A program exempting businesses from most state and local taxes while providing an incentive to develop or reuse distressed land will continue if Gov. Tom Corbett signs a bill that the Legislature approved.
The bill sent to the governor last week lets local governments re-enroll undeveloped properties in the Keystone Opportunity Zone program for seven more years.
Companies that start doing business on a property in a KOZ by the end of 2015 will receive tax breaks for 10 years. Up to 15 new sites selected through a rolling application process could join the program statewide.
Since the start in 1999, the KOZ program brought new companies and jobs to places in Pennsylvania, including the Humboldt Industrial Park near Hazleton and locations in Schuylkill County.
The program, too, has been refined to concentrate on properties that developers otherwise might disdain.
State Sen. David G. Argall, R-29, did his doctoral thesis on KOZs in 2005. He said the program has been very successful in some places and ineffective elsewhere. His thesis mentioned insider deals, corporate welfare and one adult bookstore that got tax breaks.
"We have learned to really understand what works with this kind of economic development. You need to have good data. What do they pay? How many jobs? Did they get any other incentives or was it only the KOZ that made the jobs come?" Argall said.
His amendment to the bill requires a yearly accounting for the program. Data tracked will include types of companies, jobs created and retained, annual investment and years companies have been in the program.
The bill requires the state Department of Community and Economic Development to collect similar information when re-certifying properties annually. No targets are set, however, for remaining in the program so property owners won't lose tax breaks for failing to attract investors or to create jobs.
Regulations have been tweaked to prevent professionals such as doctors and lawyers from putting their office buildings into KOZs, an unintended result from the program's early years.
"There shouldn't be any more law partners finding out that they could live tax free for 10 years," Argall said.
KOZs offer exemptions from sales tax, corporate and personal income taxes and other state taxes. Local governments forgive various taxes, including property and income taxes and business privilege and mercantile taxes.
For properties enrolled in the original KOZ program, those 10-year tax breaks have expired. Others enrolled later, so depending on their starting date, they remain exempt from taxes through 2013, 2018 or 2025.
When the expiration date arrives, property owners resume paying taxes to Pennsylvania as well as counties, school districts and municipalities. If the value of the property increased because of investments, so do the tax payments.
"It was like a temporary inconvenience, but now a permanent improvement," W. Kevin O'Donnell, the executive director of CAN DO, said.
More than a decade ago, 1,500 acres assessed at $31,000 in CAN DO's Humboldt Industrial Park went into a KOZ. Since then 1,000 acres have been developed, and they now are assessed at $4.6 million.
"I'd say that's a pretty good deal," O'Donnell said.
So far the companies such as OfficeMax that moved to Humboldt have remained even though the tax breaks expired.
After the KOZ program began in Humboldt, buildings constructed totaled 7 million square feet and represented an investment of nearly $600 million, as of 2010. The businesses now pay $4.6 million in property taxes and employ 4,360 workers who pay $2.3 million in wage taxes.
Parcels on the 500 acres that remain undeveloped were re-enrolled in a KOZ until 2018.
Schuylkill County Administrator Mark Scarbinsky said KOZs brought $750 million in investments to Schuylkill and Carbon counties, where he oversees the program. KOZ helped companies create or keep 3,000 jobs and added $4 million of taxes to the counties, school districts and local governments.
Some properties in Schuylkill and Carbon remain off the tax rolls through 2013 or 2018, Scarbinsky said.
The projects already back on the tax rolls include a distribution center for Big Lots on 175 acres in Tremont Township and the Sara Lee center on 40 acres in the Highridge Business Park.
Other projects are on CAN DO's land in Humboldt Industrial Park, which is partly in Schuylkill County and partly in Luzerne County.
"In terms of job creating, I think CAN DO created some of the most successful job numbers," Argall said.
But the senator said smaller counties lack industrial development groups like CAN DO and haven't been able to take full advantage of the KOZ program. While money currently isn't available in the state budget, Argall would like to provide financial help for counties that want to share industrial recruiters. The bill renewing the KOZ program reserves at least three of the 15 new sites for smaller counties, he said.
Argall said jobs aren't the only payoff from KOZs.
At the Flatiron building in Tamaqua, 20 jobs resulted after the building entered a KOZ, but a project there also improved the look of the borough's main intersection.
"Someone bought it, painted it," Argall said. "What was once most blighted is now a subject not only of jobs but community pride."