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Hamilton Crossings shopping center developers address issues

Published On: Feb 11 2014 09:03:34 PM CST
Updated On: Feb 12 2014 10:53:47 AM CST

Developers of a proposed shopping center in Lower Macungie Township laid out their plan Tuesday and what is needed to make it a done deal.

ALLENTOWN, Pa. -

A dozen misconceptions about the controversial Hamilton Crossings shopping center project were addressed by developers Tim Harrison and Jeremy Fogel during a community meeting at Muhlenberg College Tuesday night.

The long-delayed $140 million project, which will include Costco, Target and Whole Foods stores as its anchors, is planned on 63 acres in Lower Macungie Township.

The meeting was called by Lehigh County Executive Thomas Muller, who hopes to persuade the county’s commissioners to approve a tax increment financing plan—TIF—for the project, although they rejected that plan by a vote of 6-3 last June.

All nine county commissioners were invited to the Hamilton Crossings meeting, but none of them attended.

“I’m sorry some of them didn’t come, but I’m not going to read anything into it,” said the county executive after the meeting.

While Muller said there is a new board of county commissioners since that vote against the TIF in June, there is only one new person among the nine commissioners, Democrat Geoff Brace.

“If the interest is there,” Muller announced he plans to take the Hamilton Crossings TIF back to the county commissioners for reconsideration “probably early next month.”

Throughout the meeting, Fogel and Harrison repeatedly said what they’ve been saying all along, that without an approved TIF to help pay for the project, Hamilton Crossings won’t be built.

“Our own research shows us that the vast majority of the residents of Lehigh County want this project,” declared Harrison. “They’re excited about these tenants coming. They’re excited about the jobs, the economic benefits, the town center we’re offering the township. They want to see it happen.”

In answer to a resident’s question about the validity of that claim, Harrison said a scientific poll of 500 “carefully selected” county residents was done by Harrisburg-based Susquehanna Research. He promised to post those findings on the Hamilton Crossings Facebook page on Wednesday.

Muller said the developers’ Power Point presentation given at the meeting will be posted on the county’s web site as soon as Wednesday.

One revelation during the meeting is that no towering pylon signs will be erected at Hamilton Crossings if it is built.

A bigger revelation was that Harrison said Hamilton Crossings will not be exactly like the upscale Promenade shopping center in Upper Saucon Township.

“This is a big box shopping center,” he said. “It’s got a Costco with 150,000 square feet and a Target with 135,000 square feet. You don’t see stores of that size at the Promenade. We can’t accommodate that kind of layout.”

Fogel later added that, with larger stores, Hamilton Crossings also needs larger parking lots.

But Harrison stressed Hamilton Crossings will have quality stores, walking trails, bike lanes, public gathering areas, high levels of landscaping and enhanced architecture aimed at giving it more variety than any run-of-the-mill shopping center.

He said artists’ renderings depicting sections of the shopping center that he projected on two screens are not fictional—“this is what we’re going to do.” He added turning those renderings into reality has been a required condition of township approvals that the shopping center has received so far.

Harrison said it will be a first-class, aesthetically-pleasing shopping center, not a Walmart or like the shopping center facing Route 22 off Airport Road just north of Allentown.

Hamilton Crossings 101

The first half of the nearly two-hour meeting was like a Hamilton Crossings 101 course, being taught by Harrison and Fogel to more than 100 people.

The developers gave a detailed overview of Hamilton Crossings, including its economic benefits and challenges.

One of the biggest challenges is mine wash “muck” from 19th-century iron ore mining that is in holes up to 28 feet deep on the property, which is on both sides of Krocks Road between Route 222 and Hamilton Boulevard.

Harrison said 50,000 dump truck loads of that mine wash must be removed from the ground, treated and dried, then returned to the old iron pits. He said until that is done, no buildings or even parking lots can be built on the site.

He said that remediation is adding $12.5 million to the project cost, but TIF money will not be used for that part of the project.

