Sunday, May 18, 2014

Its Official: One Billion Dollars of Development

Its hard to know where to start on an article like this.  The idea that Allentown, Pennsylvania could have brought in nearly a billion dollars of investment money even five years ago would have been laughable.  The city was on the ropes.  Not anymore.  Now Allentown is the place to be, its the place to go out, and pretty soon it is going to be the place to live.

The first place to start might be to address some of the negative criticisms.  There are a lot of questions about what will happen after the NIZ run outs.  First off, that is a long way down the road.  The NIZ is in place for 30 years and will drive development during that entire time.  Why?  First, you need an explanation of how the NIZ works.  The law is complicated, but essentially this is how it goes:

1.  NIZ taxpayers pay their rent as normal.

2.  That local and state taxes are sequestered at the state level and returned to the ANIZDA board.

3.  ANIZDA uses the money to pay off the construction loans of the new development.

When you zoom out, what the NIZ is really doing is creating a free market, it is saying, if you build within the geographical boundaries of this zone, you can use your own money to finance the construction of your own building---the state will bow out of the market.  That's smart.  That's a free market---that what hardcore Republicans and libertarians have been gunning for for years.  People like J.B. Rilley couldn't compete with all the tax breaks and incentives that had previously been going to the 'burbs, but, because Allentown now has a free market, he (and other developers can compete).

The consequence:  ONE BILLION DOLLARS in investment.  The best part is, there is no way the tax payers are left holding the bag.  Once the NIZ ends, tax revenue is returned to the state---the new real estate development should be totally financed by that point.

Once again, this is a huge win for Allentown.  Haters are gonna hate but they are now in the minority.  My generation, the millennials, want vibrant cities.  For all we care, the strip malls of suburbia and McMansions ought to decay into dust---it would look better anyway.

Great job Allentown.


  1. That is really a bunch a bull that is a free market. Public policy steered the tax advantage, and a few are taking advantage.

  2. "Haters are gonna hate but they are now in the minority."

    When you draw conclusions about what those who disagree with you think, you betray your own resentments.

  3. publius, what don't you understand? j.b.reilly was loaned $20 million by the arena authority before the any demolition or construction began. he used that money for the parcel purchases, and construction down money. that loan, and all subsequent debt service, $17 million, was financed by state tax diverted for that specific purpose, which is his private benefit. the NIZ is a no brainer for him, or any other developer connected enough to have the opportunity. i agree that allentown will be enormously more dynamic as a consequence, but your misrepresentation of the mechanism involved is very suspect. perhaps a disclaimer is in order, for whom do you work, and who are their clients?

    1. Also, I deny that I made any misrepresentation. I claim, candidly, that you are the one misrepresenting Allentown's new real estate free market.

    2. Mr. Molovinsky, I work for the current and future people of Allentown (but certainly not the city itself)---they are my clients though they do not pay me.

    3. Molovinsky is so lost in the past that he can't even see the future clearly, let alone the present right in front if him. That is why he has zero support for his election bid for Harrisburg. I will be shocked if he even gets enough signatures to be on the ballot come November. And why does he hate development so much? For a man who "loves" Allentown so much he moved out of it and can't stop bitching about it. Why does he not right a blog about the place he wants to represent rather than one that he can't? I am sure potential voters will see that his focus on them is secondary to a place in which does not even live in. And I am sure he will make some comment that I am an "anonymous coward" or something along those lines. But Mike guess whose else is anonymous? VOTERS!

  4. publius, anon 11:15 identity is well know antagonist and cyberstalker, you should delete his comment. if you wish to refer to this NIZ mechanism as "free market" that's your editorial privilege here on your blog, but by all other real estate definitions it's absurdly distorted.

  5. Defnition Of A Free Market:-- "... where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation."

    Merriam-Webster-- "prices are based on competition among private businesses and not controlled by a government."

    The NIZ meets none of these definitions of a 'free market'.

    Talk about government "intervention"!
    There was the initial threat of using eminent domain against those former merchants properties which had no intention of selling their properties prior.

    Therefore there's no possibly way you can base your argument that the NIZ development is based on a 'free market' If anything is directly the opposite of that.

    I'm also confused with your statement, "That rent is sequestered at the state level"?
    The business owners don't pay rent to the state government.

    "there is no way the tax payers are left holding the bag"
    Do you even know what your talking about? If any one or more of these go out of business they no longer will be paying taxes (which is used to pay the loans). Why do you think banks loaned this money to them in the first place? It was because the state of Pennsylvania guarantees the loans.(i.e. the taxpayers).So yeah taxpayers would be "left holding the bag".

