At least $1.5 million in real estate tax revenue will be generated annually from Luzerne County commercial properties with tax breaks that expired in 2017 or will lapse in 2018, an analysis of county records shows.
The owners of these eight properties in Jenkins and Hazle townships paid property taxes on the land but received a decade of forgiveness on the new structures under the state’s Local Economic Revitalization Tax Assistance program, also known as LERTA, which is for tracts in deteriorated areas.
Seven of the impacted properties are at the CenterPoint Commerce and Trade Park in Jenkins Township, which was developed by Mericle Commercial Real Estate Services.
The biggest new tax generator is Lowe’s Home Centers Inc.’s warehouse on CenterPoint Boulevard. Assessed at $28.6 million, the distribution center is among the county’s top 20 highest-valued commercial properties.
The North Carolina-based owner had been paying $38,661 in school, county and local taxes on the 130.63 acres, which is assessed at $1.678 million.
Its bill for school, county and township taxes has increased by $619,999 for the building, which was valued at $26.9 million for taxation purposes.
Next in line for the highest new payments is a facility occupied by the Kimberly-Clark Corp., also on CenterPoint Boulevard.
The owner — RT CenterPoint Blvd LLC, listed with a Chicago address — has been paying $33,830 in taxes on the 49 acres assessed at $1.47 million.
Under current tax rates, payments are increasing $355,418 with the addition of the structure assessed at $15.43 million.
Some basics about the other Jenkins Township properties:
• A commercial warehouse at 185 CenterPoint Blvd. occupied by Tailored Brands and owned by Mericle 185 CenterPoint East LLC.
Taxes were $9,000 on the 24.17 acres, assessed at $390,300. The payment increases by $126,445 for the structure, assessed at $5.49 million.
• Chicago-based RT CenterPoint Blvd LLC’s warehouse at 125 Capital Rd., which is occupied by George Weston Bakeries Inc., according to assessment records.
Taxes were $9,400 on the 13.59 acres assessed at $407,700. The tax bill is increasing by $60,300 for the structure, which is assessed at $2.6 million.
• A warehouse/office building at 100 CenterPoint Blvd. owned by Mericle 100 CenterPoint East LLC and occupied by several tenants, including Lyon, Conklin & Co.
Taxes were $8,700 on the 12.61 acres assessed at $378,300. The bill increases by $57,171 for the building, assessed at $2.48 million.
• Mericle 220 Armstrong LLC’s warehouse/office building at 220 Armstrong Rd., which is occupied by FedEx Ground.
Taxes were $9,600 on the 13.47 acres, assessed at $415,500. The payment increases by $41,100 for the structure, assessed at $1.78 million.
• A warehouse at 180 Armstrong Rd. occupied by British clothier Boden and owned by Mericle 180 Armstrong LLC.
Taxes were $7,700 on the 11.11 acres assessed at $333,300. The bill increases by $31,900 with the addition of the building, which is assessed at $1.38 million.
In Hazle Township, the AutoZone distribution center off North Park Drive will yield an additional $212,650 in taxes for the structure, which is assessed at $12.8 million.
The owner, Memphis-based Pioneer Distribution LLC, was paying $51,000 in taxes on the 61.33 acres assessed at $3.06 million.
At least eight more LERTAs are set to expire in 2019, including several owned by Mericle companies, county records show.
One of the properties to be added to the tax rolls next year is among the top 20 highest valued in the county — the Cargill Cocoa and Chocolate manufacturing plant owned by Minneapolis-based Ambrosia US Newco LLC in the Humboldt Industrial Park near Hazleton.
Taxes would increase by $1.025 million for the building, which is assessed at $61.68 million. The owner is currently paying $55,220 in taxes on the 74 acres, assessed at $3.32 million.
It’s unclear if the assessment for this structure will stick because the owner is contesting the value in county court.
The county assessment appeals board made an unusual decision to increase the property by $47.8 million in 2016 in response to an assessment challenge filed by the Hazleton Area School District, which is known as a reverse appeal.
The building’s footprint did not change. However, the district argued the assessment was too low — a claim disputed by the owner.
Several properties in the county also were set to lose Keystone Opportunity Zone real estate tax exemption in 2017, but the county is still formulating a comprehensive list. While there are different variations of this break, also known as the KOZ, the participants were generally entitled to a decade free of real estate tax on both land and structures, officials said.
Critics have maintained tax-break programs unfairly give select properties a government-funded competitive advantage, while supporters argue much of the development here wouldn’t exist without tools to attract employers and developers who are offered incentives in other states.
In addition to generating new tax revenue, the break helped attract 45 tenants at the CenterPoint park that employ 5,400, said Jim Cummings, Mericle Real Estate’s vice president of marketing.
Competition for new tenants and jobs is “really fierce,” and most other areas provide tax breaks, Cummings said.
The top three factors sought by prospective tenants are highway accessibility, labor availability and proximity to major cities, he said.
A tax break package typically plays a role when a company has narrowed its choices, he said.
“If all else is equal, they will look at something to break the tie, and that often is what break is being offered,” noted Cummings.
Tax breaks also allow developers, in this case Mericle Real Estate, to take a risk and construct buildings on speculation. Most of the structures at CenterPoint were underway before tenants were secured, which helped attract companies that wanted to move quickly, he said.
The departure of tenants after tax breaks expire hasn’t been a problem because most companies don’t want to walk away from their investment in facilities and workers, he explained.
“It’s a winner — a big success for the area,” Cummings said.
County Manager C. David Pedri sent a list of the expiring LERTAs to council so they were informed some are now being taxed.
Selective tax breaks can create jobs and improve land that has remained undeveloped and often unattractive, he said.
“It’s really a balancing act, weighing job creation against sacrificed tax revenue,” said Pedri.
Pedri endorsed the most recent LERTAs granted during his administration, noting they required owners to gradually start paying taxes on the structures instead of receiving a decade of full forgiveness.
For example, plastic manufacturing company IRIS USA will receive full real estate tax exemption on its new plant in the Humboldt Industrial Park in the first year only through a LERTA that county council approved in September. The discount will be lowered to 90 percent in the second year and continue decreasing by 10 percent annually, with all taxes owed after a decade.
In January, county council approved a LERTA for Missouri-based NorthPoint Development’s project to construct three new buildings on 330 acres in Hanover Township and Nanticoke near Luzerne County Community College.
The company will receive full real estate tax forgiveness on new construction for seven years, 90 percent exemption in the eighth year, 80 percent in the ninth and 70 percent in the 10th and final year.