Friday, August 19, 2011

What the TIF?! Chrin Seeks to Build Interchange on 33 to Develop Farmland into Commercial Real Estate

This is blight?

Posted by: Noël Jones

My Republican and libertarian friends will have to excuse me on this post, because I am about to expose myself for the hippy love child that I am. Ever heard of a TIF? Me either. But at the Easton Area School Board meeting last night, there was a presentation for one on the agenda. The presentation was loooooong and boooooooring and the kind of tax talk that makes me dig my fingernails into my thighs once in a while so as not to fall asleep in the middle of a public meeting. But here and there a word or phrase caught my attention: agricultural land, highway interchange, Route 33, Chrin, development, developers, no financial risk, tax revenue...and...blight. Blight?

A Tax Increment Finance vehicle, I found out, is a way to fund things where funding doesn't exist, based
on the premise that building buildings and infrastructure is going to increase property values and therefore the amount of property taxes that can be collected. The taxing bodies (Palmer Township/EASD/Northampton County, etc.) create an entity that takes out a municipal bond for the construction costs and sell it to investors who buy it hoping that they will make interest when it pays off. They pay off construction costs up front and then pay off the bond with the taxes each year.  In the scenario proposed last night, the interest rate is 7% and for the first three years the school district gets nothing above the usual property taxes they collect. The next 17 years they get 20% of the tax increase, then the district gets 100% after 20 years--or if the bond gets paid off--whichever happens sooner.

What I had gathered from the soup of financial lingo that the presenters were serving up last night is that Chrin owns 690 acres of agricultural land in Palmer, near Route 33 and adjacent to the town of Tatamy, and wants to develop it for commercial enterprises, but can't, by state law, do the kind of development he wants to unless an interchange for Route 33 is built there first. I'm not sure what designation of blight had to do with it, but somewhere in there it was tossed out that the land qualifies as blighted property. Agricultural land.

With all our open green space quickly disappearing under malls and parking lots, we have now decided that agricultural land is blighted? Get this--they are also setting up a NID (Neighborhood Improvement District) around Chrin's property that doesn't include any of the adjacent communities (and therefore their votes on the matter). In addition to that, the fees from the NID are designated to go toward paying off the bond, so essentially we are agreeing to set up a vehicle for Chrin to develop something that he, in the end, will not pay for himself, and we'll be stuck with the long term costs of maintaining the interchange, when we can't even seem to keep up the highways and roads we already have.

One resident from Williams was allowed to speak during Citizens Right to Be Heard, and he asked why--if Chrin had already agreed to the develop and pay for the whole thing himself years ago--why we were going out of our way to arrange a TIF for him, and take on the maintenance of the interchange? Nobody on the board answered him.

There was only one board member who seemed to have any reservations about this at all, and it was Frank Castrovinci, who was appointed to Sarah Bilotti's vacated sea at the last meeting. His concern was that even though the TIF was set up so that the Easton Area School District would incur no risk, that the decisions on what could be developed there would be within the complete control of Palmer Township Administrators. He also pointed out that Porche had decided to open shop next to the Chrin property, without an interchange, suggesting that maybe taking on a bunch of debt to build and interchange wasn't necessary.

But Superintendent Sue McGinley and the other board members couldn't resist the increased tax revenue that would be created for the district down the road. In fact, the rest of the board was so enthusiastic, that they motioned to put the vote on the agenda right away--without thinking about it any further. And how could they resist? The TIF had celebrity support--former State Rep. Rich Grucela came out of retirement to pitch the thing, calling on us all to "be positive--have vision." Well, I have vision, but in this case it's not positive.

Every time I'm out driving and see a few leftover wide open fields, I sigh at how beautiful and rare they are, and then I see a developer's sign, and I have a vision--a vision of a new mall and McMansions and everything I hate about what this country has turned into. When I talk to old-timers here, they tell me how Palmer and Forks used to all be beautiful farmland, until someone decided to cover it all with concrete. I understand that we have to be able to grow if necessary, but what I don't understand is why we don't preserve open space and reinvest in cities like Easton where we have empty buildings and storefronts that need preservation and commercial tenants? Why not tell developers that they need to develop downtown if they want to develop in Easton? This city's downtown was wiped out during Urban Renewal, when the majority of Easton's population was relocated to the burbs, and where the businesses soon followed. So it doesn't seem to me like we're really growing, so much as spreading ourselves out over wide green spaces, instead of concentrating our populations in city centers and preserving as much green space, agricultural land and natural beauty as possible. Why not grow all our own food in this contracting economy and deliver it to our city centers instead of shipping in produce from California, Florida and South America?

