Pennsylvania’s Neighborhood Improvement Zones Paying Dividends

Jon Hurdle writes of the large-scale investments taking place in Allentown, where state tax incentive program is spurring the construction of 600,000 square feet of commercial and retail space, including a hockey arena and a hotel. The Neighborhood Improvement Zone (NIZ) designation allows “revenues from tenants’ tax bills to be used to pay down some of the debt incurred during construction,” according to Hurdle’s report.

The reinvestment of the tax revenue allows tenants to charge lower rents, which makes it easier to attract businesses to the city. For instance, “National Penn Bancshares, one of the development’s anchor tenants, will be paying 20 to 25 percent below the suburban Class A market rent…”

There are few stipulations about the types of tax revenues that are immediately reinvested in the NIZ: “eligible tax revenues from companies in the zone include those from corporate net income tax, personal income tax and business privilege tax but not real estate tax, in order to protect school district funding.”

Other Pennsylvania towns have also been designated with a similar, but updated version of the Neighborhood Improvement Zone: “Bethlehem and Lancaster, have recently been designated as City Reinvestment and Improvement Zones (‘CRIZ’) under a more recent law that is similar to the NIZ but restricts the tax benefits to revenues from out-of-state companies or, in the case of companies moving from elsewhere in Pennsylvania, to additional revenues that are generated in the new location.”