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BASD Should Not Fund Allentown Arena

Local municipalities and school districts outside of Allentown will be funding the new hockey arena.

Several recent news articles have shed light on an apaprent overlooked piece of the 2009 state legislation that authorized Allentown's downtown Neighborhood Improvement Zone (NIZ). The NIZ law states that all local non-property taxes collected in the zone's 130 acres are to be collected to fund the area construction. This includes the BASD and the City of Bethlehem's share of Earned Income Tax (EIT). 

EIT taxes are deducted from an employees pay and then returned to the municipality where the employee resides. BASD and the City of Bethlehem split the EIT revenues that are returned to the city. BASD also splits the EIT for residents of Bethlehem Township, Hanover Township, Freemansburg, and Fountain Hill. At this point the BASD is not aware of the total financial impact of this change, but it most certainly will be significant. 

In addition to this the NIZ has allowed developers to offer discounted lease rates within the NIZ. To date this has attracted five companies to move their offcies to within the NIZ when construction is complete. These were not outsiders coming from New Jersey or New York. These are local business that bolted to the NIZ and are leaving buildings in other municipalities vacant. In addition they are also now shifitng their EIT dollars to various NIZ construction projects and away from struggling local school districts and municipalities. How long will this last you ask?  Don't worry it's only for 30 years.

This way of financing is not in the best interest of the Lehigh Valley. We should be for the greater good, not just one area of one city. Luring a business from Easton or Bethlehem to Allentown doesn't make the Lehigh Valley a better place to live and work. However, this is not my main concern as a school board member. Let's look beyond the EIT issue. Let's ignore that some of the largest employers in Allentown are located in the NIZ. You can click here for a map and see for yourself. 

Let's instead look at the basic funding of the NIZ. According to Allentown's NIZ website all state taxes collected will fund development in the NIZ including the arena and other projects. These are monies that should be paid to a state that made unspeakable cuts to education last year. Grants, K-12 education, and Community College's funds were all slashed in the name of fiscal responsibility.  Now it is being given away, estimated at at least $10,000,000 per year for 30 years, to fund an arena and other private development.  

The City of Allentown and hockey fans win out big time in this deal. What does the state get? Not much in my opinion.  Even if some out of state business locate here the new tax created will never pay back the hundreds of millions of dollars given up over the 30 years of the deal. The more business that relocate the more money the state loses. That's the entire state by the way. That's school districts, children, and taxpayers from all 500 districts in the state that will suffer many more tough budgets all the while the State of Pennsylvania gives away bags of money to bring hockey to downtown Allentown.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Dana Grubb January 26, 2012 at 12:04 PM
Mike, The diversion of public tax dollars to anything other than the express reason for which they are collected is fundamentally wrong. And, it should never be about the projects because many are worthwhile. However, the idea that government and school districts should directly finance the projects through their use of public funding streams removes far too precious resources from the pot for which they are intended and then creates undue pressure on the taxing entity to replace them (or make damaging cuts) in order to maintain the services being provided. Whether it's an NIZ, TIF, or other funding scheme usually public funding streams will be far better used if they are applied to what they should be collected for in the first place. Somewhere along the line elected legislative officials decided that public funds should replace private financing to make these kinds of projects happen, maybe as a way to pay back huge campaign contributors, and of course the banking industry embraced it because it reduced their risk. Now many of those same elected officials now try to convince the public that the so-called public good derived from private for-profit development, from which a few profit, is more important than the purpose for a governmental entity's existence. If that isn't upside down thinking, then nothing is.
Jon Geeting January 31, 2012 at 12:52 PM
How many BASD taxpayers realistically work inside the NIZ district? How much money could we really be talking about? Also, why should the municipality where you live have any claim at all on the earned income tax revenue that you produce in the municipality where you work? Your employer is there, you're there, you're consuming public services there in the course of doing business. It's tough to see how your home municipality has any legitimate claim on this money.
Mike Faccinetto February 01, 2012 at 03:16 PM
We do not yet know what the total impact will be, however, last year the BASD received about $500,000 in EIT from residents who work in the City of Allentown. Now granted that is the entire city, but the largest employers in the city are in this zone. Agree or disagree with the reason EIT money is returned to the home municipality, it is in fact the law. That law was strengthened with Act 32. Whether it's a legitimate claim or not it's the Law and it shouldn't be changed to benefit one municipality. Don't forget municipalities do charge a Local Services Tax on employees who work within it's limits to account for service they use. On a side note that is not really relevant to this discussion I am not sure how anyone can't see the corruption in how this NIZ is being handled. The latest, and there seems to be one almost every week, are the appointees to oversee the NIZ announced last week.
Dana Grubb February 05, 2012 at 10:13 PM
Mike, I agree with you and excellent point about the Local Services Tax. Also, as I understand it, if someone who works in the NIZ is paid $50,000 today, and their pay increases to let's say $75,000 over time, the EIT on the increase is what remains in the NIZ. That will be an accounting nightmare for every community impacted and may create opportunities for over/under reporting of accurate EIT numbers. This may or may not be a good project for Allentown in the long run, but the process causes one to wonder what ever happened to an open, inclusive and honest approach to a project that relies heavily on public financing. It's little wonder the public confidence in government is as low as it has become. No ethics, no morals, pay to play and illegal behavior by many is leading to the ruin of America.

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