The Lehigh Valley is in danger of slowly turning into one large example of back-to-back urban sprawl, where nothing is walkable and everyone must drive to work and to shop, no matter how expensive gas gets. It is sprawling with the blessing of our local school district, who seems eager to collect more taxes and keep spending, rather than getting their spending habits under control. Our only hope of stopping this monstrosity now is that Northampton County Council will say no. The next County Council meeting will be Thursday, Sept. 1st at the courthouse in Easton. Use the link on the right side of this blog to right to Northampton County Council if you care about this issue. Ask them to please NOT approve the TIF for Chrin Brothers near Route 33.

There was someone missing last night. I would have like to have heard State Rep. Bob Freeman's take on the TIF--it might have been a nice counterbalance to Grucela. After all, Bob Freeman does teach a course at one of our local colleges on the importance of preserving green space. Too bad Rick Grucela got the spotlight instead.


david said...

It's always more fun when we can agree on things and on this, we agree.
The list of problems and issues here is so long that it's a bit mind boggling. Not the least of which is just what in the nine hells is the school district playing at, helping to fund a private enterprise when by it's own admission it can't pay it's teachers and other workers a livable wage even with a tax hike?
Sadly, it sounds like this is a done deal and that they are less "selling it to the public" than explaining what they will be doing. In these economic times anything that brings money and jobs to the area is going to be impossible to beat no matter how ill-fated or whatever the long term consequences. I wish you well with the opposition and oppose the EASD involving itself in any such schemes, but I think the chances of stopping it are on a par with those of the snow ball in hell. I also agree with Dennis in his earlier stated opinions about having to revitalize cities in expectation of the many changes the future will enforce on this nation wanted or not.

noel jones said...

david--i would rank the chance of stopping is slightly better than a snowball's chance in hell just because the TIF has one more stop to make before it's a done deal and that is County Council, where according to the ET article, there is already one councilman adamantly against it. if some citizens show up and speak against it and speak against in and one or two councilmen do to, then who knows, it may convince enough council members to at least get the vote TABLED for more consideration, as our school district SPED IT UP by moving to vote on it when a vote wasn't even on the agenda.

if council members table the vote, and take more time to consider the long-term costs of maintaining a new cloverleaf over the years, and ask themselves why we're helping a private developer be able to do all this for free anyway, and--miracle of miracles--if they actually care and give thought to whether we want to become a valley of unending sprawl with no green space at all--then they may decide to vote NO in the end. but we won't know until we try!

it would be really nice if Bob Freeman could show up to the county meeting and talk about the importance of preserving green space since he teaches a college course on it...

Ken Sturzenacker said...

As always, follow the money - in this case, the relative costs. Where are the incentives, where are the punishments under the existing laws and regulatory requirements? A developer, in this case, Chrin, can get a long-term project financed at little or no net cost to him with the aid of a TIP and/or an NID. IF, instead, he attempted to develop an equally large amount of acreage within the built-up areas of Easton, Palmer or Williams, what would he face?
Hosts of delays on everything from
demolition permits to abestos remediation to architectural reviews to possible environmental impact statements (Is any one of them a potential SuperFund cleanup nightmare?) on each of the existing individual properties - all at considerably higher upfront costs to Chrin.
The reviews and often conflicting barriers to getting permissions from multiple layers and agencies of government to re-develop in urban areas are usually far more costly and time-consuming than the incentives for starting on relatively "fresh soil."
Governments have made the system and structures what they are: follow the money. I'm not certain what Noel's Republican friends would say, but this libertarian friend suggests she's right to be baffled: Is this really what gov'ts intended to accomplish?

noel jones said...

Great point, Ken. We need to make it more attractive (and less frustrating) for developers to invest in our cities.

Anonymous said...

This is insane. The TIF should not be approved for more than the cost of the bridge. Look at the lovely Porsche building in the link below.

