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Borough Council Approves Tax Assistance Program for Redeveloping Older Downtown Buildings

by on May 07, 2019 10:37 AM

State College Borough Council on Monday approved a tax abatement program aimed at revitalizing historic properties in the downtown.

The Local Economic Revitalization Tax Assistance (LERTA) ordinance will apply a graduated increase on tax payments for the value of improvements made to about two dozen aging buildings. The property owner would continue to pay taxes on the assessed value of the building before rehabilitation, but would have a phased implementation of taxes on the increased value created by the improvements, adding 10 percent per year for 10 years.

It can only be applied for commercial use, not residential, and a minimum of $75,000 in improvements will be required to be eligible for the LERTA, which has been available to local taxing authorities in Pennsylvania since 1977 to help revitalize aging buildings.

Borough officials have said the aim of enacting the LERTA is to incentivize adaptive reuse of historic properties instead of demolition and rebuilding.

Council President Evan Myers said on Monday that the LERTA helps achieves goals in the borough's strategic plan by limiting greater housing density, allowing more space for commercial properties and preserving historic structures. He also clarified that the ordinance is not reducing the tax base on commercial properties.

"There is no tax forgiveness involved in this ordinance whatsoever," he said. "What this does is freeze the tax floor where it is. It doesn’t allow for the properties that are so declared to have a reduction of their taxes or a reduction of their assessed value, which in fact a building that is not renovated could have as it deteriorates. If there is an increase in value, it just puts that value in over a period of time but does not result in any loss of tax."

The LERTA district includes 25 downtown core properties listed in the 1982 Centre Region Planning Commission report on "Historic Resources of the Centre Region."

Two of those properties — the State College Area School District Nittany Avenue Building and Penn State's James Building — are already scheduled to be demolished this summer so will not be eligible.

Another property that will qualify is the 86-year-old Glennland Building at 205 E. Beaver Ave., currently home to apartments and offices.Scholar Hotel Group — a subsidiary of Ardmore-based Real Estate Capital Management LLC, which developed the Fraser Centre in State College — has submitted plans to convert the Glennland to a 72-room boutique hotel with professional offices in the basement area.

The Glennland was the initial driver of the ordinance, with Gary Brandeis, president and founder of Real Estate Capital Management and Scholar Hotels, approaching the borough in late 2018 about a potential LERTA because of the risk involved with redeveloping historic properties such as the Glennland. An offer by another company last year to buy the Glennland and convert it to a hotel fell through after the developer determined the renovation costs would be too high.

Borough council member Theresa Lafer said that she has long heard from residents who want to maintain the ambience of the borough and that incentivizing preservation of older buildings is a way to do that.

"We require that anything that is repaired is brought up to code, so when we ask somebody take a 60- or 80- or 90-year-old building and bring it up to code we are asking for a massive amount of investment," she said. "I think it is worth it in the case of many of the older structures in our community. I think this is an extremely good way for the community as a whole to work together to maintain the things we value.

"I do hope those people who are concerned about short-term economic goals look at it as part of the larger maintenance of this community and all the things we most value about it."

Also among the properties included in the proposed LERTA District is State College Area School District's Fairmount Building, long ago the home of State College High School but now housing the Delta Program. If the district decides to sell the building after Delta moves to the new high school North Building on Westerly Parkway next school year, the LERTA would then be available to encourage a buyer to redevelop it commercially.

Some properties, like several fraternity houses on East Beaver Avenue, currently have residential uses and would need to be converted to commercial uses for LERTA eligibility. Many others currently have mixed uses, like the Glennland or 123-127 W. Beaver Ave., which houses Saint's Cafe and Penn Pide on the first floor and apartments on the upper floors. Only improvements made to the commercial portions or conversion of the residential portion to commercial use are eligible.

The properties are mostly included in an area bounded by College Avenue, north of Beaver Avenue, and between South Burrowes Street and Locust Lane, along with several properties south of Beaver Avenue between Fraser Street and South Allen Street and north of West Fairmont Avenue.

The borough received correspondence that it is unfair to give the tax abatement solely to designated commercial properties, but Myers said tax incentives are regularly provided at all levels of government to achieve specific goals, including tax exempt status for nonprofits, research and development credits for businesses and tax depreciation for rental properties.

"Some folks have talked about that this is unfair, that it helps some people and hurts others. I’m not sure who it hurts but it does in fact help revitalize these buildings," Myers said. "Tax policy is used to implement public policy and that’s what we’re doing here."

The LERTA is available for applications within five years, so any property owner that is granted the assistance through May 2024 will be able to receive the 10-year graduated tax application on improvements to the property. Council also will have the option of extending the application time for periods up to five years.

A building also cannot have had its assessed value appealed or lowered in the last two years and cannot be demolished. Building facades also will not be substantially altered.

For the most significant incentive possible, the borough has asked State College Area School District and Centre County to consider adopting a LERTA as well. Both the State College Area School Board and Centre County Board of Commissioners are expected to consider LERTA measures at upcoming meetings.

The new LERTA District and eligible buildings in downtown State College. Image via State College Borough

Geoff Rushton is managing editor for Contact him at [email protected] or find him on Twitter at @geoffrushton.
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