State College and Centre County have already adopted a tax abatement program aimed at revitalizing historic buildings in the borough’s downtown. But the biggest piece of local taxes won’t be part of the incentive.
In a 6-3 vote on Monday night, State College Area School Board rejected including school taxes in the Local Economic Revitalization Tax Assistance (LERTA), which is intended to phase in over 10 years taxes on improvements for commercial use for 25 aging downtown properties.
LERTA, which has been available to local taxing authorities in Pennsylvania since 1977, provides an incentive for revitalizing deteriorating older properties instead of demolishing and building new by helping cover some of the financial risk associated with redeveloping older buildings.
The school board’s decision likely throws a wrench into plans for one already-proposed project. Scholar Hotel Group has submitted plans to convert the 86-year-old Glennland Building at 205 E. Beaver Ave. from an apartment and office building to a 72-room boutique hotel with professional offices in the basement area.
‘For the proposed Glennland Building, without the school board’s support of the LERTA ordinance the current plans will not move forward,’ Gary Brandeis, president and founder of Scholar Hotels, said prior to the board’s vote. ‘We will need to take a step back and reevaluate our plans with a smaller, less ambitious plan.’
Brandeis, whose Real Estate Capital Management also developed and owns the Fraser Centre, noted that a previous potential buyer of the Glennland Building terminated the contract because of unknown and potentially high costs.
Under the LERTA ordinances adopted by the borough and county earlier this year, the property owner would continue to pay taxes on the assessed value of the building before rehabilitation, but would have a phased implementation of taxes on the increased value created by the improvements, adding 10 percent per year for 10 years.
It can only be applied for commercial use, not residential, and a minimum of $75,000 in improvements will be required to be eligible for the LERTA. To be eligible for LERTA, a building cannot be demolished, nor can the assessed value of the property have been appealed or lowered in the last two years.
But at 16.760 mills and 7.840 mills, respectively, borough and county taxes are only about a third of local property taxes. SCASD’s current millage rate is 46.0875. Without the district’s participation, the LERTA has ‘little value to the projects that would benefit,’ and ultimately new and higher tax revenues might not materialize, Brandeis said.
‘There is no reduction in the amount of taxes being paid to any of the taxing authorities nor are any taxing liabilities passed onto others,’ he added. ‘There is no risk to the school district that taxes from eligible properties will be reduced from their current level as a result of the current LERTA ordinance.’
School board members who voted against the ordinance said they don’t believe using the LERTA for school taxes is part of the district’s mission.
‘I think it’s incumbent on the school district to support economic development, but I don’t think it’s incumbent on the school district to invest in or pay for economic development,’ board member Scott Fozard said.
Board member Dan Duffy questioned the fairness of offering an assistance program to a small subset of taxpayers.
‘Frankly it’s a tough sell for the community, even in a small, incidental way, to support this kind of economic development by postponing taxation while at the same time other individuals are held to the same schedule to pay their taxes on time,’ Duffy said. ‘Essentially, I think it’s outside of our mission and, in a manner of speaking, it’s not fair to the average taxpayer to offer this kind of assistance when it’s really not our job.’
Board President Amber Concepcion said that she appreciated the position of the borough and county, but that the school district faces a much different taxing and revenue structure, with more than 80 percent local funding.
‘There is certainly more at stake for the school district when we decide to use our taxing authority to pursue or invest in economic revitalization efforts,’ she said.
Amy Bader, David Hutchinson and Jim Leous voted in favor of the LERTA. Bader said she felt there was not a high risk to the district because of the restrictions in the ordinance.
Leous said that while the district would lose out on some taxes on the improvements over the 10-year period, it would ultimately stand to benefit.
‘This will only increase our tax assessed value not decrease because it… forces a reassessment as part of the process,’ he said.
Resident Michael Krentzman, who said he has no financial stake in the LERTA, said during public comment he believes the assistance is needed if historic buildings are to be maintained downtown.
‘What I see here is an opportunity to add a tool so the community can develop nicely,’ he said. ‘It helps to build the economy and then the school district benefits as it happens.’
