A NorCo NIZ Post-Mortem

Allentown Mayor Ed Pawlowski has called his City's 130-acre Neighborhood Improvement Zone (NIZ) a "tremendous opportunity for the entire Lehigh Valley." But 18 townships and boroughs, along with one school district, viewed it more along the lines of taxation without representation. Despite pleas for "regionalism," they filed suit in Commonwealth Court. They objected to the diversion of their tax dollars for  a hockey arena, office buildings, a luxury hotel and other amenities in Allentown.

Allentown's NIZ is the result of a law that State Senator Pat Browne slipped into the Fiscal Code in 2009, after a record-breaking 101-day budget stalemate mired Harrisburg in gridlock. NIZ developers can use state tax revenue, even cigarette taxes, to fund the cost of improvements. They can even use the earned income taxes of people who work inside the NIZ, but live somewhere else.

This was a sticking point for Lehigh Valley townships and boroughs. They were also concerned that their own businesses would be lured away by the cheaper rents made possible by the use of tax money.

This NIZ was created for any local government with a population between 106,000 and 107,000 in the 2000 census. This could mean one, and only one, community.

Allentown.

And the Queen City had just been handed a tool that allows the Lehigh Valley to cannibalize itself, at least in the eyes of Hanover and Bethlehem Township officials. They spearheaded a lawsuit aimed at the very constitutionality of this funding mechanism.

This lawsuit was filed after several months of getting nowhere with Allentown officials.

In February, Allentown Finance Director Garret Strathearn told numerous township officials that "a lot of this stuff is still being worked out." He promised to return the next month with answers about the impact of the NIZ on their own bottom lines. But the following month, he failed to appear. Instead, another Allentown representative promised that information would be sent the very next day. Then Allentown claimed there were "some discrepancies" with its own data. Now, instead of receiving information from Strathearn or someone else in Allentown, the information "will be sent out to you by Senator Browne's office."

A lawsuit followed on March 29.

Attempts to negotiate a settlement with Allentown were as fruitless as discussions leading up to the suit. Allentown had proposed creating a special development fund for all municipalities affected, but had no authority to actually change the law.

That took state lawmakers, who created the law in the first place. On Saturday evening, June 30, every single Lehigh Valley state legislator approved changes to the NIZ law, removing the provision that would authorize the diversion of municipal EIT. They also changed the NIZ definition, giving the City of Erie an outside shot at some day having a NIZ of its own.

Lehigh Valley House Republicans Reps. Julie Harhart (R-Lehigh/Northampton), Gary Day
(R-Berks/Lehigh), Joe Emrick (R-Northampton), Marcia Hahn (R-Northampton), Ryan Mackenzie (R-Berks/Lehigh) and Justin Simmons (R-Lehigh/Northampton) issued a joint statement, calling their vote "a symbol of state government working with local municipal officials, who in this case expressed deep concerns about the impact of losing their local tax revenue."

Northampton County Council member Lamont McClure, at a July 5 Committee meeting, called this attempted local tax diversion an example of  "the limits of regionalism." Calling the arena an "unambiguous good for the entire region", he noted that the entire project had been imperiled because of the way the NIZ legislation was drafted and the way it was handled.

"Regionalism was cast aside in the name of what local officials thought was in the best interest of their municipalities," claimed McClure.

Pete Reinke, who handles regional development for the Lehigh Valley Economic Development Corporation, worries that the Lehigh Valley's reputation as a "collaborative" body has been impaired. He added that some developers are still unhappy, even with the changes.

Council member Bob Werner's assessment is a bit more blunt. "That flawed piece of legislation will never be forgotten about," he predicted.

"The only reason it was changed is because people fought for it," the Democrat stated, in an obvious compliment to mostly Republican township officials.