TIF

If a TIF is approved for Hamilton Crossings, the county, township and East Penn School District will give up 50 percent of increased property taxes generated by businesses in the shopping center for 20 years.

The TIF will give the developers $7 million, which can be used only to help pay for public infrastructure improvements.

Harrison said the project has been in the works for more than five years.

Fogel said trying to get the TIF has delayed it for close to a year and has “risked the entire project.” He said no developer would spend so much time and effort to try to get a TIF if it wasn’t critical to the financial success of the project.

Harrison said Hamilton Crossings will bring $132,000 in new tax revenue to the county every year, and twice as much annually after 20 years.

He said East Penn School District will get over $571,000 annually for the first 20 years, then double that.

“This is an investment of tax money that doesn’t exist today,” said Harrison. “It’s not like the county is getting this money today. It’s not going to get this money unless the project is built.”

Harrison said the developers’ rate of return on Hamilton Crossings will be lower than any of the projects they’ve done. “But we’ve sunk so much into it. It’s really hard for us to walk away. And we’ve got our reputations on the line.”

The 12 misconceptions

Here are the 12 misconceptions the developers addressed about their project:

1. The TIF is a tax break.

Fogel said all businesses in the shopping center will pay the full property tax, just as if there is no TIF.

He said the only difference is when the tax is collected, 50 percent of it will be allocated to help pay for the project’s infrastructure improvements and the other 50 percent will go to the county, township and school district.

2. The project should be able to pay for itself without a TIF.

Harrison said about two-thirds of the project’s infrastructure costs will improve existing problems that may never be fixed if the shopping center isn’t built.

They include road, utility and flood control improvements. He said those costs total $10.3 million, $3.3 million less than the $7 million developers would get from the TIF to help pay for those improvements.

3. Without the TIF, the shopping center’s tenants will just find some other location in the Lehigh Valley.

Fogel said the Lower Macungie property is the tenants’ “first and only” location in the Lehigh Valley. Harrison said if Hamilton Crossings falls through, the key anchor stores won’t be built in Whitehall Township or in Northampton County, but in other states that are competing to get them.

4. The TIF will cause our taxes to increase.

“The truth is the TIF cannot cause a tax increase,” said Fogel. “The TIF is funded from the projected increase in real estate taxes from our project and from our project only.”

5. The TIF would let governments play favorites.

“TIFs are used across the whole country,” said Fogel. “They are available to any project that thinks they are appropriate.”

He said the school district, township and county don’t care who the developers are but just want the project developed according to the plans.

6. Lower Macungie Township has “no skin in the game” because it doesn’t have a real estate tax.

Harrison noted the township adopted a real estate tax for 2014. He also said the township is prepared to invest $3 million in the project. “Lower Macungie has plenty of skin in the game,” he said.

7. TIF financing is for blighted urban areas, not for affluent suburban areas like Lower Macungie.

Harrison said Pennsylvania’s tax increment financing law does not require that TIF financing can only be used in blighted urban areas.

He said the law stipulates that the planning commission of a municipality where the property is located must find that one of six criteria exists.

“One of the criteria is economically or socially undesirable land use.” He said on Nov. 13, 2012, Lower Macungie’s planning commission “found that this barren property -- on which nothing will grow, on which nothing can be built, which generates $7,000 of property tax from 63 acres – constitutes an economically or socially undesirable land use.”

He added there was a 30-day appeal period to the planning commission’s finding, but no one appealed because no one disagreed.

8. The TIF unjustly enriches the landowner.

The landowner, not identified by Harrison Tuesday night, is the Allentown Catholic Diocese.

He said when the developers presented the landowner with a phone book-size binder detailing problems on the property and said “we need help,” the landowner reduced the price of the land -- a lot.

He added the landowner is getting less than half of what a previous developer once offered for the property “and they’re getting something like 40 percent less than we originally agreed to pay. We’re talking about millions of dollars of contribution the landowner has made.”