You can be sure this presentation was done during the summer months when people are enjoying vacations and not as much paying attention to the news.

Anonymous said...

Gee it's good enough for the thownship but I remember reading how the city was turned down several times.

Even with that, this is jobs and we need jobs. But the city also can provide jobs so I don't get it.

Either way, we need to do something to vreate jobs.

david said...

There is an argument, that the type of economy we are in, one essentially manufactured by the right is perfect for this sort of thing. Poor people, desperate for jobs ask few questions and look a very short distance into the future. A handful of long term groups within the right and only the right have proposed such concepts for years. Bringing about the economic ruin of the nation for reasons ranging from discouraging illegal aliens (which it has done to be fair-look at the dozen or so recent NYT articles on the subject) to simply speeding job creation by forcing an environment where any and all other considerations are easily set aside (Fracking).
I think this is but another in what may well become an unending slew of such things.
I do hope that you are right Noel, and we'll see.
Personally what I find funniest is that the bonds being sold will at least in part be back by the full faith and credit of the EASD- a group of people who couldn't find truth or honesty with both hands at noon on a sunny day.
Still, the desperate may yet invest.

Anonymous said...

This type of project is not going to "create" jobs, and projects like this are not what is needed to address our nations unemployment. What it will do is bring jobs to the north end of Palmer township at the expense of another community. It could be at the expense of industrial parks in Forks Township, Bethlehm Township, or beyond. This form of incentive is best for brownfield sites, where without it nothing is likely to develop at that particular location.

noel jones said...

i understand this development butts right up against Tatamy and Nazareth, among others. hopefully people there care enough to show up at the County Council meeting on the 1st.

Dennis R. Lieb said...

Part One...

I am probably going to go to the county council meeting and get some things off my chest. Here are a few in no particular order:

Chrin ran a dog and pony show for Tatamy residents 6-7 years ago when he rolled out his architects and consultants at the firehouse to propose a New Urbanist community on the land adjacent to their town. It had lots of pretty renderings, showing how the mixed use buildings would cozy up to the narrow streets and people would be able to live in townhomes and apartments close to, or even above, their jobs. The plan showed a compact street grid crossing Tatamy Road and seamlessly integrating the new and old section of the Borough.

Forgetting for a minute that Chrin wouldn't know New Urbanism if it kicked him in the teeth, the joke wasn't lost on my brother, who has lived there for decades. He laughed and said it would never happen and of course it hasn't. Any opportunity to create a livable, sustainable development that used existing infrastructure to add value to the community has now been abandoned for yet another insulated, stand alone, suburban retail/industrial pod. This monoculture of development will mean anyone shopping or working there will need to drive and in no instance will anyone - God forbid - be able to live there. Palmer Township will make sure of that.

Chrin promised (despite revisionist history to the contrary) to build the interchange with his own money for something in the $20 million plus range. He obviously thought he could make money doing it that way or why would he buy the land in the first place? Or maybe it was just speculation that eventually the investment in developing farmland could be fobbed of on others with the right slight-of-hand maneuvering.

If he wanted to spend $20 million for the interchange before, why would we need to do a TIF for the whole project now, including the additional $5 million bridge replacement? Why not a TIF for the bridge alone and let him finance the rest? Chrin says he just found out the bridge is deficient. I think that knowledge was probably available when he bought the property in 2000...its not like Rt 33 got old overnight. I smell a rat.

Part Two to follow...


Dennis R. Lieb said...

Part Two...

I heard a lot of people (including Rich Grucela) embarrassing themselves at the EASD meeting. He implored his former students in the room (of which I was one) to hope for the best, have vision for the future and be if that is going to solve the problems he obviously doesn't fathom. He waved the pom-poms for this as if he had some personal stake in the outcome and urged the board to ignore their opinions of "the person developing the project" and think of the future. Here is my question. Who gets to decide the future? I doubt if Tatamy had anything to say about a project that will change the character of their town forever. I doubt state taxpayers had anything to do with "a vision" to build another interchange in the middle of rural farmland so that a private developer can get rich(er) while they're stuck with the long-term maintenance costs of another PenDOT highway interchange.