    "Haters are gonna hate"
    This has nothing to do with favoring or not favoring the project. It has everything to do with taking taxpayers' money under the full force of the law then reallocating it to directly benefit 'private ownership'. Sure taxpayer's money might have been used in the suburbs and elsewhere that benefited developers, but never (before NIZ) was it used for properties not owned by the government (bridges, streets, highways, etc.)..

    For the next 30 years the NIZ developers taxes are creating a hole in the state budget by diverting all this money from the state's coffers. In essence taxpayers are footing the bill till the loans are paid off in the hopes there will be a return on investment that may or may not happen. Everyone screams about government pork. This just got to be the grand daddy of all the 'pork projects' Pennsylvania ever came up with!

    If you can't see that, there's no point in trying to further reason with to you.

    1. Like I said man, haters gotta hate. I think you just proved it with your absurd rant that has no relation to the real world.

    2. you are right though about the "rent" i meant to write "local and state taxes." I updated the article.

    3. A couple of quick replies. By your own definitions, the NIZ is a free market. Developers are free to contract with whomever they like, there essentially is no tax (since the tax is returned) nor is a subsidy received from the state. Regulations are minimal since the city radically loosened downtown zoning, etc.

      Eminent domain was not used and people were given SUBSTANTIAL incentives to relocate. Once that happened and the NIZ opened for business, there has been no government coercion.

      There is a Commonwealth pledge in the law, but, it relates to the bonds that were issued for the aerena not the real estate development. See sec. 1907-B.

      If you really want to see the motherload of pork, look at government subsidies to the suburbs.

  6. publius, if you're going to host ad hominem attacks against me, or anybody, by a notorius cyberstalker, i will not continue to interface with your blog. this individual is responsible, and brags about, the numerous blogs that he has encouraged to shut down.

    1. Dear Mr. Molovinsky, I understand where you are coming from but I think that people have a right to mostly say what they feel. I don't think that anything the poster said would shock the conscious of a normal man. If someone made a similar attack about me (they are already calling me pubicless over on Bernie's blog), I would expect that it should stay up. In fact, I would be disappointed if you were to take a comment like that down off your blog about me.

      I'm sorry that we disagree, but, I think that we both have some common ground in our rhetorical appreciation and nostalgia for Allentown, and I hope that you continue to dialogue with my blog and use this opportunity to confront to poster about why he is wrong.

    2. This comment has been removed by the author.

    3. That is what is wrong with you Molovinaky, you can't stand criticism but on a daily basis you throw it around with zero thought on your own blog. And now you want to run for state office? You better to learn how to take criticism quickly.

    4. Now boys (or boy and girl), play nice. You have both said your piece and I won't allow a continued back-and-forth off topic attack. You can each have one last comment, then, that's it. Thanks :)

  7. 1. Public policy distorted the market to cause funds to flow where they were not flowing. Of course, such policy decisions do happen elsewhere in many ways (highways, etc), but to say this happened due to a free market or that it continues to attract tenants and construction because of a free market is incorrect.

    2. $1,000,000,000 is a lot of money and not to be laughed at. It is 11 times greater than than the city's budget. It is $8,500 per citizen in Allentown. Very cool, but how has it rippled through the community? More important, as buildings open, will an appropriate number of dollars that flow from transactions remain in the community. The concept is called leakage. Ultimately, from an economic perspective, I certainly do wish to see how much leakage has occurred or eventually does occur. Leakage occurs because supplies come outside the city or employees do not live in the city.

    3. Given #2, ensuring that leakage is kept to a minimum requires that the $1,000,000,000 and follow up commercial activity is retained partially by those who live here, which means jobs and sales by local businesses. It is this latter point where public policy has failed. Since this was created by public policy who ultimately benefits? This is the question I want answered. In a free market that is fair and just, I do not care. Just participate as best one can with the skills they have or obtain. When policy steers benefits to a select few, as this project does, at the expense of others, then people have a right to be concerned. This latter point is the great mistake made by NIZ policy makers: from the beginning they ignored this topic and gave it lip service only after a few activists attempted to alter the balance.

    Development is both physical and human. A free market also implies that human development comes from personal diligence and industriousness. I get that. When it is impossible to participate in a free market because the field is tilted, no matter how industrious or how diligent, one is left out of the game, and told to go away. The NIZ and its participants are like a club, created by government edict, hoping that its rules will keep out the peasants.

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