By Natalie Duvall, EdD, MFA
Annville, PA- If you’ve attended a school board or township meeting in the past year, you might have heard an acronym at the center of much discussion: LERTA. Standing for Local Economic Revitalization Tax Assistance, LERTAs are special tax agreements businesses can make with townships and school districts when they purchase and build on land in the township. If these authorities approve a LERTA, that business gets a tax abatement, or doesn’t have to pay full taxes for a set amount of time.
This tax abatement act started in Pennsylvania in 1977, and reads “This act shall be construed to authorize local taxing authorities to exempt new construction in deteriorated areas of economically depressed communities and improvements to certain deteriorated industrial, commercial and other business property.” The act further describes deteriorated areas as “located in a deteriorating area, as hereinafter provided, or any such property which has been the subject of an order by a government agency requiring the unit to be vacated, condemned or demolished by reason of noncompliance with laws, ordinance or regulations.”
Several LERTAs have recently been granted in South Annville Township, and that has caused some residents to question how previously fertile farmland is classified as deteriorating. The process allowing this to happen can begin years before a company even has its eyes set on a property. Setting the stage for a LERTA starts when a township, borough, or city determines zoning.
Susan Eberly, who is the President/CEO of the Lebanon Valley Economic Development Corporation spoke with Q’Hubo news about LERTAs to give us some background. She said “Farmland that is zoned industrial can be viewed as underutilized.” In the case of the South Annville land, it has been zoned industrial for decades.
Eberly noted that LERTA’s in the county started as a way to alleviate the economic pain residents were feeling. “30 years ago, the decline in the steel industry and the high unemployment rate left a vacuum throughout the County, especially in the city. During these periods, incentives were a real asset and a positive attraction and remediation tool. We encouraged the use… because it gave developers an incentive to work in less desirable areas. One of the main LERTAs established was for the north side of the City of Lebanon. Utilization of this tool as incentive was so that businesses would invest in the city and would have an extended time to have the improvements incrementally taxed.” She went on to say that these days, LERTAs are appealing to townships and school districts who “…are looking to generate more tax revenue. They see the use of the LERTA as an attraction tool. They do not lose the current tax base and they know that the tax base will increase over time so they are willing to give up incremental portions now so that in the long run they will reap the benefits.”
We spoke with representatives of the Annville-Cleona School District, where two LERTAs have been approved in the last two years on South Annville’s industrially-zoned farmland. Krista Antonis, superintendent, Steven Ritter, director of business, and Cynthia Eby, school board president, echoed what Eberly said in favor of these LERTAs. “The primary benefit of a LERTA is generating a long-term stable revenue stream and partnership by redeveloping vacant or underutilized properties.” They added “the primary drawback is the community perception of granting a large tax break to a company.”
In LERTAs, a governing authority like a township or school district will agree upon a reduced tax scale for the property. Eberly said, “LERTA does require that property owners pay full land taxes, while taxes on improvements to the land grown incrementally over 10 years or the time-period that is designated for the LERTA.” Antonis said this incentive allows districts to receive extra income for much-needed district expenses. “This revenue allows a district to take some of the pressure from the taxpayers as school taxes are the largest percentage of revenue for our district, making up about 48% of our total revenue.”
In Annville-Cleona, a LERTA was granted to The Hershey Company in 2020. The term of the LERTA spanned ten years, with Hershey paying no taxes on their improvements in the first year. In the second year, they will pay only 10% of their assessed taxes. The number will increase by 10% each year until the tenth year, when they are no longer exempt from taxes on the property. The same month this LERTA was approved in 2020, Anville-Cleona finalized their annual budget, passing a 1.9% increase onto taxpayers, the same as the previous year’s increase. In 2021, Annville-Cleona raised taxes 2.9%.
Antonis told us that she and the school board consider what is best for the community when determining if a LERTA should be granted. In the case of the rationale for the two LERTA’s granted in South Annville, she said, “It is our understanding in speaking with the land owner, the land developer, and the township, that the ground that has been granted LERTAs was challenging to develop due to rock and steep grades. The cost to turn that into usable land for building construction had a large price tag and there were not many companies who were willing or able to put that amount of funding into moving dirt. This land has been zoned industrial for some time by the township without much interest to develop it until now.”
And, as Eberly stated, “Nowadays developers use incentive requests as leverage. Many will note that they will not come to an area unless they receive a LERTA or other incentives.” With several new developments on the horizon throughout Lebanon county, which sits at the intersection of state and national highways, we can expect more LERTA requests to be heard at school boards across the area.
Author: Amaury Abreu
