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Friday, April 13, 2012

A-town DCED Director Hailstone Crashes a NIZ Party

Allentown's Neighborhood Improvement Zone (NIZ), which consists of 130-acres in downtown and along the Lehigh riverfront, is going to divert the EIT of nonresidents who work there to fund a hockey arena and other improvements. Surrounding municipalities, who have no control over the projects being funded with their own money, will see their bottom lines reduced. Seven of them have so far signed onto a legal challenge. But there's an even a bigger problem than losing EIT revenue. Many are also concerned that local businesses are being lured away to the and cheaper rents in the NIZ made possible by their own EIT.

Will area developers like Lou Pektor's PennCap, which spent $124 million just a year ago for 32 Lehigh Valley office complexes, be forced to reduce rents to keep tenants? Will they then seek lower assessment values, which will mean less real estate tax revenue to school districts and counties?

These were the questions discussed during a private meeting yesterday afternoon among 35-40 of the area's top developers. From Abe Atiyeh, who has already filed two lawsuits challenging the arena plans, to Allentown attorney Greg Feinberg, the Lehigh Valley's movers and shakers were all there. Lou Pektor. The Zawarskis. The Benner boys. Rich Thulin, future Chair of LVEDC. Jaindl reps. Don Frederick.

Will they join the NIZ lawsuit, too? Or start their own? We'll see.

Jim Preston, the Broughal and DeVito attorney who has filed suit on behalf of Hanover and Bethlehem Townships, explained the litigation.

Serving as Master of Ceremonies was Dr. Stephen Thode, Director of the Murray H. Goodman Center for Real Estate Studies at Lehigh University. Thode, has already publicly expressed his reservations:
Allentown was granted a special, preferential tax structure for the NIZ. That structure is unavailable to any other municipality in the state. … It creates an unlevel playing field, which will permit private developers to apply taxpayer funds to the debt service on the buildings they develop in the NIZ. Hence, they will be able to offer lower rents [and still make a tidy profit!] [compared to] developers and property owners outside the NIZ. Unless the NIZ creates new jobs as a result … the NIZ will simply attract existing tenants from other landlords and municipalities in the Lehigh Valley. Wealth will be taken from other property owners and municipalities outside the NIZ and be given to developers inside the NIZ.
Although the meeting was originally scheduled for Lehigh's campus, the venue was changed to the Best Western on Route 512 as word leaked. The press, including a certain bottom-feeding blogger, wanted to be there.

I was told to meet everyone at the 7-11 in Hellertown.

Matt Assad was at White Castle.

Allentown Mayor Ed Pawlowski wanted to come. He was told No. Then his DCED Director, Sara Hailstone, wanted to come. She was told No, too. But when everyone rendezvoused at the best Western, Hailstone was there. Not only did she want to attend, she also wanted to be the first to speak. Again, she was told No.

After the meeting got underway, Abe Atiyeh exited the room to use the facilities. When he opened the door, Hailstone nearly fell into the room. She had been outside, eavesdropping, as best she could. Somebody even snapped a picture of that, and if I get it, I'll post it here.

Hailstone pretended she was practicing her Irish step dance for Celtic Woman, but nobody bought it.

Lou Pektor got up and asked Sara to leave. Again. This time she did, and immediately called Bethlehem's DCED Director, Joe Kelly. She complained that she was being excluded while Tony Hanna, Bethlehem's former DCED Director, was allowed to remain.

Maybe that's because Bethlehem has no NIZ and is not trying to poach tenants from other municipalities, Sara.

So what happened?

Dr. Thode, who was designated as spokesperson, was very coy.

"We're weighing our options, considering our next steps," he blandly stated.

When I asked whether it was true, as I've heard from several others, that an ad hoc committee is strongly considering the litigation option, he gave me a "No Comment."

Fortunately, I was able to speak to several of the participants, and from that, I can tell you this much,

1. There is pretty much a consensus among area developers that they have no desire to kill the NIZ.  Bt conversely, they don't want the NIZ to kill them.

2. Jim Preston explained that the legislation creating the NIZ can be distinguished from other legislation that applies to places like Philly. Those pieces of legislation could conceivably apply to other municipalities. But the legislation creating the NIZ applies to a "closed class," i.e. the oly place where it could possibly ever tke effect is Allentown.

3. Mayor Ed Pawlowski's settlement offer, in which he'd give back current EIT by raiding a parking fund, went over like a lead balloon. Municipalities, and even developers, are not worried about this or next year, but the next 30 years,  in which more and more businesses are lost to the NIZ.

4. The effect of the NIZ is already being felt. Tenants are much cagier about renewing leases in the industrial and corporate parks. They are starting to demand rent reductions.

