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Allentown seeks KOZ approval for 2 old factories

By Randy Kraft, WFMZ.com Reporter, RKraft@wfmz.com
Published On: Jul 11 2013 08:40:32 AM CDT
Updated On: Jul 11 2013 12:41:42 PM CDT
Adelaide Mill

Randy Kraft/69News

Former Adelaide Mill

ALLENTOWN, Pa. -

Allentown officials hope to spur the economic redevelopment of two old landmark factories in the city by designating them part of a Keystone Opportunity Zone --KOZ.

They are the former Allentown Metal Works, which covers more than 17 acres just above Little Lehigh Creek at 606 S. 10th St. and Adelaide Mill at 333 Court St. Formerly the home of Phoenix Clothes, it is just off Hamilton Street and across N. Race Street from the city’s bus terminal.

KOZ properties that are redeveloped do not have to pay any local or state taxes for 10 years. That gives developers a major financial incentive to invest in properties that otherwise might remain vacant and deteriorating indefinitely.

Pennsylvania’s KOZ program is designed to improve long-neglected properties, create jobs and ultimately increase tax revenues, improving the financial health of the community.

All three local taxing bodies -- Allentown, Allentown School District and Lehigh County – must approving giving the two city properties a KOZ designation.

Lehigh County commissioners could be the deal-breakers. Last September, they rejected a KOZ for the S.10th Street property by a vote of 6-2.

At that time, the site was privately owned by a New York City company that owed back taxes. But in April, it was purchased for $500,000 by the Allentown Commercial and Industrial Development Authority, which takes the property off the tax rolls. As part of that sale, more than $280,000 in back taxes were paid, said Michael Hefele, Allentown’s planning director.

Allentown City Council is expected to act on the KOZs during its next meeting at 7 p.m. Wednesday. Last night, after Hefele made a presentation, council’s community and economic development committee recommended to the full council that both properties be designated KOZs.

Allentown School Board voted to approve the S.10th Street property as a KOZ at its June 27 meeting, but with no discussion or even any mention that it was voting on that issue.

The school board is expected to approve the Court Street property at its July 25 meeting. Hefele said it delayed approving that property because it wanted more information about its proposed reuse.

Unlike the former Metal Works, the Adelaide Mill property is privately owned and does generate tax revenue for the city, county and school district, which they will have to agree to give up for a decade. Hefele said annual real estate taxes from that property now total $28,800, of which the city gets less than $6,000.

A first reading on an ordinance approving both KOZ sites should be on the agenda of the July 24 county commissioners meeting, with final action anticipated Aug. 14.
Many of the nine county commissioners philosophically oppose government subsidizing private enterprise through tax breaks, as demonstrated by their recent 6-3 rejection of tax increment financing for the proposed Hamilton Crossings shopping center in Lower Macungie Township.

Some commissioners also feel giving a property a KOZ designation unfairly increases its value.

The city must submit its two approved KOZ sites to the state by October.

City officials hope the S. 10th Street site, which has rail access,

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will become part of a revitalized industrial corridor along the Little Lehigh, attracting new businesses and creating more family-sustaining jobs for Allentown residents.

The existing complex of buildings on that site may have to be torn down and replaced with new structures for future industrial and manufacturing uses.

The city will study how the S. 10th Street site might best be reindustrialized, said Scott Unger, executive director of the Allentown Economic Development Corporation.

He said the city also is looking at “potential environmental issues” on the site, which was in industrial use for more than 100 years. He said remediation of environmental problems may be necessary so it will be acceptable for future manufacturing use.

Beyond that, said Unger, ACIDA has several options: “Whether we build-to-suit, partner with a private developer, sell it, develop it partially and lease it, subdivide it for multiple users or use it as a site for one large user – that’s yet to be determined.”

He said ACIDA does not yet have a prospective user. “ACIDA and AEDC sometimes act as the developer of last resort.”

Adelaide Mill was built in 1881, according to a date on a peak of the huge brick building. City officials consider it both historically significant and a future focal point of a revitalized Allentown, because it stands between Neighborhood Improvement Zone redevelopment underway uptown on Hamilton Street and proposed NIZ riverfront redevelopment along the west bank of the Lehigh River.

Developer Borko Milosev has an agreement of sale to acquire the Adelaide building, according to city officials. It has about 200,000 square feet of usable space. He proposes converting it into a residential building, with commercial uses on the ground floor.

A presentation about the proposed KOZs was made to county commissioners in June.

If the KOZ properties are in such prime locations, Commissioner Scott Ott questioned, why they can’t be developed unless they get special tax exemptions?

“If it’s really such a great location – in the heart of some terrific corridor -- why is that we people in government are the only ones that see that?” asked Ott, who is the Republican candidate for county executive.

Responded Todd Collins, Allentown’s business development manager: “The opportunity is to continue to build upon success --success upon success. The opportunity to create incentives just helps the development process that much more.”

Other properties in Lehigh County may meet the criteria to become KOZs, but the two Allentown sites “are the most significant and will have the most impact,” explained Cindy Feinberg, the county’s director of community and economic development.

With the cooperation of the school district and county, Allentown successfully participated in the KOZ program in 1998, 2001, 2003 and 2009.

Its KOZ “success stories” include the Plaza at PPL Center, Butz Corporate Center, the Center Square Building, Allentown Brew Works, Townes at Trexler Square and Bridgeworks by the Creek. The KOZ designation has expired on those sites, so the city, school district and county again are receiving taxes from them.