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.