State College

Should State College offer developers a tax break to rehabilitate historic properties?

The Glennland Building, located at 205 E. Beaver Ave in downtown State College, is one historic property eligible for graduated tax assessment under the Local Economic Revitalization Tax Assistance program Borough Council is considering.
The Glennland Building, located at 205 E. Beaver Ave in downtown State College, is one historic property eligible for graduated tax assessment under the Local Economic Revitalization Tax Assistance program Borough Council is considering.

While Borough Council considers a tax abatement program to incentivize the redevelopment of aging or deteriorating historic properties downtown, the public was given a chance Monday afternoon to voice concerns and ask questions.

The Local Economic Revitalization Tax Assistance, created by the commonwealth in 1977, authorizes the local taxing authorities to provide a graduated tax exemption for up to 10 years on construction improvements.

The reason State College is considering adopting it, communications specialist Douglas Shontz said, is to offer commercial redevelopers some additional funding to help maintain historic properties — such as the Glennland Building on the corner of South Pugh Street and Beaver Avenue.

“This is an opportunity for us in the way that we collect taxes to offer them a little additional funding so they can increase their property value and increase their business,” he said. “But as you saw from the public hearing, we’re trying to do our due diligence on this.”

The idea to consider LERTA was sparked when the borough was approached by Ardmore-based developers Scholarx Hotel Group, interested in redeveloping the Glennland Building into an extended-stay, 72-room hotel, Planning Director Ed LeClear said. The Glennland Building, constructed in 1933 by businessmen O.W. Houts and Dr. Grover Glenn, currently houses a mix of commercial offices and apartments.

“When first approached, staff looked at it and said we should really be looking at how do we incentivize our preservation of historic properties and try to incentivize it down to where we can keep some of these properties to rehab them,” LeClear said. “We have many of them that are dealing with significant end-of-life issues in terms of their systems.”

A previous attempt by an out-of-town buyer to redevelop the Glennland Building into a boutique hotel in 2018 fell through after studies indicated the condition of the building was such that the cost would be substantially more than preliminary estimates, and not feasible, Richard Campbell, a State College attorney whose family has owned the building for eight decades, told the Centre Daily Times then.

He said at the time that the building needed about $3 million in renovations — including $1 million to fix the elevator, as well as facade work and adjustments to the retaining walls.

To be eligible for LERTA, LeClear said, the building in question must be commercial, not a residential or rental property, and the renovations must be for adaptive reuse and rehabilitation only. No building may be demolished as a part of LERTA. Eligible projects must also have a proposed improvement in excess of $25,000 in value.

That last requirement is to ensure redevelopers aren’t using LERTA for simple maintenance projects, but rather for significant rehabilitation, LeClear said.

The proposed LERTA district comprises 25 eligible parcels and 27 buildings, according to the proposed map. Most of those properties are in downtown State College, along College Avenue. The largest properties in the district are the Glennland Building and the former Fairmount Elementary School. But as both of those buildings are mixed use, LERTA would only apply to the commercial parts, LeClear said.

The State College Area School District’s Nittany Avenue Administration Building and Penn State’s James Building on Burrowes Street — both set for demolition — are also included in those 27 eligible buildings. Once they are demolished, LeClear said, those properties are no longer included.

The proposed LERTA district consists of 25 eligible parcels and 27 buildings. Two of the buildings, the school district’s Nittany Avenue Administration Building and Penn State’s James Building, are set for demolition. State College borough Graphic provided

Once a LERTA application is accepted, the current assessed value and the taxes that are being paid on the property continue, LeClear said. The graduated tax assessment applies only to any additional value incurred by the improvements made to the building. In the first year of the program, 100% of the difference between the current value and the new assessed value is not subject to taxes. Each year of the program, another 10% of that value becomes taxable. So by year 10, there will be full assessment and taxation on improvements made as part of the redevelopment project, LeClear said.

As taxing agencies affected by this proposed ordinance, Centre County and SCASD have both been a part of the discussion process. Commissioner Michael Pipe and school board President Amber Concepcion were both included in Monday’s hearing, along with Borough Council President Evan Myers, who ran the meeting.

Although, LeClear said, the incentive would be most effective if all three local taxing authorities would pass LERTA, it’s not required for them all to do so.

The main concerns brought up by the county and school district in various meetings, according to Shontz, have been regarding how much money both entities could lose under the proposal, and the potential to have to raise property taxes to make up for that loss.

That concern was echoed by at least on resident at Monday’s hearing.

“I’m really concerned about the future of property taxes in the borough,” Susan Venegoni said. “Not just for myself, but for people wanting to move here. It increases rent when property taxes go up, we have a lot of retirees, and I have worked for many years with the First-Time Homebuyer Program. It’s great if you can buy a home, but can you afford to stay there?”

She requested to see numbers associated with the program, and how much the taxing authorities would be able to afford before raising property taxes.

Although LeClear said they don’t have final numbers yet, they do have some projected figures for the Glennland Building. He cautioned, however, that the full assessment of that building has not yet been completed. But based upon what they know, over the 10 years, the total money that would be abated is projected at $30,000 for the county, $63,000 for the borough and $171,000 for the school district.

Borough Council is tentatively scheduled to discuss and vote on LERTA at its May 6 meeting, while the commissioners and school board will continue to hold discussions on the topic. Although Monday was the only required public hearing, both Concepcion and Pipe said their respective entities will be taking public comment at upcoming meetings.