9. The TIF isn’t needed; it’s too small a piece of the overall budget.

Fogel said Target and Costco are building their own stores but that’s included in the $140 million project cost. He said the development team’s share of the total cost is $66 million.

The $7 million the developers would get from the TIF constitutes nearly 11 percent of that $66 million, he said. “That $7 million is a very significant amount of money in the context of our budget and critical in our ability to finance the project.”

10. The developer will never walk away, even if there is no TIF.

Fogel did not directly refute that misconception but words on the screen stated: “Without a TIF, this project will fail for lack of financing.”

He said the developers do not want to walk away. “If we didn’t need this TIF to make this project work, the last thing we would do is spend the time to go get it. It’s critical to the project.”

11. The county has no dog in this hunt.

Said Harrison: “We have heard the argument that ‘why should Lehigh County invest in this project? Those are not county roads. Those are not county sewer pipes. Those are not county water pipes.’”

He said the county will benefit from $2.6 million in new tax revenue the project will generate over 20 years, plus new jobs, plus $11 million that will go to the school district, which educates the children of many county residents.

“Even if you thought that the TIF were of no benefit to the county, why not say yes just to help the school district, which sorely needs the help?”

12. Cedar Realty will develop the site without a TIF.

Last June, Bruce Schanzer, president and CEO of Cedar Realty Trust, which owns the nearby Trexler Mall and Trexlertown Plaza shopping centers along Hamilton Boulevard, told county commissioners that if they would vote against the TIF and the Hamilton Crossings developers would walk away, “Cedar Realty Trust would be happy to do this development without the TIF.”

Representatives of Cedar Realty have argued the TIF unfairly would subsidize Hamilton Crossings and harm their business. But Harrison said Cedar’s chief operating officer admitted they really don’t know the economics of the project.

He said Cedar also must abide by restrictive covenants that prohibit that company from developing another food store -- or any store that sells perishable groceries -- within a four-mile radius of its existing shopping centers.

Harrison said Cedar has taken no action to say it wants to buy and develop the property. “It’s really a competitor doing what competitors sometimes do, which is insulate themselves from the competition.”

Muller’s position

There was a brief skirmish between Muller and Atty. Jonathan Hugg, who represents Cedar Realty, during the question-and-answer period near the end of the meeting.

Hugg challenged the appropriateness of the county executive holding such a meeting. Muller said he would have held the meeting for county residents even if he did not support Hamilton Crossings.

Muller said he called the meeting because of two questions. He said county residents often ask him what’s happened to Hamilton Crossings. And some have questioned whether the project has changed and it’s now just another shopping center, which is “not what everybody expected.”

“This is informational,” said the county executive at the beginning of the meeting, but not “a pep rally for Hamilton Crossings.”

“I am in favor of the TIF and moving forward with Hamilton Crossings,” said Muller. “To me, this is about jobs. We still need jobs. We’re talking about 495 construction jobs and then 930 ongoing retail jobs-- something like 619 of them full-time.”

“The biggest criticism we’ve heard is that retail jobs aren’t great jobs,” said Fogel. “Costco’s average hourly raise is over $20 an hour. And Whole Foods’ average hourly wage is $15 an hour.” He said a full-time employee at either store will earn more than the median per capita wage in Lehigh County.

Three members of the East Penn School Board, which approved the TIF last year, attended the meeting in Muhlenberg's Moyer Hall.

In response to a resident’s question, Muller said there is no legal requirement that the entire TIF approval process must start over, beginning with the school board again approving it.

Three Lower Macungie commissioners, as well as township manager Bruce Fosselman, also attended.

Lower Macungie will get to vote on the TIF only if Lehigh County commissioners approve it. Three of the five township commissioners already formally are on the record in support of the project.

Also in the audience were former county Executive Matt Croslis and developer David Jaindl.