and the projected economic return.

Council Chairman Jimmy Sabatino invited Augustine to publicly critique the plan at last week’s council work session to ensure the development sector had an opportunity to weigh in.

Augustine had been highly critical of last summer’s county proposal, which was later scrapped, to standardize county tax break discounts by project type, such as warehousing/logistics, manufacturing, and tech-based development. He and some council members had predicted that plan would deter development.

Under the proposed new ordinance, tax break applicants would have to identify the number of permanent jobs to be created, the median annual and hourly wages for those jobs, and the anticipated timeline for job creation.

Augustine told council it may have to settle for job creation estimates based on historical averages because most major development in the county is constructed “on speculation” before tenants are identified, as opposed to building to suit a known occupant.

To be competitive, many developers are forced to invest in shell buildings “in the hopes that somebody will come,” he said.

“It’s impossible for them to know who that end user is going to be,” Augustine said.

The ordinance also mandates annual reporting throughout the awarded tax break period and following two years on the total number of permanent jobs associated with the project, the median annual and hourly wages by job category, the number and percentage of jobs held by county residents, and a breakdown of which jobs are full-time, part-time, temporary, or seasonal.

In addition, recipients must disclose the number of jobs offering employer-sponsored health insurance and retirement benefits, the proposed ordinance said.

Augustine cautioned that developers cannot contractually force their tenant to provide detailed proprietary data on their employee positions, wages, retirement, and benefits packages.

Another option could be multiple resources that provide highly accurate estimates and averages for each job category based on the industry and building size, he said.

Regarding the fiscal impact analysis, Augustine took issue with the wording that it must estimate the amount of county revenue that would be “foregone.”

The breaks would be through the Local Economic Revitalization Tax Assistance (LERTA) program for blighted properties, which provides a maximum of 100% forgiveness on the new structure portion of a project for up to a decade.

Augustine said many have a “misconception that we’re taking taxes away,” but taxing bodies continue to receive the same payments they have all along on the land.

“Without the LERTA, there is no project and no new taxes, so the revenue foregone is actually zero,” he told council. “Instead, I believe the question should be, ‘What incremental tax revenue does the project generate compared to doing nothing?’”

Developers of these properties must “take large risks” and invest “significant amounts of capital” to prepare the sites, which are often coal mine-scarred and always declared blighted by municipalities, he said.

Although a LERTA makes a site more marketable, the overall risk is still high for developers, he said.

“LERTA does not give developers a free ride,” Augustine said.

County Councilman Chris Belles said the reporting requirements were proposed in the ordinance because he and his colleagues are trying to “do our due diligence” when considering tax breaks.

Concrete documentation on job creation and other gains from the projects helps both the elected officials approving breaks and the developers receiving them, Belles said, adding that the county is not expecting developers to provide a listing of employees by name and their individual pay and benefits.

Augustine said he fully agrees with the county’s attempts to quantify. The data will help show the public the program works and communicate expectations to developers, he said. He also suggested a county analysis capturing how other local businesses benefit from the purchase of goods and services by those employed at the new developments.

“There should be no business, no industry, no developer that shouldn’t be singing from the rooftops what they’ve accomplished after that LERTA is over,” Augustine said.

Council Vice Chairwoman Brittany Stephenson said she agrees with Belles about the importance of the data.

“We do need to see what the results are, the tangible outcome of having this LERTA over that course of that time,” Stephenson said. “That’s exactly what this language represents.”

Sabatino said the uniform application requirements create a “level playing field for all developers to come to the table.”

“Whether they’re big or small, they’re going to get a fair crack,” Sabatino said.

Councilwoman Joanna Bryn Smith told Augustine she wants to be “very intentional about the way we develop,” but does not want to stop development.

Augustine said he does not foresee any major problems with the ordinance as long as council considers the points he raised.

Sabatino said after the meeting that he wants to revise the ordinance’s wording based on Augustine’s feedback before the matter advances to a voting agenda.