5. Unlike Allentown Mayor Ed Pawlowski, who took shot at developers like Thulin and attempted to pit Allentown against the world, the conversation among these business leaders was bereft of the personal animus that is becoming all too common in the political arena.

6. Most of these office complex developers think they can absorb the losses created by the development of the NIZ in downtown Allentown. But the riverfront has them worried. At this point, they don't know whether it's 500,000 sq ft or 1,500,000 sq ft. The more developed as office space, the more their business will suffer. The more their business suffers, the lower the tax base for surrounding municipalities.

7. Don't count on Governor Corett to side with developers, even though the state needs tax revenue bbadly. NIZ developer J.B. Reilly had a fundraiser for Corbett at his home, just a few weeks ago. He's got another tonight.

Oh yeah, no Celtic Woman was injured during the making of this meeting.


Anonymous said...

Give Sarah credit for trying to do her job.

Anonymous said...

Why would a so called professional like Hailstone dip to the level of inviting herself to something she was not welcome? Why, after being asked to leave, would she reportedly stoop to eavesdropping? What an embarrassment to herself and the City. Unbelievable. And she sits on the NIZ Authority and is paid by the City? Google her name. Enough said.

Anonymous said...

maybe she thought that she was supposed to be the entertainment

Jon Geeting said...

"The effect of the NIZ is already being felt. Tenants are much cagier about renewing leases in the industrial and corporate parks. They are starting to demand rent reductions."

This is unquestionably awesome. Lower rents are great for business. Obviously the landowners don't like it, but when businesses' rents are lower, they can expand, hire more workers, etc. NIZ or no NIZ, local governments should be adopting land use policies that lower rents anyway, as a policy, for housing and for offices.

zoid said...

I believe Don Frederick was the one who went into the hall with his phone.

zoid said...

I believe Don Frederick was the one who went into the hall with his phone.

Anonymous said...

Hey Geeting, please stop getting things wrong. These are not just landowners (like the farmers you hate so much), these are people who have invested hundreds of millions OF THEIR OWN MONEY into the Lehigh Valley over the years.

They didn't do that just to get fucked over by pathetic pukes like you.

Oh, and businesses expand based on opportunity, not on cost structure.

Bernie O'Hare said...

Geeting's comment is incredibly insensitive, but it's I expect from someone who dances on the grave of people with whom he disagrees politically.


Anonymous said...

True. I'm surprised he was able to control his glee at Santorum's daughter's illness.

Anonymous said...

Anonymous said...
"Why would a so called professional like Hailstone dip to the level of inviting herself to something she was not welcome? Why, after being asked to leave, would she reportedly stoop to eavesdropping?"

Maybe her advisor is James Gregory?

Anonymous said...

Geeting thinks it's great when private developers have to lower rents to compete with the government. This is the same mind set that believes unemployment insurance is stimulus. They correct - if money magically grows on government trees and is not produced by individuals through risk and toil.

Geeting doesn't understand economics and half the country believes in ghosts. The chickens of our shitty education system have come home to roost.

Anonymous said...

*They are correct ...

Anonymous said...

Things are beginning to unravel for Allentown. Bush league stunt by Hailstone. Unfortunately, that's par for the course for Scranton and she probably thought nothing of it.

I don't see how the NIZ survives surgery. If the majority of the funding mechanism is the continued capture of "outside" EIT, and that's removed, how do you fill that hole?

zoid said...

The settlement offer made by the city from what I read only gives the municipalities the current level of EIT over the next thirty years. What about all the residents of these areas that will become future employees in the NIZ and all that future EIT is lost. Further if this thing survives municipalities will be losing future yet to be determined EIT for the businesses that are poached from around the valley and move into the NIZ. REALLY REALLY STINKS!!!

Bernie O'Hare said...

"Maybe her advisor is James Gregory?"

Heh, heh. Jim Gregory is the dude who attempted to crash a Rendell event and actually had to be restrained as he chased after a bus. That and other antics landed him in Bill White's Hall of Fame.

Bernie O'Hare said...

"What about all the residents of these areas that will become future employees in the NIZ and all that future EIT is lost."

Yes, and that is why the "offer" is being viewed with skepticism.

Anonymous said...

This is a disgraceful and uncalled for attack on Sara Hailstone, a hard-working woman and role model of a professional Bureaucrat dedicated to the wonderfulness of the transformational Palace of Sport.

This unseemly and all-out Republican War on Women must stop immediately as Chairman Pawlowski and his Democrat minions must be allowed to pursue their great vision for the City With No Spending Limits.


Anonymous said...

The wives of everybody who opposes the NIZ have never worked a day in their lives.

Mrs. Browne

Anonymous said...

It's panic at City Hall.

No way are they getting bonds for a project in this economic climate that is the subject of two lawsuits, and possibly a third.

Anonymous said...

