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Lancaster, Allentown: Tale of Two Improvement Zones

Allentown’s NIZ program may be the father of Lancaster’s CRIZ, but the family resemblance ends there.

Fri June 27, 2014 - Northeast Edition
Bernard Harris - Lancaster News

ALLENTOWN, Pa. (AP) In the center of this city’s downtown is a Civil War monument complete with a sailor, artilleryman, infantryman and a cavalry soldier.

It is very similar to the one in Lancaster’s Penn Square, but larger.

That’s fitting for a city with twice the population and twice the land area as Lancaster.

And for a city that has experienced proportionally larger swings of fortune.

Unlike Lancaster, Allentown hasn’t seen an influx of young, hip residents. Nor has it seen older empty-nesters move in. Or the growth of arts and entertainment venues.

What Allentown is seeing are cranes and construction workers.

The Lehigh Valley city, about 70 miles from Lancaster, is moving to stop a decades-long downward spiral.

At Center Square, a recently completed office building overlooks Allentown’s Soldiers & Sailors Monument. It now is the headquarters of National Penn Bank.

A nearby building will house the Lehigh Valley Health Network.

Across from the bank building, a new Marriott hotel is under construction.

The nucleus is another new structure, the PPL Center. The 8,500-seat hockey arena soon will be the home ice of the Lehigh Valley Phantoms, the minor league team of the Philadelphia Flyers.

That ice will be covered with seats for the first scheduled event, a concert by the rock band the Eagles on Sept. 12. Cher performs three days later.

And that’s just the beginning of the revitalization being fueled by Allentown’s Neighborhood Improvement Zone.

That program, passed by the state legislature in 2009, allows state tax revenue generated in the designated zone to be used for redevelopment.

The program provided Allentown with $50 million this year.

"We currently have about $400 million worth of development downtown that is funded and we have about $600 million in the planning stages," said Sara Hailstone, Allentown’s community and economic development director.

The Neighborhood Improvement Zone program — and the $1 billion in development — has not gone unnoticed.

Last year, the Legislature passed the City Revitalization & Improvement Zone law to help other cities. It is based on Allentown’s NIZ.

Lancaster and Bethlehem were the first cities selected for the new CRIZ program.

Important changes were made when rewriting the law. Unlike Allentown, Lancaster will not receive all revenue from most state taxes generated in the zone.

Under the CRIZ law, Lancaster will receive only the tax revenue that is more than the amount collected before the program began.

City officials are in the process of collecting tax data from businesses in the zone last year. The 2013 tax information will be used to establish a baseline.

While the eventual amount is expected to be far less than the NIZ revenue in Allentown, Lancaster’s application for the new program listed a potential $210 million in new projects.

But Lancaster is starting in a much better place.

The Allentown Parking Authority owns 3,000 parking spaces within two blocks of Center Square.

"We were at about 7 percent occupancy after 7 p.m.," Hailstone said.

There is no burgeoning arts scene or entertainment district.

Hailstone said she didn’t choose to live downtown when she took the post four years ago because there wasn’t a place to get coffee before 9 a.m. and only two restaurants were open later than 5 p.m.

The seeds of the redevelopment actually were sown about seven years ago.

At that time, hockey team owners Jim and Rob Brooks were looking for a new home for the Phantoms after demolition plans had been announced for Philadelphia’s Spectrum. The Brooks brothers settled on Allentown.

In 2009, Sen. Pat Browne drafted the legislation that began the Neighborhood Improvement Zone program.

The project centered on the hockey arena, which was publicly funded with a $220 million bond issue.

Hailstone said officials quickly realized there was an opportunity to build private-sector projects on top of the arena.

"There is a private office building connected to the arena and a hotel, as well as two parking garages," she said.

Lehigh Valley Health Network has leased the office building. Its 700 employees are expected to move in this summer.

Penn National moved its headquarters from Boyertown, Berks County, to the new office building across the square. The bank relocated 330 employees there.

Another 791 jobs are moving downtown with the relocations of Air Products, Lehigh Gas and other companies.

Those are all signed leases, Hailstone said. A total of 3,000 jobs are expected to move to downtown Allentown with additional NIZ construction.

Also attached to the arena is a Marriott Renaissance hotel, which will have between 170 and 174 rooms.

Nearby, within the improvement zone, an existing Holiday Inn is being renovated, Sacred Heart Hospital is expanding with the addition of new doctors, and plans are being drafted for the long-closed Americus Hotel, she said.

Plans also call for a 200-apartment complex and commercial spaces. Hailstone said those projects will come after the workers are in downtown offices.

"The jobs come first. The commercial comes before the retail," she said of the plan.

Duane Tolson, Allentown’s business development liaison, said it used to be like "pulling teeth" to get outside developers to talk to him.

Now, he said, "People are breaking down our door to speak to us about properties, about projects, from developers to businesses. It’s the most exciting thing in the world."

While interested in talking to outside developers, Tolson said Allentown is more interested in working with the small restaurant owners, tailors, small engineering firms and other businesses that have held on downtown.

"We have all those businesses and we want to make sure that they have a piece of this renaissance for Allentown," he said.

For years, Allentown was working against the image painted by Billy Joel’s song "Allentown," said Tolson. The 1982 working-class ballad described life after the closure of the steel plants.

It was really about nearby Bethlehem anyway, Tolson said.

The NIZ is erasing that image, he said.

"When you have three cranes up at the same time in downtown — it can’t get better than that — that speaks for itself," said Tolson.

J.B. Reilly has ridden Allentown’s decline and rise.

The real estate developer first invested in downtown Allentown in 1986, when the flagship Hess’ department store was still struggling to keep its doors open.

"Downtown Allentown has been on a slow, steady slide since the 1960s," said Reilly, president of Center City Lehigh Valley.

That downward spiral continued through 2010, with businesses moving from the city.

That year, the boundaries of the city’s NIZ were established. In early 2011, Reilly said he took a close look at the legislation and the plans for the arena and recognized the opportunity.

"We certainly believed there was an opportunity to do significant development," he said.

His company now has $350 million in projects in development.

Yet, it was not being done speculatively. Development in Allentown is being driven by demand — backed with signed leases, he said.

Even with state tax backing, Reilly said it was challenging to get lenders comfortable with the new NIZ program and to get businesses to commit to the plans.

"It continues to be," he said.

Yet, he added, that’s beginning to change.

"I think we’ve turned a corner, because now people can see the physical product."

Reilly said it is just the beginning. The downtown development will have a multiplier effect on the surrounding area even if they are outside of the NIZ, he believes.

Nearby neighborhoods will change over the next five to seven years, he said.

"It’s all demand driven. It’s all about attracting businesses," he said.

And he pointed out the downtown area is only five or six blocks. About 60 percent of Allentown’s NIZ area is a former industrial area along the Lehigh River.

The waterfront project is still in the pre-development phases, Hailstone said. Building could go on for several years.

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