Pennsylvania Approves Legislation to Create City Revitalization and Improvement Zones to Finance Development in Select Cities
New legislation passed as part of Pennsylvania’s 2013-2014 budget process allows for two cities in Pennsylvania to establish “City Revitalization and Improvement Zones.” Certain tax payments from businesses in the zones would be funneled back into the zones in an effort to spur development and redevelopment projects. The legislation was modeled after an existing law that has been the catalyst for the development of a multimillion-dollar arena complex in the city of Allentown, Pennsylvania, though the new legislation contains important differences.
Recently approved Pennsylvania legislation allows two cities in the Commonwealth with at least 30,000 residents to establish City Revitalization and Improvement Zones (“CRIZ”). Certain state and local taxes generated by businesses in the zones could be used to finance the construction and development of commercial, sports, exhibition, hospitality, office, retail or recreational projects, in addition to other permitted uses. Eligible cities include Erie, Reading, Lancaster, Bethlehem, Altoona, Wilkes-Barre, Chester and York. Beginning in 2016, two additional cities each year may be given the ability to establish a CRIZ. In addition, the law provides for a “pilot zone” within a township or borough with a population of at least 7,000.
The new legislation is modeled after existing legislation that has been the catalyst for the development of a multimillion-dollar hockey arena and entertainment complex in Allentown, Pennsylvania. However, the CRIZ program contains important distinctions. For one, the prior legislation permits all tax revenues generated within the zone to be directed toward financing development in the zone. The new CRIZ program only provides for tax revenue generated over and above existing baseline amounts to be made available for development purposes. Another important feature of the new legislation is a requirement that private investment be generated in an amount equal to 20 percent of the tax revenue directed toward a zone.
The first two cities that will be selected for the CRIZ program will be determined by the Pennsylvania Department of Community and Economic Development (“DCED”), the Office of the Budget and the Department of Revenue of the Commonwealth on the basis of applications submitted to the DCED. Applications must include an economic development plan, specific information related to the facilities intended to be financed and a designation of the specific area that will comprise the zone (no greater than 130 acres). The legislation directs the DCED to develop and publish guidelines to implement the new law by October 31, 2013.
For more information on the new legislation, please contact George T. Magnatta (215-972-7126, firstname.lastname@example.org), Chair of the Public Finance Practice or Michael C. Barnes (215-972-7188, email@example.com), an associate in the Public Finance Practice.