Republican (in name only?) Senator PAT BROWNE is an outstanding citizen and a shining example of what is possible if people would only put aside their partisan bickering and compromise with Democrats.

Let me be clear --- it is time for the greedy Suburbs to start paying their Fair Share.

Stop acting stupidly.


Anonymous said...

Future Downtown Arena Attendee,

Still just can't seem to effectively sell your $ 160.0 million dollar Palace of Sport to the uneducated public ... can you?

Joey G

FutureDowntownArenaAttendee said...

Bernie, Rolf is impersonating me again

ironpigpen said...

You are not reading so well today, FDAA ... are you?

I see a note addressed to you ... but I do not see me impersonating you from "Joey G" but that would be about it.

So, what's up ... more non-sense from you, or what?


ironpigpen said...

"I see a note addressed to you from Joey G"

... I must be as mixed up as you today!



ironpigpen said...

So, as long as we have this wonderful dialogue going, Future Downtown Arena Attendee ...

... why not go ahead and ditch your cowardly anonymous front and tell everyone who you really are and how much you making promoting the magnificent Palace of Sport?


ironpigpen said...

Oh, that's right.

You don't answer direct questions.

Just push lame-ass propaganda.

My bad ...


Anonymous said...

Are the developers willing to do what is appropriate and give up LERTA, TIF, KOZ and now NIZ.

Everyone wants an even playing field, but just give them a little edge.

Is Easton going to stop the LERTA and KOZ push?

Is Bethlehem going to address Martin Tower without a tax benefit?

Are these guys going to forfeit their KOZ deals in Allentown.

ironpigpen said...

I know why you won't tell us your real name, Future Downtown Doofus ...

... you are just not into level playing fields!

You only play games when the odds are fixed in your favor and you have all the referees bought off ahead of time.

You could not beat anyone in a fair fight and you are fully aware of it ... this is why you run and hide each and every time I ask you even the simplest of questions ... you know you can't handle someone like me --- I have too many facts and figures in my arsenal that I can call on at will.

YOU, Future Downtown Arena Attendee, are THE perfect icon of the NIZ.


PS --- you do understand O'Hare is not the greatest fan of mine, so it is entertaining for me to see you cry to him and falsely accuse me of stuff which just ain't true ... get a pair of reading glasses.

Anonymous said...

Lap dances and bjs for all on palumpas palace o sport. Was a pole sent there also? Lots of giggles with there jiggles.
Take a good look at the players pure gluttony, just because food is there you do not have to eat it all palumpa and crew?
Just all in funnin

Anonymous said...

I see the Phantoms are currently ranked 22nd out of 30 teams in the American Hockey League at the box office.

That's not so good, Future Downtown Arena Attendee. But things will be so much better at the Pawlowski Palace of Sport, right?

Even if the Phantoms pack the place every night for all 40 or so home games ... the total attendance still won't come anywhere near the loft projections of 2.5 million people, as publically stated by Captain Spellcheck.


Anonymous said...


my computer keys get stuck sometimes - but the construction of the transformational Palace of Sport must never.


Anonymous said...

From 702 W Hamilton Allentown, PA
MSA: 816,012

Lehigh Valley Ironpigs, highest attendance in the whole country (IL)

Hershey, PA 75.5 miles West
MSA: 528,892

Hershey Bears, highest attendance in the whole country. (AHL)

Wilkes Barre, PA 65.4 miles North
MSA: 563,631

Scranton/WB Penguins, 8th highest attendance in the whole country. (AHL)

Philadelphia, PA 68.1 miles South

Philadelphia Flyers, 3rd highest attendance in the country. (NHL)

2010-2011 final attendance report

There is no doubt that attendance will not be an issue.

Anonymous said...

3:21 PM

But surviving to attend a 2nd time - questionable. You must work for the mayor.

Anonymous said...

For the developers, they could care less about the arena.

They care about JB's brand new offices sucking up all their tenants.

This project has never been a civic project. It's been a mechanism for Topper and Reily to make money in a down economy on the back of the taxpayers. They found a willing, desperate victim to help out in the City.

I think if the NIZ was "just" the arena, you might not have everybody so eager to go stop it. You could say "hey municipalities, we want to capture the EIT to pay off the arena, and that's it. Once it's paid off, we're done." Of course that'd be done in advance of getting it made into law. You know, at least attempt to be slightly cordial to your neighbors.

But no, the NIZ goes out and hands out tens of millions of dollars to select developers so they can turn around incredible profit on office and retail projects on the taxpayer dime.

And that's when the trouble started.

This project is doomed, and that's sad because it could have gone about ten different, successful ways.

Anonymous said...

