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Thursday, April 19, 2012

Commercial Developers: NIZ a "Destructive Monster"

South Whitehall Township Commissioners voted unanimously last night to join seven Northampton County communities in challenging the NIZ. Municipalities are concerned about the deprivation of EIT over the next 30 years. Instead of going into their coffers, that money will be used to fund a hockey arena and office buildings in downtown Allentown and along the riverfront. But there's another adverse consequence to the NIZ, and this one might be worse than Allentown's tax grab.

Two of the Lehigh Valley's most respected commercial developers, Don Frederick and Tom Roma, expressed their concerns to Commissioners last night. Here's what they have to say.

Don Frederick
Don Frederick (as in the Frederick Group. He's 82 years old, and tells me he's spent the last 52 of them peddling real estate).

"I am here as the managing partner for our family partnership, which owns a 90,000 square foot office building at 3500 Winchester Road.

"Our primary concern about the tax subsidized zone is the negative effect it will have on our building and, ultimately, South Whitehall Township and the Parkland School District. In a few months, we will be paying $120,000 in taxes. We're gonna' need rent to pay for that.

"The value of our property is based on the rental income we receive. Because there is currently a large oversupply of office space available, the tax subsidized zone will worsen the office market with its lower rent prices, thereby depressing the value of office buildings. [Frederick told me his tenants are already negotiating cheaper prices and threatening to head off to the NIZ].

"Obviously, we owners will have no choice but to seek lower assessments to reduce our real estate taxes.

"Therefore, I respectfully request, on behalf of my family and myself, that you seek guidance from your Solicitor, Att'y Joseph Zator, on filing a lawsuit that, at a minimum, would require tax subsidized properties to only lease space to tenants from a radius of 25 miles outside the tax subsidized zone."

The NIZ & J.B. Reilly
Tom Roma (as in Roma Corporate Center. He's older than dirt, too):

"In this total NIZ discussion, it has been mentioned that the framers of this law were out to do something evil.  I don't believe that at all. They were trying to do a very noble thing, and that is to increase and resurrect downtown areas of cities in the state. However, I think the law was very poorly written and ill-conceived. 

"It wasn't their intention to write a law that was going to siphon off the real estate values of the suburbs and take them into the city. But unfortunately, that is what is happening. 

"Dr. Frankenstein started off to build a human being from discarded parts. He was trying to do something noble for the world. But what he developed unknowingly was a destructive monster. 

"In my opinion, the way the NIZ law is written is exactly that. It is a destructive monster. 

"It's going to, among other things, siphon off wage tax money, which you already know. But also, it's going to have an effect on reducing commercial real estate values, not only in South Whitehall Township, but all the other townships around the city. The result of that is that the value of commercial real estate will be reduced. And as a result of that, the tax revenue, both for South Whitehall and for every other Township will be reduced, as will the County itself and a much larger amount for the school boards, which are going to come up on the short end of the stick.

"At a meeting I attended last week, several people mentioned that we should go into a negotiation mode. Let's talk to the state and the city and try to talk to them in a friendly tone. 

"My opinion? I think it's too late for that. I think that ship has sailed. I think the only approach we should take now is litigation. If the Township is suggesting that legal action be started one way or the other, I would strongly support that."


Doc Rock said...

Don Frederick and Tom Roma are two of the most decent commercial real estate people I know. They have spent decades investing, with their money and sweat, in improving the Lehigh Valley. For everyone!

Powerful voices who have earned respect.

urban_LV said...

Bernie -

It seems like one major concern being voiced is that if the Lehigh Valley builds a ton of new office space there won't be enough tenants to go around, making it a "buyers market".

Do you know where I can find statistics about how much new office space has been constructed in the Lehigh Valley over the past 10 years? I think that would be a helpful reference point.

Bernie O'Hare said...

I'm still writing right now. I looked at LVPC's 2011 LV Profile & Trends, but it does not seem to answer your questions. Numerous commercial developers have expressed the concerns raised by Frederick & Roma. These include Thulin, Chrin & Pektor. Look at the empty Martin Tower. At the same time, Reilly is offering rents as low as $5 per sq ft. He is poaching. I will try to get data by Friday.

Anonymous said...

I'm glad you're here to provide us with all of this information, and I am certainly not a fan of the process that led to the creation of the NIZ, but I am sick and tired of people who have no clue what they're talking about adding their two cents about how this should be challenged in court without providing a valid legal argument with which to attack it.

Everyone talks about how this will "hurt" MY business or this will "take money away from" X, Y, Z. These aren't valid arguments. Just like it wouldn't be a valid legal claim to sue a township that decided to abolish all taxes. Inevitably this would convince people to move in, thus taking money away from some other, currently more populous, township.

The NIZ was legal when written. It was stupid politically, and I'm glad the city is getting shit for it in the press. But the fact is that this legislation is well within the purview of the legislature to enact. Everyone was fine with the concept of the NIZ until they learned about it's details. So, attacking the NIZ itself isn't a valid argument. People should study first, complain second.

Anonymous said...