Easton and other Lehigh Valley cities struggle for development - and in response to Ken's comments, in Easton at least, we have put zoning and development incentives in place that encourage new development of existing sites. Our problem isn't attracting interest; it is financing it. We have a new retail business trying to open downtown and it required four components of financing just to get to a confident position of success. The fifth component was like pulling teeth and threatened to kill the project until the retailer's representative held up the marketing study, shook it in the financer's face and said, look - we are building what the public says it wants!

All of this because the banks and so-called community funding agencies do not undertand how to finance what was once traditional downtown retail. At the same time, various taxing bodies like EASD are willing to take a memorandum up for discussion, add it to new business and vote on it the same night as if $20 million and 20 years of commitment are meanigless figures on a Monopoly board. Mr. Castrovinci should be praised not only for being the only no vote the other night but for being the ONLY council person willing to ask the probing, in depth questions about the realities of this decision.

If county council gives me the opportunity I will have a field day with this. Hopefully, Mr. Castrovinci will come along for the ride.


Anonymous said...

The Chrin company is willing to participate with the NID's ability to assess taxes on property he owns to pay for the loan if the land does not develop as hoped. There is absolutely an ability to get them to also front some of the funding for this project as they originally intended. This is simply a risk mitigation strategy they are using to reduce their exposure to the pace of development. They spent $20 million on the land. This project is not going away if the proposal as written fails. The question is how much they pay for it. Noel's point of maintaining green space is noble, but that is already lost. Focus should be on who is paying.

Ronnie DelBacco said...

I am against this for the bare-bones reason that no further taxation should be forced on the residents. Period.
The EASDSB should have said NO loudly and unanimously. Agreeing to this mess allows them to ignore the necessary task of cutting wasteful spending within the district and shields them from the onslaught of criticism that would potentially come from supporters of budget items they propose cutting. It allows the board to side-step the real issue of spending. None of them seem to understand that we residents cannot afford any more taxes. I would like to see, and if elected hope to be part of, a serious effort by the EASDSB to actually represent the tax payers and stand up to the various entities and unions that continuously soak the district with unrealistic contracts and funding demands. Adding another source of "revenue" (taxation) is not the answer. This madness has to stop and actually be reversed to the point where a basic education once again is the focus of the EASDSB and we tax payers realize a reduction in our property tax outlay instead of the usual 1.7% increase.

tunsie said...

dont we have enough strip malls with bad chinese restaurants and pizza shops already...maybe we should build on on every block so we dont have to travel far 2 get FAT...why R we getting rid of precious farmland for a many cellular phone stores do we need.....these people dont need a beating they need PROZAC.....I yuv U,baby.........anon-mouse

Carter said...

Great. That's just what we need. Another financial scheme that ultimately makes a lot of money for the developers and contractors then leaves empty storefronts and less farmland. And people wonder why our country is in shambles? It's because our business and political leaders are either criminals or idiots (quite possibly both).

noel jones said...

it's not too late to stop it--come to the county meeting Sept. 1st!

i drove out with a friend today to see the land--it's beautiful, high with corn--690 acres is A LOT of land, and it's literally right across the street from Tatamy--those residents should really be thinking twice about whether they're just going to let this happen, or whether they're going to go the county council meeting to stop it. this development will absolutely destroy the current character of the landscape out there.

Frank Castrovinci said...

I need to provide some comments to ensure what the school board approved is understood. The board agreed to give up additional property taxes that it would collect on land as it increases in value as the land is developed. The property will still be assessed appropriately, and property taxes will be paid by the new owners as they move in to the Chrin Commerce Center, but instead of going to the school district, the money will go into a fund to pay off the loan taken out to build the interchange (entrance / exit ramps and replace the Main St bridge). The school district would get 20% of the increased taxes after 5 years, and will continue to get 20% for up to 20 years or when the loan is paid off, whichever comes first. There are many questions about this, and though as I mentioned at the meeting I am pro tax incentives, I am strongly against this, as proposed.

I agree with one of the posts which mentions that this land will be developed one way or the other. The issue is does an excessive incentive get handed to the developer, or should they be paying a large portion of the cost as they had said they would? This plan allows for the interchange to be built at a very minimal cost to the developer, much less than they planned. I have yet to find a resident of the Easton School District that supports this proposal once they understand the facts. The surrounding communities will be getting a free interchange to alleviate congestion, so I don't expect large numbers of residents from Stockertown, Nazareth and Tatamy to speak up against this.

noel jones said...