Essentially when the NIZ takes a tenant out of the local suburbs and builds a new building for them downtown, the local suburb loses the tax revenue that is associated with that business. The tax revenue the business generates is funneled into the NIZ to pay the mortgage for the developer on the new building. If the general population is ok with having the suburbs they live in loose tax revenue to pay the mortgage of a private developer, then I guess there is nothing wrong with the NIZ. If the general public is ok with local suburbs having to raise taxes to support the loss of tax revenue so that Allentown can have a shiny new downtown, then I guess there is nothing wrong with the NIZ.

Bernie O'Hare said...

I think you distill it beautifully and succinctly.

Anonymous said...

So now if all of this unravels, the city of Allentown is left with an entire block which is completely leveled. In their haste to ram this through they demolished everything before they had it finalized. Typical government.

Anonymous said...

6:20. Great point but take it a step or two further. The owner/landlord now has to find a new tenant for his empty space. What kind of rent do you think he will now get? Probably less in this market. Now all the neighboring businesses want their rent lowered. The landlord/ owner now can't make ends meet so he asks the county to lower his assessment. Or maybe the bank calls the loan and won't refinance the building because there is not enough revenue coming in to carry the debt load and taxes and other costs. It gets foreclosed on.
Now the municipality is working with a lower tax base because of foreclosures or a lower assessment. What does this municipality do? They have to raise taxes! Who pays? Anyone and everyone who owners a home. You rent --- guess what your landlord has his residential property taxes raised, your rent is going up. We all suffer to line the pockets of a few.

What are the politicians that voted for this saying now? I would like them to have a regional round table lets say at Zoellner to discuss their position on the NIZ.

Anonymous said...

I elect Thode to be the moderator for this panel. I see the ropes hanging from the lights swaying back and forth

Anonymous said...

So allentown finally found a way to out manuver the suburbs.After years of shopping and working in the burbs and paying sales taxes and other taxes to fund their open space inititives and infrastucter the tables are now turned.And by no less then a D mayor,R state senator and a few R private citizens.Politics at its finest.

Anonymous said...

How did a project for a hocky arena turn into a project to rebuild Allentown ?

Bill Coker said...

Great question 1:07 AM.

Like every other project in the Valley it progresses to a hotel, convention center, concert hall, etc. How many conventions have you heard of involving minor league hockey or any other minor league sport?

Anonymous said...

Was Justine Simmons there!

Anonymous said...

The issue isn't really about the Hockey arena. If the 130 acre district used the tax base that is currently located in the district to fund municipal bonds to help pay for the arena, no one would be filing law suits. The problem is that the district doesn't stop there. Go to the City's website and look at the Guidelines that were written in October. Any project can be approved by the NIZ board, so long as it fits within the "future and amended Master Development Plan". So essentially the fear is that 130 acres can be developed into 5 million square feet of Class A, B, and C office space in a market that only contains about 10 million square feet of office space and currently has a vacancy rate of 11%. In that senario, half of the Lehigh Valley business community would be communting into Allentown to go to work. It also would mean that half of the Lehigh Valley's EIT would go to Allentown and would then pay the mortgage of the private developers who own the buildings. If the people running the district would focus efforts on pulling businesses from outside of the Lehigh Valley into the NIZ district, then everyone would win, since ther wouldn't be a canabalism from within the Lehigh Valley. Well except for the gangsters in Allentown, they would not win. They would get pushed out of Allentown and into the surrounding areas.

Bernie O'Hare said...

As MM points out in a recent blog, its pretty hard for any developer to apply for a NIZ project in downtown Allentown since JB Reilly owns most of the land. Along the riverfront, we have Jaindl and Twiggar. I am unsure whether Reilly is invested there as well. I thought he was but will have to check that.

Anonymous said...

Republican in Name Only Justin Simmons...
was taken to the wood shed for voting for the Tax on the drillers and his vote for the NIZ Tax.

Anonymous said...

Immediately after Sara was ejected, She was transported to Lehigh Emergency due to a door knob being lodged in her ear!!!

Anonymous said...

I don't know when it is ever appropriate or professional to stand out side of a private meeting for an hour with your ear pinned to the door.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

It is not strange that Miss Hailstone had her ear pinned to the door. When she is beckoned by the powers above she responds without question, it is in her job description.

In the picture leading this post, I am sure she is looking for a dress to wear to the opening gala of the new polo field that will replace the palace of sports when the Brooks Brothers pull out.

Reilly will bail as well and Allentown will be left with an urban ghost town. As far as the eye can see there are empty commercial properties all over the Lehigh Valley.

Also I suspect it is only a matter of time before the Farr building joins the rubble of concrete down by the river. I for one would not sleep well living in that building.

Anonymous said...

Just got back in town and caught up on your BLOG.

Sarah actually attempted to get into a "private meeting" of developers and landlords in her official capacity with the City of Allentown.

This is just another example of the inappropriate behavior of the current administration in the City of Allentown.

The entire administration should be indicted.