Luzerne County Council discusses pros and cons of tax break guidelines

Luzerne County Council is debating the pros and cons of setting county real estate tax break guidelines by category to provide realistic expectations for prospective developers.

Councilman Jimmy Sabatino, who chairs council’s infrastructure committee, had proposed the idea to his council colleagues during discussion about a tax break in March, saying council should decide in advance what fees and discounts it deems acceptable for warehousing and logistic, manufacturing and tech-based development.

The infrastructure committee subsequently agreed to present the resulting recommendation to the full council for its consideration and input, prompting last week’s discussion. Council majority approval would be necessary at a future meeting for a schedule to take effect.

The schedule would apply to breaks requested under the Local Economic Revitalization Tax Assistance (LERTA) program for blighted properties, which means the property owner pays real estate taxes on the land throughout the break and receives a discount on taxes for the new development.

Under the suggestions presented last week, warehousing and logistic development would receive the least favorable break — five years instead of the maximum allowable decade, with a discount of 50% the first year and decreasing 10% annually to a final 10% off taxes in the fifth year.

A development fee of $5,000 per acre also would be owed to the county, it said.

The discount for manufacturing and tech-based development would be 90% the first year and decrease by 10% annually to a final 10% in the ninth year, it said.

Development fees would be $2,500 per acre for manufacturing and $3,500 per acre for tech-based development.

Council would use the schedule for guidance in evaluating tax break requests, the proposed resolution said. The adoption and publication of a standardized LERTA fee and abatement schedule would “provide clarity to prospective applicants, improve administrative consistency and help align economic development efforts with county priorities,” it said.

Council members presented mixed reactions during last week’s work session.

Councilman Greg Wolovich said he believes the schedule is a “great idea” because it will provide “clear direction” to prospective developers and “more definition of what we are looking for.”

But Councilman Kevin Lescavage said he has reservations about putting out “cookie-cutter numbers” because each project is unique and must be weighed individually.

Councilwoman Joanna Bryn Smith said she supports the concept because it would be advertising a “ballpark” of what the county expects while providing council with flexibility to deviate if there are special circumstances.

Sabatino agreed, saying the schedule is a “starting point for negotiations” and a tool for developers to determine if it would be worth investing resources in requesting a county tax break.

Because these standards only apply to county taxes, developers would still be free to seek school tax breaks — which make up the lion’s share of real estate tax bills — as well as municipal tax reductions, Sabatino said.

Council Vice Chairman Brian Thornton expressed concern that the schedule would deter prospective developers with worthwhile projects. He worries that a schedule would automatically prompt developers to bypass the county and take their projects elsewhere, leaving the county in the dark about negative impacts.

Councilman Chris Perry commended the committee for its work on the proposal and said tax breaks will always be a “touchy subject.” He hesitated to commit, saying he does not know if categories are appropriate and worries a schedule would “turn people away.”

Council Chairman John Lombardo said he does not want to “turn away any economic development” due to a fee schedule and added that negotiation is always an option if council is dissatisfied with a proposal.

Lombardo said “everything we do is about optics,” and he does not believe it will be positive for the county “if it appears we are trying to put a knee on a certain type of development.”

Councilman Harry Haas said he wholeheartedly supports the plan and stressed the standards are not binding.

Haas said he does not believe a schedule would discourage developers because they already have been using the most recent negotiated county tax breaks as their guide on what council has been accepting over time. The county must be proactive, he asserted, predicting that any developer who “sees profit” will not hesitate to seek a break.

Lescavage pointed out most of the land involved in LERTAs is mine-scarred with limited reuse options. These projects are “pumping a lot of dollars into this county,” and the resulting revenue as the breaks expire is needed to avoid or minimize future school, county and local tax increases, he said.

Sabatino said he does not disagree with these arguments, but he wants to avoid development-related problems in the Lehigh Valley and other markets by determining “how much is too much.”

“Nobody at this table is against development, but we want to use this as a tool to get the right development,” Sabatino said.