Frank--thanks for posting. For those who don't know it already, Frank Castrovinci was recently appointed to a vacated seat on the school board, and he is running for the remainder of that two-year seat in the fall. He is also the only school board member who spoke up against the TIF at the last meeting, while everyone else decided to vote on this huge project.

Frank, your points are well-taken (even though I, personally, think that farmland that is growing a crop is already "developed") and I know one thing that residents are really tired of is watching school board members move to vote on things they haven't even done the research to understand.

Thanks for speaking up at the meeting, and for posting here. It's nice when voters can interact in a modern forum with candidates and elected officials!

Dennis R. Lieb said...


Thanks for the details on the TIF. I didn't get into that explanation in my post because I wanted to keep it relatively short and concentrate on my gripes.

We could also disclose the so-called unique situation of having Chrin - rather than the taxing bodies - being on the hook for the repayment of debt if the TIF fails to payback on schedule. Although this may sound magnanimous in theory, the goal - as I understand it - is really to transfer those payback responsibilities to new owners via the NID fees as people buy the properties up...and of course there is probably nothing in the pro-forma about future maintenance and extended public service costs that will accrue over time to a development situated at a remote part of the rural transect.

I could do a whole post just on this topic (and I may forward some interesting editorial material on such "Ponzi schemes" to Noel in the future) but to be brief, deferring tax revenue now, based on future values will mean the maximum tax generation will occur at the same time that this interchange and the county roads servicing the area will be ready for reconstruction. I see no net benefit to the region if you factor state and county maintenance costs into the equation.

It may not enter into the thinking of the school board, but school taxes must be considered as a package of city, county and state commitments and infrastructure spending can't be artificially isolated to a particular project without considering how wide a portion of the general population truly benefits from them and what those improvements actually cost to maintain in the future.
I am equally puzzled by all the rhetoric from Palmer's representative about blight designation since this doesn't seem to have any impact on the project.

Also, the discussion of a NID for that site is baffling to me. I have been discussing NIDs with the director of the PA Downtown Center as part of my research on funding Easton's Main Street Program and when I call him back I am going to get some clarification on what he thinks about the use of a NID for that site.


Frank Castrovinci said...

Dennis - You have some good thoughts on this and appear to have more knowledge on these types of incentives than I do myself. I had never heard of the TIF concept prior to the night I was appointed to the Easton School Board, but I have read a lot about it since that night. I mentioned at the meeting the fact that this type of financing is intended to address blighted properties to try to get people interested in this proposal as I wasn't feeling much oppositon to the concept that was being presented. The NID aspect is interesting. It seems to be a dis-incentive for companies to move into this location. I wouldn't want that hanging over my head if I could locate down the street. I would venture a guess that nobody that is supporting this project outside the Chrin organization understands the economics of this project, and if the Chrin companies can afford the interchange if the development occurs as the Deitrich Group has projected. It is interesting that the Chrin organization will pay for a chunk of this via the NID if the area doesn't develop. You would think that is when they would need some assistance. The proposal seems backwards in a way. Also, this type of financing comes under the urban redevelopment law. I have read that some areas have stopped permitting this type of financing for greenfield sites as that hurts other areas that this legilation was intended to help (i.e. brownfield sites). The two existing TIF districts in Northampton County were great ideas. Those were the 25th St Home Depot shopping center and the SteelStack complex. I applaud those that helped to develop those two properties through the use of this financing concept.

noel jones said...

Frank--you said:

"I mentioned at the meeting the fact that this type of financing is intended to address blighted properties to try to get people interested in this proposal as I wasn't feeling much oppositon to the concept that was being presented."

Please continue to follow your instincts--residents have been watching the school vote like a vapid Borg on things they don't understand for way too long. We need more board members who ASK QUESTIONS, and then as FOLLOW UP questions, and refuse to vote on things that they have not yet had time to research as you did. Keep up the good work!

noel jones said...

looks like the TIF has been put off to another meeting, i don't see it on tonight's (Sept. 1) agenda at all: