How to inspire new investment in our city
Harrisburg has its first balanced budget in many years. We sacrificed a lot to achieve this. We monetized assets—including our parking garages and incinerator—increased taxes, fees and fines.
According to the Harrisburg Strong Plan’s projections, the city’s budget will only remain balanced for another two years. That leads one of to two conclusions—we have to spend less or we need to make more money. I think it is fair to state we can’t afford to cut our services further than they are today. In fact, we need to increase spending to fix sinkholes, repair blown streetlights, and hire more public safety officers.
Therefore, the question is, How do we make more money?
The simple solution is raise taxes.
But a better solution is to expand our tax base.
This is what some townships surrounding Harrisburg have done. One example—Hampden Township—has even managed to lower the tax rate over the last 35 years because of an increased tax base. The township benefited from population trends of moving to the suburbs, a top notch school district, reliable public services, and low taxes.
How can we make Harrisburg more attractive to live?
The answer is we do everything we can do to get more people to move into the city. Harrisburg population declined for 50 years, but from 2000-2010 the city saw its first population increase of 1.2%. It is a good start, but we need more. Many in the city are convinced that tax abatements made the increase happen and are needed to make it continue.
Abatement. It is a word that brings strong emotions and heated debate in the city. It should. Harrisburg had a long standing tax abatement program that expired at the end of 2010. There was attempt to create a 7 year abatement in 2012; however, Dauphin County rejected the proposal as unlawful. The issue of abatement was a key argument in last year’s mayoral elections. Both Fall candidates supported tax abatements. Eric Papenfuse advocated a city-wide abatement program while challenger Dan Miller favored targeting our most blighted neighborhoods.
Proponents contend that tax incentives expand the city’s tax base and keep tax rates down. They also help focus redevelopment efforts on the vacant and blighted properties.
Opponents argue that it gives away needless tax dollars that the city could ill afford. Some argue that it rewards developers while hurting residents.
When improvements are made to a property, it opens a property to reassessment. Typically in the City of Harrisburg this is done when a property that has been condemned is renovated or a new construction project is completed.
Tax abatement is a scheduled series of tax forgiveness on a year by year basis. Historically the first several years (about 5) were 100% forgiven. This was followed by a 20% decrease yearly until the homeowner was paying their full assessed after improved value.
Local Economic Revitalization Tax Act (LERTA) is the law that allows tax abatements to exist in Pennsylvania and lays out how the differing taxing authorities must work together when an abatement program exists. LERTA allows municipalities to enact 5 or 10 year tax abatement programs. Hence, why the 2012 city ordinance was never enacted. LERTA is intended to be applied to property located in deteriorated neighborhoods. All three local property taxing authorities—City of Harrisburg, Harrisburg School District and Dauphin County—must agree to an abatement program to have full effect of abatement.
It’s important to state that an abatement does not mean that homeowners do not pay property tax. It means that initially they do not pay for the improvements made to a property. If you begin to look at things in this light ,many of the perceived negatives of abatement start to disappear.
This big question is, though, is abatement needed to get people to move into the city?
Does abatement make people move here?
If you believe the answer to the second question is yes, then you should not worry about the first.
I think the easiest way to determine if abatement will cause people to move into the city is to answer the question does it help create homes people want to live in?
Major developers in the city claim that the economics don’t work without abatement. I am sure this is true if you are trying to rehab a large project such as Lux at the corner of N3rd and State Streets, the COBA Building across from the Broad Street Market, or another teardown and rebuild type project.
In a Central Penn Business Journal article, Lux developer Dan Deitchman said, “I can tell you there is going to be a slowdown,” said Deitchman, who had just two projects under way to start the year. “If there was a 10-year abatement in place, we would already been planning our next two, three, four projects.”
Abatement brings new properties into the market. If some houses would be built without abatement, what is the harm if abatement drives a few extra? Without new housing stock there is a lack of move-in ready houses to purchase in the city. The city cannot budget future construction into projected revenues. With or without abatement, growth will increase future revenue, but it is time for City Hall to send a message that it is listening and are willing to step up to provide the leadership needed to lead the city back to prosperity.