Pennsylvania’s Lehigh Valley On The March

Editor: Tell us about your professional background.

Allinson: I have been a business lawyer in Norris McLaughlin’s Allentown office since our firm, Tallman, Hudders & Sorrentino, merged with Norris McLaughlin & Marcus in October 2009. Prior to the merger, I practiced with Tallman, Hudders & Sorrentino since 1989. I started my career handling commercial litigation. From there, my business practice evolved into working with a number of the Lehigh Valley’s economic development agencies and authorities. I developed a subspecialty in economic development law and now chair our PA office Economic Development Practice Group.

Editor: The Lehigh Valley is said to be experiencing a period of economic renaissance.

Allinson: The Lehigh Valley is going through a transformation that is quite remarkable, but in many ways it has been 20 years in the making from the time Bethlehem Steel and other manufacturing corporations sadly closed their doors. Many Lehigh Valley leaders took the opportunity in the mid-1990s to evaluate our three cities and two counties and to come up with a plan to regionalize and market the Lehigh Valley as one region. This effort took a tremendous amount of work. Currently, there has been a dramatic revitalization in Bethlehem, in Easton and most recently in Allentown, which has the benefit of a new tax legislative zone called the Neighborhood Improvement Zone (NIZ). That has generated about $1 billion in new development in downtown Allentown, including a professional hockey arena known as the PPL Center, which will open in September. (PPL was formerly known as Pennsylvania Power and Light Company.)

Editor: Is there a tax abatement that goes along with this specialized zone?

Allinson: No, it’s not a tax abatement. In simple terms, this legislation allows a developer who is building a new building inside the 130-acre zone or rehabilitating a current structure to offset between approximately 60 to 80 percent of the borrowing costs by capturing essentially all state taxes that are generated from construction, from state income taxes, including construction workers and the like, and those taxes are then accounted for annually and sent back from the Department of Revenue in Harrisburg to the Allentown Neighborhood Improvement Zone Authority (“ANIZDA”). This is the authority that was established to monitor development in the zone and to handle these funds, make payments to lenders and pay the PPL Arena bonds. The funds are then distributed among the lenders to offset construction loans. It is a very powerful tool for the developers, who, while they have risk in borrowing the funds, are potentially able to achieve tremendous rewards. That’s what is attracting a lot of development in the city of Allentown today.

Editor: Bethlehem and Lancaster were recently awarded CRIZ distinction. How important to the economic development of the region as a whole are programs like CRIZ and NIZ?

Allinson: The CRIZ stands for the City Revitalization and Improvement Zone. This statewide legislation was enacted as a result of other communities within Pennsylvania observing the tremendous benefits of the NIZ in Allentown. The Program administered by Pennsylvania’s DCED was enacted in 2013. There were two CRIZ designations for 2014, namely Bethlehem and Lancaster, based on their most complete proposals on specific projects with specific developers that would benefit from the CRIZ designation. There is an expectation that there will be two more cities designated in 2016. There has been some speculation that the legislation will be amended to allow a CRIZ designation, or two, in 2015, but it does not look likely. As of now, I am not aware of any of the CRIZ designated projects in Bethlehem where construction has commenced since there remains some preliminary technical work that needs to be done. A CRIZ Authority Board for Bethlehem was established recently. The benefits of being a CRIZ-designated city are not as powerful as the NIZ-designation in Allentown as there are different calculations as to which taxes can be used to redirect state tax money back into a specific CRIZ project, but the intent is for new investment, job creation and economic growth in the state’s cities.

Editor: Once it’s funneled back, it can be used to enhance the project?

Allinson: Yes, or to reimburse a lender for a portion of the financing to the developer/borrower.

Editor: How has the TIF (Tax Increment Financing) Act been used to strengthen the economy in challenged municipalities?

Allinson: That’s a great question. I’ll only speak to TIF transactions that our firm has been involved in over the last ten years or so. I can point to four of them: one is in Easton; one is in Palmer Township, which is just northwest of Easton, and two are in the western part of Lehigh County. Each of them is different, but from the standpoint of job creation they have each had a tremendous positive impact. From the standpoint of identifying properties where a TIF might spur development, the focus is properties generation of very little in the way of tax revenue to the county, to the host municipality, and to the school district. For the projects, the projected numbers have been outstanding and quite accurate as they relate to increased tax dollars to the impacted municipal and school entities. There’s always a philosophical question of whether a governmental body should forego a portion of future tax revenues when a TIF is approved, even though each of these TIF projects has to stand on its own merits. They can be for road and infrastructure improvements, as is true in the Palmer Township interchange project at Route 33. I was intimately involved with the project in Palmer Township for probably six years altogether; it is being built right now to create a highway interchange in the middle of a thousand farm and industrial acres formerly owned by one gentleman. It is anticipated to create between 3,000 to 5,000 jobs in the next five years. The land was all agricultural so it was generating very little in the way of taxes. The projections are that as the land continues to improve, each of the taxing municipalities will receive millions of dollars over the life of the TIF not otherwise anticipated.

