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Invenergy: KOZ was not condition of land deal

If all goes as Invenergy plans, its Jessup plant will operate for five years without paying property taxes until 2023, when the latest round of Keystone Opportunity Zones expire.

The Keystone Opportunity Zone is a policy tool designed to spur development on land that might otherwise sit empty. They require approvals by all local taxing entities and the state Department of Economic and Community Development. Lackawanna County has 25 parcels, or “subzones,” with such designation that will expire in 2017 through 2023, according to data from the Redevelopment Authority of Luzerne County.

While the tool mirrors those used all over the country, its legacy has been mixed in Pennsylvania. Some say it has been effective at creating jobs in their jurisdictions, though the state has never tracked thoroughly whether exempting companies from paying property tax for a certain time yields a net benefit for affected communities.

In fall 2013, local officials sought tax-free status for Invenergy’s preferred power plant site, arguing they needed to entice the company to move its operations there.

The company had several sites in mind in Lackawanna County and elsewhere, county economic development director George Kelly said. The Jessup site was “not a done deal,” he said.

But Invenergy’s attorney Mike Blazer says the Chicago firm’s option to buy the land did not hinge on its tax-free status.

“I’m not going to tell you, I suppose, it’s not un-nice to have for a few years, but it was not conditioned,” he said in an August interview.

The company signed the option to buy in October 2012, Mr. Blazer said. The state Department of Community and Economic Development approved the tax-free status in November 2013, after borough, school board and county officials passed resolutions in favor.

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Getting approval

In early fall 2013, Jessup’s council passed a resolution exempting the full 340 acres of Pompey Coal Co. land, including the 80-acre parcel in which Invenergy is interested.

Attempts to reach then-council members Lorraine Stevens, Randy Santarelli, Maggie Alunni, Joseph Mellado, Jim Brunozzi, Pat Kurpis and Nick Marino regarding their discussion and votes were unsuccessful. All but Mr. Marino still sit on council.

The proposal came before Valley View School District’s board in September 2013, when board members Dominick Perini, Ellen Nielsen, Joseph Mondak, Joseph Koniszewski, Lynne Callejas and Curt Camoni approved it. The resolution did not mention Invenergy or a power plant.

“I don’t remember anyone explaining to us (that) it would be a power plant,” Mrs. Nielsen said.

Mr. Camoni said that is typical for Keystone Opportunity Zone votes. The program has helped add new development to Valley View’s tax rolls and benefits the district in the long run, he said.

“In the times that I’ve voted on them, we didn’t know what they were for,” he said. “It works out very well for the district because when that property does eventually come out of KOZ, we get a jump in the tax revenue.”

Efforts to reach all other school board members were unsuccessful.

The 80 acres is part of a 248-acre tract of undeveloped land assessed at $25,000. Invenergy’s parcel would have to be split from the rest and just how much the company would pay yearly in taxes right out of the gate is difficult to estimate, said county tax claim bureau Deputy Director Ronald Koldjeski.

“It depends on what they’re going to build, how big it’s going to be, what equipment’s going to be there, what’s going to be considered personal property or what’s considered operational,” Mr. Koldjeski said. “So there’s a lot of moving parts.”

After the KOZ expires, Invenergy estimates it will pay $30 million in taxes over the life of the plant.

The company also has offered a $500,000 annual community host agreement to be split among the borough, the Valley View School District, volunteer emergency companies and several key civic groups in town.

Sweetening the deal even further, Invenergy has offered a $300,000 scholarship for students in the Lackawanna College School of Petroleum & Natural Gas.

The incentives are contingent on the project winning state and local approval.

The last local approval came from county commissioners, who voted in favor on Sept. 23, 2013, with a slew of other Keystone Opportunity Zone designations in the county.

With the local approvals in hand, the property owners Raymond, William and Fred Rinaldi applied to the DCED to grant tax-free status. Efforts to reach them were unsuccessful.

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‘Want the jobs here’

Democratic state Sen. John Blake, 22, Archbald, said he made a phone call to the DCED’s legislative office asking for fair consideration of the proposal, something he said he has done for other Keystone Opportunity Zone applications. He did not know at the time about the plans for the property.

“I don’t remember having any knowledge at all about the development,” he said.

State Rep. Frank Farina, D-112, Jessup, touted his own involvement in a December 2013 press release, where he called the plant part of his platform of “American made, buy local and create jobs.” Efforts to reach him regarding the issue were unsuccessful.

As a former DCED deputy secretary who worked at the agency during the early days of the program, Mr. Blake said he sees the enormous benefits of the economic development tool. Based on Michigan’s tax incentive program, it also mirrors those at work in other Mid-Atlantic states, such as New York’s Empire Zones.

The possibility that major industries could move to other states with better tax incentives provides a strong incentive to keep such tools in place, said senior policy analyst Eric Montarti with the Allegheny Institute for Public Policy near Pittsburgh. His organization studied the tax incentives’ statewide economic impact for several years after the program began.

“We want the jobs here, and nobody else is laying down their economic development sword,” he said. “That’s how the thing keeps chugging along. No one wants to be the first to say, ‘We’re not going to do the incentives or subsidies any more.'”

Whether the program’s purported benefits have been worth the tax tradeoff is difficult to say, given the lack of data. A 2009 report by the state Legislative Budget and Finance Committee faulted the DCED for not tracking the program’s successes and failures adequately.

Today, the DCED claims the program created more than 19,000 new jobs statewide and yielded more than $1.5 billion in real estate investment by private capital, but nowhere on its website does the agency list the amount in lost tax revenue for comparison.

Mr. Blake said he can think of plenty of projects that would not have happened without Keystone Opportunity Zones. One example is cosmetics manufacturer Process Technologies and Packaging in Scott Twp., he said.

In Jessup, eight parcels have tax-free statuses that expire 2017 through 2023. Keystone Technology Consulting and TMG Health Inc. were the only to list any jobs on their sites.

TMG’s is probably the greatest example of Keystone Opportunity Zone success in Jessup. The company now employs 881 people at its National Operations Center at 25 Lakeview Drive, according to its renewal application.

The major concern is when companies leave after the tax-free period expires, Mr. Blake said. That seems unlikely for Invenergy, whose officials say the $1 billion plant will have at least a 30- to 40-year lifespan.

On Nov. 25, 2013, the DCED approved the designation a little more than a year and a month after Invenergy signed for the land. The site reverts to normal, taxable status if the power plant falls through, the approval letter states.

The county has close to 1,000 acres of Keystone Opportunity Land, Mr. Kelly said. If Invenergy walks away, no one else will want it, he said.

Invenergy’s proposal by the numbers:

–80 acres within 340 acres of Pompey Coal Co. land, Jessup.

–Part of a 248-acre tract of undeveloped land assessed at $25,000.

–30- to 40-year life span.

–Within a Keystone Opportunity Zone that will not pay taxes until 2023.

–Proposed $500,000 annual community host agreement to be split among Jessup, the Valley View School District, volunteer emergency companies and several borough civic groups.

–Offered $300,000 in scholarships for students in the Lackawanna College School of Petroleum & Natural Gas.

Jon O’Connell, staff writer, contributed to this story.

Contact the writer: bgibbons@timesshamrock.com, @bgibbonsTT on Twitter

This article was written by Brendan Gibbons from The Times-Tribune, Scranton, Pa. and was legally licensed through the NewsCred publisher network.