Poaching is a part of doing business. Governments create incentives for businesses to either be created in a location or to relocate. Low rental costs is a useful incentive -- it's how they are trying to get young professionals to move to downtown Allentown ("Oh, no! They're poaching the young professionals who would otherwise not live in Allentown. Let's sue them for their dirty trick.")

I'm waiting for the legal arguments to be analyzed. When you have a chance to dispense with this red meat that most of your readers rely on for sustenance, please move on to the crux of the matter -- what are the lawyers saying?

Bernie O'Hare said...

Poaching is NOT part of economic development from gvernment agencies. That point has been made by economic development pros in NC and by Pete Reinke at LVEDC.

As for the legal arguments, I have posted the complaint and have explained Preston's theory in a post last week. I am not going to engage in a legal debate while I am still trying to write up the may things that happened yesterday.

This is special legislation that apples to a closed class and is hence unconstitutional.

When I'm ready to have this debate, you'll lose.

Anonymous said...

"These include Thulin, Chrin & Pektor"

Whores and hypocrats. Not ONE of them has not benefited from their own politics-fueld incentives.

Anonymous said...

Yes! Yes! Yes! Its alive! The NIZ that is.

Mark Baker said...

Glad to see this thing has some powerful voices in opposition.

Wonder why there's no word from Bethlehem...........

Is there a back door fix?

Jon Geeting said...

Again, low rents are good for business. Obviously developers hate it, but that's not some debate-ending argument. Surprise! Business people hate losing money.

Anonymous said...

Yes, It's destructive...when it doesn't benefit them!!!

Bernie O'Hare said...

"Again, low rents are good for business"

Keep telling yourself that.

Bernie O'Hare said...

"Yes, It's destructive...when it doesn't benefit them!!!"

Althogh Frederick and Roma are two of the good guys, I'll agree there's not much likable about developers. They're almost as bad as bloggers. But you don't have to like them. he point they make its this right on the head.

The EIT tax grab is only one of the problems. The other is the uneven playing feld created by subsdized rents. Owners of all those all those office buildings in the industrial parks will be forced to seek assessment reductions, or worse, to walk away. Townships, counties and school districts will lose those tax dollars. They'll have to get t from the rest of us. That's why the radius suggested by Frederick is a good idea. It's not his bottom line that concerns me, but the tax bill the rest of u will see increase.

Andrew Bench said...
This comment has been removed by the author.
Bernie O'Hare said...

Mark Baker, Read today's LVEDC post. No less a person than Callahan himself voted NO to endorsing the NIZ. He has an 1800-acre brownfield and an empty Martin Tower, located very close to a NIZ.

Anonymous said...

I assume Roma and Frederick will now not use tax based benefits for their projects?

It isn't NIZ versus KOZ versus LERTA. It's government interfering in commercial activity.

Just another Solyndra.

Bernie O'Hare said...

John Jay (Andrew),

First, your comments are going directly to spam. I checked this time. Although I appreciate your use of a blogspot name, something about it is activating Blogger to recognize your insightful comments as spam.

Second, I believe your points are very fair. I will research them over the weekend. I'm not sure I agree with you entirely, but there's no question that many developers have been heavily subsidized.

Although Mrs. Frederick and Rma are two of the good guys, I don;t really care muh abut their bottom line except when it means that it ill reduce the tax base and drive everyone else's taxes up. This, incidentally, includes businesses within Allentown itself.

Finally, it is illogical to defend a subsidy to the rich by arguing that other subsidies to the rich have been made in the past. If it is wrong, it is wrong.

Anonymous said...

Which one of these guys was the one bleeding from the ear on the 69 News?

Hang it up already.

Andrew Bench said...
This comment has been removed by the author.
Andrew Bench said...
This comment has been removed by the author.
Bernie O'Hare said...

John Jay, aka Andrew bench, Both of your comments went into spam. Try signing out of google and posting by just typing in your name in future comments and that should work. Something screwy with Blogger goes on with some readers like you and Donna Rovito, your ideological opposite.

just so you know, I do not oppose the NIZ per se. There is much common ground. I'd even like to see Allentown succeed. But Allentown will fail if the rest of the LV fails. We are all in a symbiotic relationship. This is a toll that is guaranteed to achieve failure for both Allentown and the rest of the LV, while converting JB Reilly from millionaire to billionaire.

Anonymous said...

Oh puleeaze.

Pumping Allentown full of business is a bad thing? You people really are self-serving, closed-minded, and short-sighted. Allentown is the economic engine of the region and we absolutely need to get it back on its feet. All of us. Quit your whining already. And I live in Bethlehem. We'll be fine, trust me.

Anonymous said...

Diversify your portfolio. Bethlehem had its Steel and we all know how that turned out.

Does anyone remember the outrage from surrounding cities and townships when the Sands Corp. got a sweetheart deal to develop that useless pile of rust along the river? I don't.

Or how about the Promenade Shops? That must have really made the Lehigh Valley Mall people angry. (Alas, nobody cares about the Whitehall Mall.)

Whitehall gets all the shopping, Bethlehem gets the universities, Allentown should get the corporate office space. Easton can keep the boxer.