East Penn Quandry - Deal or No Deal for Hamilton Crossings TIF?

The Hamilton Crossings project will have many positive and negative impacts on the surrounding community.  This series will look at some of the financial impacts of the project and the associated TIF (tax increment financing) and will leave important quality of life issues to others.

The $140 million Hamilton Crossings project is counting on about $8.5 million of funding from Tax Increment Financing bonds plus another $10 million of grants and loans from the Commonwealth, including money for transportation improvements.

On Monday, May 13, the East Penn school board is expected to consider their requested involvement in this financing, in which half of the increased property tax revenues (about $11 million of the $22 million additional increment) over the next twenty years) would be directed to an authority which would pay back the TIF bonds.

The school district will not be on the hook for any of the payments on the bond, except that the terms of the revenue split or diversion could continue beyond twenty year until the bonds are fully paid off.

The PA TIF act allows this alternative financing to help defray a portion of development costs for blighted redevelopment areas by using new (incremental) tax revenues.  Because of the land’s previous use as a mine, a determination was made that the abandoned ground is blighted and economically undesirable because it needs remediation with additional cost.

Like any project of this scope, the developers also will be making many improvements to the surrounding roads and infrastructure.  LMT zoners and planners will be sure to demand many measures to reduce the impact on the surrounding community and also resolve other existing problems.

Specifics can be found in the interagency TIF committee report at: http://www.eastpennsd.org/progfiles/newsimages//Hamilton%20Crossings%20TIF%20Plan%204-2013.pdf.

Most important to many East Penn taxpayers is the impact of the project and the TIF on their individual property tax.  If things go according to plan, Lehigh County’s additional tax revenue will increase by about 0.28%, but half of that will go to the authority that will pay the bond holders.  For a property in Lehigh County assessed at $200,000, the net effect would be a net property tax reduction of about $1, but if the TIF didn’t exist, and the project was built anyway, it would save twice as much, or $2.

The impact for East Penn taxpayers would be greater.  EPSD’s total tax assessment would increase by about 1.7%, but again, for twenty years, half of that new revenue would go to the authority to pay the bonds.  For the same $200,000 assessed property, the net property tax reduction would be about $28, but if the TIF didn’t exist, and the project was built anyway, it would save the property owner twice as much, or $56.

Realistically, taxes probably won’t go down, but the project would mitigate future increases or allow added services, which both are economic benefits that are just as valuable.

The big question is if the East Penn school board should accept getting only half the revenue from the new property taxes or should it demand more, at the risk of losing it all?  It kind of reminds you of a popular TV show from a few years ago.  Some additional information and thoughts about the choice the school board will face Monday night will be in Part 2.