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Health & Fitness

Will East Penn School District Be Caught Holding the Bag Alone for Hamilton Crossings TIF?

People are wondering whether or not the proposed Costco and Hamilton Crossings shopping center will be built along the US222 bypass in Lower Macungie Township.   I think it will.

From the onset, most media outlets have implied (as did lehighvalleylive.com) that the “developers must get the OK from Lower Macungie, East Penn and Lehigh County”.  This conventional wisdom has been fueled by statements from the developers after the Lehigh County Commissioners turned down the TIF (Tax Increment Financing) that the project could not continue without the TIF and that the developers have not really considered a TIF under a different structure. 

Even recently, some have extrapolated this to mean that the  ”county, East Penn School Board and the Lower Macungie Commissioners would have to approve of the TIF for it to go into effect”.  Since Lehigh County has rejected its TIF resolution, does that mean that the TIF and Hamilton Crossings are both dead?  I don’t think so, because almost all of the evidence so far shows that they both will survive.

It is true that the TIF plan published by the Lehigh County Industrial Development Authority conceives a plan where all three governments would participate.  But there’s nothing in the plan that actually requires that.  Nor is there anything in the TIF Act which requires that all three of them participate. 

Specifically, paragraph 5(a)7 of the TIF Act states that  “the governing body of a municipality or school district that levies property taxes within the boundaries of a proposed tax increment district shall, by ordinance or resolution, agree to participate or opt not to participate in whole or in part in the tax increment district.”

It’s clear from this language that any one of the potentially participating governments for the Hamilton Crossings TIF could approve a different rate of participation from the originally proposed  50% to almost  any other rate  like 25% or even 0% without affecting the participation of the others!

So now that the county’s participation is doubtful, could East Penn withdraw from the TIF?  Many TIF resolutions do contain contingencies that one governing body’s approval would be dependent on all of the others’.  A Harrisburg TIF resolution said “The School District's participation in the Project Plan is conditioned upon a pledge by the County and the Township of their respective incremental real property taxes for the TIF District”. 

But, EPSD's May 13 TIF resolution doesn’t contain any similar language to make its approval contingent on the others'.  So, like it or not, EPSD may be stuck with the TIF.  If the school board tried to withdraw, the developer might even take legal action against them for the costs that they expended between EPSD’s approval of the TIF and their hypothesized withdrawal. 

In reality, EPSD has little incentive to want to withdraw from the TIF since nothing has really changed for them.   Wise or not, if the TIF was good enough for EPSD before the County’s rejection, it still would be now, since the economics for district haven’t changed.

So now there is a question whether the TIF will move forward, even without Lehigh County’s participation.  I think it will.  It’s doubtful that the developers will  ever withdraw from their lucrative project.  They have already achieved most of their purpose with the TIF, having gained approval from EPSD that would yield them about $5.5 million of the total of $7 million bonds for funding improvements to their project’s environs.  Of course, they'd be foolish not to try for the other $1.5 million that would be gained from the County's participation, no matter how unlikely that was.  You can't get what you don't ask for.

This summer, WFMZ reported  that “(Lower Macungie) Township officials assume the school district won’t back out even if it is the only local government body financially supporting the project through the TIF.” For many months since the county’s rejecting the TIF, the developers have continued working on many details for the project and they recently have received sign-related variances from the township's Zoning Hearing Board  according to the Morning Call.  It would be silly for them to throw good money and resources on this project if they weren’t going to pursue it because of the loss of only 1% of their funding.  Besides, why would they leave $5.5 million on the table?

The only question remaining is whether or not Lehigh County will approve the TIF.  Things could change, but there’s little evidence of any real incentive for the Commissioners to change their position and it’s doubtful that the developer would abandon the project they've worked so hard on over so little.  Thus, the East Penn School District may be caught holding the bag as the only participant diverting its real estate tax revenue to the Tax Increment Financing bonds!

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