Editor: Is this because it will be zoned commercially?

Allinson: Yes. The property was rezoned. Some of the property is industrial; there was an overlay for a retail district as well near where the interchange is being built.

Editor: What size population dominates this general area of the Lehigh Valley?

Allinson: That’s a great question because many educated people in this field would give you a different answer. We take the view that the Greater Lehigh Valley includes not only Lehigh and Northampton Counties, but also Warren County in New Jersey and a portion of Berks County to the west. From that standpoint, you’re looking at about a million people.

Editor: Are the transportation arrangements in that area adequate, aside from what you’ve just mentioned?

Allinson: Yes. That is one of the reasons why the Lehigh Valley region is on many national developer’s and site selector’s premier list of locations to expand or relocate. We have a very well-designed transportation system, particularly the highway system. I’ll point to the example that Porsche North America established their eastern headquarters in Palmer Township based upon their metrics of how far a truck can travel within an eight-hour drive. (That gets you to Montreal or to Cleveland or to Richmond, Virginia.) That’s why, particularly in the western part of Lehigh County, there’s been a very substantial logistics and distribution network of companies established.

Editor: Please talk a bit about the Lehigh Valley Economic Development Corporation’s recent report.

Allinson: The LVEDC’s recent report is quite accurate. I was the solicitor for the LVEDC from it’s formation in the mid-90s until 2006, but I have consistently worked with their leadership. A number of the economic development organizations that the LVEDC’s professionals administer are organizations where I and my partner serve as solicitors. It’s been a very seamless relationship. The LVEDC has been in the forefront of marketing the region, working with Lehigh Valley companies on matters that they need to improve, such as a retention program, which they are just now reestablishing, which links in the region’s Workforce Investment Board, job training and the like, and working with site selectors across the country when they’re looking to potentially move a company into the area. They play a very critical role. There are many other key things that the LVEDC does but globally, that’s their mission.

Editor: Are there any economic inducements to bring new companies into the area?

Allinson: Yes. LVEDC runs point for determining what type of economic incentives may be out there from job creation tax credits from Harrisburg, to low interest industrial development authority loans, etc. There are also RCAP-type grants for Pennsylvania’s DECD principally based on what the company does, how many jobs will be created and how many employees they are bringing into the Lehigh Valley from outside the state.

Editor: Are there any environmental concerns about bringing certain companies in?

Allinson: That’s a good question. The LVEDC also houses and staffs the Lehigh Valley Land Recycling Initiative. Those executives are really on the forefront on environmental issues facing companies that are here or companies that are considering moving here.

Editor: Ocean Spray opened a facility in the Lehigh Valley this year. What are some key opportunities and business incentives available to other companies considering an investment in the region?

Allinson: There’s no question that right now there are at least 40 food and beverage manufacturers and distributors in the Lehigh Valley, principally in western Lehigh County near where Ocean Spray is located, including Nestle and other major food and beverage companies. The synergy of having these companies located all in the same area is probably one of the principal reasons why Ocean Spray decided to open this manufacturing and bottling plant. Sam Adams has a major brewery here. Don Cunningham, CEO of the LVEDC, has been on the forefront here.

Editor: Is Ocean Spray also advantaged by being close to its supply chain since cranberries are grown in southern New Jersey?

Allinson: The supply chain is certainly part of it. While I can’t speak to the details of the incentives that Ocean Spray received, I know that the LVEDC worked diligently with the state’s Department of Community and Economic Development to make it happen.

Editor: Please tell our readers about some of the economic development projects that Norris McLaughlin has been involved in.

Allinson: From a TIF standpoint, the 25th Street Palmer Town Center Project which houses a Giant Food store and a Home Depot, the Charles Chrin Interchange Project in Palmer Township, the Hillwood TIF in New Smithville, and the Hamilton Crossings TIF in Lower Macungie Township which, will include a Costco, a Whole Foods, Dick’s Sporting Goods, Target, and Nordstrom Rack as some of the principal tenants. That TIF was a challenge – we were able to secure the final vote just recently because this property, owned by the Allentown diocese, generated essentially no taxes and had been an old mine. The TIF funding will be used for remediation of the old mine waste, allowing the developer to pour concrete pads for the new construction and generate substantial new revenue for the taxing bodies.