Allentown Finance Director Has Few Details on NIZ Biz

Allentown Finance Director Garret Strathearn

There were no pitchforks or torches. No coffee, either. The mood in the room at Hanover Township Community Center was angry. This was no ordinary lynch mob, but an assemblage of nearly 80 municipal officials from both Lehigh and Northampton County, meeting at 8:30 AM. They wanted answers. How could Allentown could take earned income taxes intended for them, without so much as a thank you? Why would their local taxes, some of which are set aside for open space, be diverted to finance a hockey arena and business improvements in Allentown's 130-acre Neighborhood Improvement Zone? When they left at the end of four long hours, they knew little more than they did when they came. But Allentown Finance Director Garret Strathearn promised to return again on March 15, to answer their questions.

Technically, this was a meeting of both Northampton and Lehigh County Tax Collection committees, called by Executive Director David Woglom, purely "to educate ourselves." But in addition to tax collectors, the room was also packed with Township Managers, Supervisors, Borough Council members and school district officials.

Allentown's NIZ, buried deep inside a state budget approved in 2009, is what drew them. Allentown State Senator Pat Browne drafted the bill as a mechanism to finance a hockey arena and other improvements in the Queen City. In addition to using state taxes, the earned income taxes of nonresidents who work within the NIZ, can be used to pay the debt service on the financing. This will result in a reduction of EIT revenue owed to other municipalities, from Bethlehem to Coplay.

The exact impact is still unclear. Local officials were largely unaware of this legislation until a Morning Call report in January, followed by a blog report that Senator Browne's wife is employed as a lobbyist with Pugliese Associates. That firm has coincidentally just added NIZ developer J.B. Reilly, NIZ tenant Joe Topper and NIZ publicist Vaughn Communications as clients.

"To be honest with you, a lot of this stuff is still being worked out," explained Allentown's Strathearn. He was able to identify 96 businesses within the NIZ, which is only 50-60% of the total. From that, the Finance Director went on to say there is approximately $550,000 in annual EIT revenue owed to non-Allentown municipalities and school districts. Allentown and its school district will also lose approximately $300,000.

"That's in pencil," he cautioned. "With a big eraser on the end. It could go up. It could go down. I don't mean to make light of it."

Although Strathearn held out the possibility that the EIT could eventually find its way back to the municipality, Forks Township's Jim Farley was skeptical, noting he is still waiting for EIT from Allentown from 2008, 2009 and 2010.

That was disputed by an Allentown official.

Noting the complete lack of projections, Upper Mount Bethel Township Manager Maureen Sterner complained, "You may be forcing us to raise taxes to make up for the tax money that you're taking away from us. ... I would think the City of Allentown would be a little more involved and know a little bit more about this issue that has so much of an effect on neighboring municipalities and school districts."

In addition to lost EIT revenue, one school official complained about the loss of state tax revenue.

Another difficulty for Strathearn is that, at this point, "they haven't really sized up the bond issue."

Lower Macungie Township Manager Bruce Fosselman complained that he and three other Township Managers have been unable to meet with Senator Browne, who has postponed two scheduled meetings, including one set for that day. Senator Browne's Chief of Staff, Ellen Kern, acknowledged that the meeting has been postponed until later in the month, but only because the Senator wants to include some experts who could explain the EIT process.

Fosselman defended Strathearn, who did not write the law.

"Got any band-aids?" asked Strathearn as the meeting ended. He was thanked for facing a tough crowd.

Over the next week, municipal officials will send questions to Tax Committee Director Wolgrom, so that Strathearn can work on responses in advance of the March 15 meeting.

Although he was short on details, Strathearn strongly advocated the NIZ after the meeting was over. He stressed that the bonds issued for improvement will not be general obligation bonds and that no real estate taxes will be used to pay the debt service. "They will not be backed by the full faith and credit of any municipality," he insisted.

Noting that there will be 1,000 jobs during the construction phase alone, Strathearn is confident that surrounding municipalities will benefit. "Allentown is the heart of the Lehigh Valley," Strathearn argued. "If that heart denigrates, it's going to eventually spread."

NIZ foe Michael Molovinsky later retorted, "If Allentown is the heart of the Lehigh Valley, we all should be dead."

Updated 11:50 AM, to reflect a conversation this morning with Senator Browne's Chief of Staff, Ellen Kern.