State College Considers Temporary Tax Break for Redevelopment of Older Downtown Buildings
State College Borough Council is considering a 10-year tax abatement program for improvements made to redevelop the Glennland Building and 19 other aging or deteriorating properties in the downtown.
Council voted unanimously on Monday night to schedule a public hearing later this month on establishing a Local Economic Revitalization Tax Assistance (LERTA) ordinance, which would apply a graduated increase on tax payments for the value of improvements made to 20 designated 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.
It can only be applied for commercial use, not residential.
"It’s important to note this does not reduce any tax," Council President Evan Myers said. "I think it does a lot of really good things for the community. It works to preserve and protect historic properties. It adds into the borough’s strategic goal for diversity of downtown of both residents and use. It helps us build a stronger and more vibrant downtown by not turning land over to more dense housing and that vibrant, diverse downtown helps keep the neighborhoods nearby strong."
To be eligible for LERTA, a building cannot be demolished, nor can the assessed value of the property have been appealed or lowered in the last two years.
LERTA has been available to local taxing authorities in Pennsylvania since 1977 to help revitalize aging buildings.
"The whole focus of this program would be to incentivize adaptive reuse and rehabilitation of historic properties, not to provide a situation that is incentivizing teardown and rebuild of existing structures downtown," said Ed LeClear, borough planning director. "It is commonly used for that in many other communities and we believe it best serves the borough if we are focusing on encouraging adaptive reuse as opposed to encouraging additional new development. We are getting enough of that from the market. We do not need to incentivize that at this point."
Building owners that apply and are approved for the LERTA would have the property assessed before and after improvements. For the amount the assessed value increased, the additional property tax would be abated 100 percent in the first year, then phased in 10 percent each year. The LERTA would only be available for applications within five years of the ordinance being adopted.
For the most significant incentive possible, the borough also will ask State College Area School District and Centre County to adopt a LERTA as well.
"It is not legally required for all three, but as you can understand from a taxation standpoint the biggest benefit comes from the abatement of the school district taxes," LeClear said.
As drafted, the LERTA district would include 22 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 would not be eligible.
One property that will be eligible, and which is responsible for the LERTA proposal for State College, is the Glennland Building, 205 E. Beaver Ave. 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 conference, meeting and co-working spaces. Current professional offices on the lower level accessible from Pugh Street will remain, and some first floor offices will relocate to the lower level, according to Gary Brandeis, president and founder of Real Estate Capital Management and Scholar Hotels.
The exterior of the building will remain mostly unchanged.
Brandeis said he approached borough staff in late 2018 about a potential LERTA because of the risk involved with redeveloping historic properties such as the Glennland, which was built in 1933.
"When we built the Fraser Centre, once we were done excavating the site, there wasn’t a lot of natural risk in the development of the vertical side of the building. We were building it brand new," he said. "In this case, in redeveloping a historic building, a lot of the risk is unknown until we actually get into the building and start the actual process. That means interior demolition, looking at the inside of the façade, looking under the roof and the parapet and really understanding the true viability of the redevelopment.
[The LERTA] helps a developer from the financial side manage that risk. The LERTA program gives us the opportunity to take on those additional risks."
Asked by Councilwoman Janet Engeman if the swimming pool -- which was the first indoor pool in the county but was removed in the 1967 -- would be restored, Brandies said it would not because of the cost and practicality. But, he added, the building's history would be honored in interior public spaces "on a very large scale."
Also among the properties included in the proposed LERTA District is SCASD'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, LeCLear said.
The rest of the proposed eligible properties are located within the downtown core bordered by College Avenue and Beaver Avenue, between Fraser Street and McAllister Street.
LeClear said borough staff have worked with 16 Pennsylvania municipalities to learn about how they have implemented and used the LERTA.
After a public hearing at a date to be determined this month, council is expected to vote on the ordinance on May 6. Following that the State College Area School Board and Centre County Commissioners are expected to consider similar measures.