City Center developer J.B. Reilly: The NIZ is working

Allentown’s most prominent builder praised the initial outcomes of rapid downtown development and expressed guarded optimism about the city’s future last week during a presentation to City Council.J.B. Reilly, president and CEO of City Center Investment Corp., said the company has invested $700 million in downtown development over the last five years following the creation of the Neighborhood Improvement Zone, a one-of-a-kind economic development tool that allows developers in a 128-acre area to tap some state and local tax revenue to pay project debt.A view from the 9th floor of the under-construction Five City Center in September 2018. ADP has leased over 243,000 sq. feet of Five City Center. Five City Center will feature an all-glass exterior, the building will be nearly 300,000 sq. feet with first floor retail space.
(APRIL GAMIZ / THE MORNING CALL/)Over the past five years, Reilly said, no other city in the nation has “experienced this amount of development or seen this kind of transformation.”“Sometimes we forget what it looked like a few short years ago,” he said.The presentation followed a recent round of criticism from city political candidates and advocacy groups claiming the downtown revitalization has exacerbated inequality and not done enough for surrounding neighborhoods.Allentown mayoral candidate Q&A;: Is the NIZ working, and how would you ensure downtown development benefits other neighborhoods?City Center has completed the majority of NIZ development so far, and Reilly indicated he wants to maintain the momentum. The company is planning to invest at least another $500 million in the coming five years, he said.RELATED CONTENT: Allentown NIZ diverted record amount of subsidies to developers in 2018, while returning less money to state coffersCiting Lehigh County assessment data, Reilly said City Center properties in 2018 generated nearly $5 million more in total property tax revenue than they were generating prior to the creation of the NIZ. This year, Reilly said he expects the figure to increase to $7 million — $5 million to the Allentown School District, $1.1 million to the city and about $900,000 to the county.Property tax revenue is not among the six local tax revenue streams captured by the NIZ and reallocated to developers for debt service (local tax revenue accounted for less than 4 percent of total NIZ revenue in 2018). Every city property owner has benefited from NIZ development, Reilly said, because it’s reduced their share of the overall tax burden. He speculated the city’s 27% property tax hike this year would have been higher if not for NIZ property owners’ contribution to the tax base.Reilly said he thinks Allentown can handle significantly more new office development. The 1 million square feet or so of office space City Center has developed since 2014 represents less than 5% of the regional office market total inventory, according to a Lehigh Valley Economic Development Corp. report.And according to a report by commercial real estate services firm Jones Lang LaSalle, about two-thirds of the office buildings are at least 30 years old and not conducive to the open floor plans and natural lighting younger workers desire.Because 20- and 30-something employees also want to live and work in urban areas, Reilly thinks companies increasingly will look to relocate or consolidate operations in cities like Allentown that are among the more affordable in the Northeast.Reilly said perhaps the biggest mistake City Center made in the early days of the NIZ was not building enough apartments. City Center is consistently turning away tenants because its apartment buildings are at full occupancy, Reilly said, and the residential population affects both the demand for office space and the success of retail and restaurant operations downtown.By next year, City Center will rent to nearly 1,300 residents in 856 units. It is building two more apartment complexes on Walnut Street between Seventh and Eighth streets.Reilly also took a stab at addressing some of larger problems lower-income residents in Center City and elsewhere continue to face.He questioned whether Allentown has an affordable housing issue so much as aging housing and homeownership issues. In order to continue improving neighborhoods surrounding downtown, Reilly suggested, the city should pursue public-private partnerships and other initiatives aimed at renovating the housing stock.While crediting city staff for ramping up code enforcement and its blighted property review process, Reilly recommended city leaders look into tax abatement programs as added incentive for homeowners to invest in their properties.Reilly said the “absolute biggest thing” the community can do is provide job training to residents. While such programs might not be driven by the city government, he said, officials can help by focusing on and advocating for sound policies.“As you think about public policy for the future, try to make sure policy is rooted in data,” he told council. “Understand what the actual problems are, and come up with solutions that address those problems.”Some residents at the meeting said Reilly was being too sanguine.Sharon Fraser, a Center City homeowner, told him and council she appreciated the progress downtown but feels too many of her neighbors are being left out. She argued much of the wealth created downtown is escaping the city and being reinvested elsewhere.“It’s important we don’t think just one way,” she said. “It’s time we take care of the people who live here and want to stay.”David Melman, an attorney who works downtown, thanked Reilly for playing a pivotal role in the city’s “astonishing” revitalization, but said he’s witnessed the divide between the “haves and have nots” grow.“We can do more for some of the people not benefiting as much at this point,” he said.READ MORE: Moody’s downgrades two ANIZDA bonds, concerned about overreliance on biggest businesses to pay debtMorning Call reporter Andrew Wagaman can be reached at 610-820-6764 or awagaman@mcall.com
Source: Morningcall