The State College Area School District Board of Directors chose not to adopt a resolution for a tax exemption program that would incentivize the redevelopment of aging or deteriorating historic properties downtown.
By a vote of 6-3 on Monday, the board rejected the resolution for the Local Economic Revitalization Tax Assistance program, which State College Borough Council and the Centre County Board of Commissioners have already passed.
“I think that it’s incumbent on the school district to support economic development, but I don’t think it’s incumbent on the school district to invest in, or pay for, economic development,” said board member Scott Fozard, who spoke by phone at the meeting Monday night.
Created by the Commonwealth in 1977, the LERTA authorizes the local taxing authorities to provide a graduated tax exemption for up to 10 years on construction improvements for commercial or business properties. The borough is primarily interested in offering commercial redevelopers some additional tax incentives to help maintain historic properties like the Glennland Building, Communications Specialist Douglas Shontz told the CDT in April.
In March, developers from Scholar Hotel Group in Ardmore approached the borough with plans to redevelop the Glennland Building into an extended-stay, 72-room hotel. Currently, the borough is awaiting an application from the partner in the Glennland project, said borough Planning Director Ed LeClear.
Eligible areas for the LERTA are properties south of College Avenue, north of Beaver Avenue and between South Burrowes Street and Locust Lane, as well as properties south of Beaver Avenue between Fraser Street and South Allen Street, and north of West Fairmount Avenue, according to the resolution.
Board member Laurel Zydney said she was concerned about the language of the LERTA resolution, which specifically identifies tax exemption for new construction and building improvements “in deteriorated areas of economically depressed communities.”
“We are not in an economically depressed community, so I have trouble with that aspect moving forward with this,” she said.
Board vice president Amy Bader and board members Jim Leous and David Hutchinson voted in favor of the LERTA resolution.
Bader said she felt that since the language of LERTA was very specific and constrained to commercial properties and areas, it would pose little to no risk to the district’s tax base.
“This is about getting more businesses into our community and businesses bring jobs, and jobs bring people, and people bring housing,” she said.
Leous agreed that the LERTA would increase the school district’s tax assessed base and value, though over the 10 year agreement it would mean “giving away” over half the difference between the taxes on the assessed property value and the current value.
That’s because, per the LERTA, 100% of the difference between the current value and new assessed value of a property is not subject to taxes in the first year of the program, LeClear told the CDT in April. Each subsequent year, over 10 years, another 10% of the value becomes taxable, meaning in the last year, the property will have full assessment and taxation on improvements, he said.
“I think that this is money that we would not have had without this program, so I’m inclined to say yes to this,” Leous said.
But board member Lori Bedell said she felt approving the LERTA resolution was an overreach of the school district’s power.
“Of course we want to maintain a vibrant, diversified, attractive downtown,” she said. “But I have to say that I also share the concerns about what the role of school board is in lending to that sort of economic development, you know, as the largest taxing authority in the county ... this feels a little like we’re picking and choosing winners.”
At prior borough council meetings, State College residents pointed out concerns over taxing authorities raising property taxes to compensate for the lost revenue from LERTA.
In response to those concerns, board President Amber Concepcion noted that since the school district is over 80% locally funded — as opposed to the county which is primarily state-funded — “the tax burden for taxpayers from the school district clearly is far greater than the county taxes ... so I think there’s certainly more at stake for the school district.”
With the school district’s dismissal of the LERTA resolution, LeClear said the program will still operate but on a “reduced scale of assistance” to any applicant.
“Abating the school taxes is the vast majority of the benefit for project,” he said. “At least for the Glennland project, the Board’s vote creates a significant gap in financing for the project. The partner doing the redevelopment will need to significantly change and reduce the scale of the project to make up for the shortfall in the budget.”
He added: “The borough will continue to look for ways to assist and incentivize preservation and rehabilitation of our historic properties. We hope to continue (dialogue) with the school district about ways to support our efforts in community development.”