Ethan Regner

Pa. turnpike hiring ex-FBI chief to clean up image

First Posted: 1/21/2014 A majority of Luzerne County Council members are expected to approve a tax-break extension Tuesday night for a proposed Hanover Township distribution center that could employ 800, though the company representative seeking the break endured lengthy grilling last week.Texas-based developer Trammell Crow Co. asked council to extend Keystone Opportunity Zone, or KOZ, exemption from real estate taxes through 2024 on two parcels owned by the nonprofit Earth Conservancy. KOZ status on the tracts was set to expire in 2017 and 2020.The Hanover Area School Board and Hanover Township Commissioners already have approved the extensions.Trammell Crow representative Andrew Mele told council last week his company was interested in buying the land in 2009 but had to shelve the proposal due to the economy. The scale of the project was expanded to include three buildings on 170 acres, and these delays narrowed the window left for the KOZ, he said.Mele, a principal with the company, said the project won&#8217;t happen without the tax-break extension. He cited 23 other suitable sites for a similar project in Pennsylvania and said 20 have tax breaks, with the remaining three expected to follow suit. Additional options are expected to surface because municipalities throughout the state are increasingly granting tax-break status to land they want developed, he said.
He projected the project will create 1,100 temporary construction jobs, 800 permanent jobs in the distribution center and 400 ancillary jobs in outside businesses servicing the workers and center. These 1,200 jobs will total an estimated $44 million in wages annually, he said.
He predicted the distribution center jobs on average will pay more than $30,000 a year, though he said his company has not yet identified a tenant.
Trammell Crow also will spend $1 million rebuilding a 2,000-foot stretch of county-owned New Commerce Boulevard and redoing the intersection of state Route 29 and Main Street to make it safer and reduce congestion.
Councilman Jim Bobeck asked why the extension must be approved now.
Mele said his company must complete its financing package, and investors won&#8217;t agree unless they&#8217;re assured the KOZ status is guaranteed through 2024.
Trammel Crow expects to spend about $6 million over the next six months, largely initiating the road repairs and moving about a million cubic yards of dirt to make the building pad level.
It could take up to a year to negotiate an agreement with a company to occupy the center and another year to 18 months to build the facility, which means the existing KOZ would expire too soon after the center is up and running, he said. Taxing bodies are not giving up taxes they receive now because Earth Conservancy is exempt, he said.
&#8220;If we don&#8217;t move ahead, the site will stay owned by a nonprofit,&#8221; he said.
Councilwoman Kathy Dobash said she works in a warehouse and questioned why the site isn&#8217;t marketed for another type of higher-paying jobs. She also said Trammel Crow&#8217;s projection the tenant will provide higher-than-average pay for the area isn&#8217;t guaranteed because there is no firm tenant.
Mele said a warehouse is the &#8220;highest and best use&#8221; of the land because there isn&#8217;t demand to fill the large space with smaller buildings. The jobs created would be &#8220;worthwhile&#8221; and improve lives, he said.
Councilman Rick Williams said the job creation is &#8220;exciting.&#8221; KOZs are probably not in the best interest of all taxpayers but have become necessary to stay competitive among others that provide breaks, he said.
The economy has made tax breaks a &#8220;must-have,&#8221; and the Hanover Township site is worthy of exemption because job-generating development will sit on former mine-scarred land, Mele said.
Councilman Stephen A. Urban said he also works in a warehouse, which is &#8220;hard work&#8221; with high turnover, and he questioned why the site can&#8217;t attract office complexes that pay more.
Philadelphia, the fifth-largest city in the country, had to offer an &#8220;enormous amount&#8221; of economic incentives to entice Comcast to build an office tower in center city and agree to construct a second office building, Mele said.
He pointed to other major companies operating distribution centers in the region and said major highways and population within a four-hour radius are a major draw.
&#8220;In this market cycle, that&#8217;s what&#8217;s most attractive about this particular geography,&#8221; Mele said.
Councilman Harry Haas questioned if the new tenant will &#8220;bolt&#8221; after the tax break expires, which has been a criticism associated with KOZs.
Mele said the development will cost close to $125 million, so his company has incentive to find a tenant who will stay put after 2024 so Trammel Crow enjoys the return on its investment.
The tenant also must spend $50 million to $75 million in material handling systems, racking and conveyors to quickly get products to customers, he said.
&#8220;This isn&#8217;t a 50,000-square-foot office building where they can pick up and move the phones to North Carolina or wherever,&#8221; he said.
If the tenant left, Trammel Crow would have an asset to market to another tenant, he said. Companies also may be interested in buying the building, which would demonstrate interest in staying here for the long haul, he said.
&#8220;Once they settle in and move somewhere and make that investment, they&#8217;re not picking up and leaving to save half a million a year in real estate taxes,&#8221; he said.
The project also would put a &#8220;new front door&#8221; on the &#8220;very tired, older&#8221; Hanover Industrial Estates, he said.
&#8220;We&#8217;ve breathed some life into a park that&#8217;s really seen better days,&#8221; Mele said.

KOZ tax break extension looks likely