Penn’s Northeast President and CEO John Augustine made his case this week on why Luzerne County Council should reject a pre-determined real estate tax break schedule by project type.
Councilman Jimmy Sabatino and several council colleagues wanted to set and publicize acceptable discounts and fees in advance for warehousing and logistic, manufacturing and tech-based development.
Under the suggestions, warehousing and logistics development would receive the least favorable break.
Council held off on voting earlier this month because Augustine asked to weigh in on behalf of economic development entities, resulting in a lengthy presentation and many questions from council during Tuesday’s work session.
Augustine said a set schedule “threatens to derail the positive momentum that our economy is experiencing” and unfairly targets the logistics industry.
The average warehouse/distribution center wage here is now $19.75 per hour, plus benefits, compared to around $12 per hour five years ago, he told council.
These largely unskilled jobs must be part of the diverse mix added in this region to employ those not seeking higher education, he said.
Warehousing is the third largest business sector in the county, supporting more than 27,000 jobs and yielding $1.4 billion in wages, with an average annual compensation of $52,000, he said. Manufacturing and health care are the top sectors.
COVID-19 converted more older residents to online shopping, and supply chain issues prompted more companies to expand distribution centers to stock up on inventory, he said. Since COVID-19, there has been more development in Northeastern Pennsylvania than in the decade leading up to the pandemic, he said.
“Warehousing and distribution are industries that people love to hate, and they wonder why it’s here and growing. Yet these are the same folks that order online from Amazon and then expect the package in a day or even in a few hours,” Augustine said.
The industry also indirectly supports other jobs, he said, citing mechanical and electrical contractors, equipment mechanics, landscapers, snow removers, truck drivers, IT vendors and uniform suppliers among the examples. One area distribution center has a standing order for 100 pizzas from downtown Pittston every Friday night, he said.
“So how many more warehouses do we want or need? My answer is all of them. Until our unemployment rate is zero, we want a job for everyone in Luzerne County who wants a job, and we want those jobs to pay family-sustaining wages,” Augustine said.
He urged council to continue its current practice of evaluating and negotiating each tax break request on its own merits “without handicapping the process from the beginning.”
A county schedule could prompt developers to automatically look elsewhere, he said, adding that no competing markets have schedules.
Tax breaks are particularly warranted here for projects on abandoned coal mine land and other distressed sites that require remediation before construction, he said. Pristine land would not qualify for a break, he said.
While this region has an advantage at the crossroads of Interstates 80 and 81, it is also a greater distance from shipping ports than some competing markets, he said.
“Incentives play a vital role in allowing us to try and be competitive,” he said, citing million-square-foot buildings that cost an average $100 million to construct. “Even just $1 dollar difference in taxes per square foot will make or break a project.”
Another problem with a county tax break schedule is that the future use is often unknown, Augustine said. Speculative, or spec, construction of buildings before a tenant is identified is essential to attract developers because prospective companies exploring sites don’t want to wait for building permits and a lengthy planning and construction process, he said.
Augustine also said he wants to “dispel a myth” that companies will leave after a tax break expires. He said the companies are investing too much money in the properties to walk away and noted some have also expanded operations.
Council feedback
Council Chairman John Lombardo said he firmly believes “all development in this county is good development” and said the Pittston Area School District has averted tax increases due to the increased revenue from commercial properties that had previously received tax breaks.
Councilman Kevin Lescavage said he wants a Trader Joe’s grocery store chain here. Augustine said he cannot speak about specific potential companies but is confident additional retail development will materialize as competition from increasing jobs raises wages because retailers examine income and spending habits.
Council Vice Chairman Brian Thornton said he was struck by Augustine’s point that school districts and municipalities could unknowingly miss out on development if a county tax break schedule prompts investors to bypass this area.
Councilwoman Joanna Bryn Smith said she won’t say she is against warehouses, but she wants to see better jobs.
Augustine said economic developers are seeking and attracting all types of investment, but he will continue to argue that the warehousing industry “pays very well and more than a majority of other industries in (Northeast Pennsylvania)”
Councilwoman Brittany Stephenson said affordable housing is an increasing concern amid the growth in commercial and industrial development.
Augustine said affordable housing is an issue nationwide due to construction costs and current mortgage rates. He said there is “no magical answer” and recommended council activate a housing committee to identify resources and solutions, adding he would like to be part of that discussion.
Sabatino, who requested responses to a series of questions for Augustine, asked about complaints raised earlier in the meeting from citizen members of the Alliance to Stop the Line.
This group is opposing new PPL transmission lines through Nescopeck, Black Creek, Sugarloaf and Hazle townships. PPL said that project will provide additional power and support existing and future load growth.
An alliance representative asked county council to withdraw past tax breaks and reject future ones for southern county projects — a request that will also be made to the Hazleton Area School Board and municipalities.
Among the alliance’s concerns is a tax break approved earlier this year to construct a 15-building data center in Hazle Township.
Augustine said he cannot comment on the power line because he is not directly involved.
He said a tax break was warranted for that Hazle Township site because it is mine-scarred, adding that the breaks are only for “crap land.”
Augustine said several other data centers may be located in the county, which will result in significant future real estate tax revenue.
“Council should be giving a check to every resident in the near future based on the investment that we have on our desk,” he told council.
Councilwoman Patty Krushnowski said she is concerned about the environmental impact of data centers because they require “an awful lot of energy.”
Augustine said there is sufficient “capacity on the grid” to serve ones currently under discussion. New technology is reducing water usage through closed-loop systems to cool the data servers, he said.
He also argued developing mine-scarred sites is better for the environment because the projects must address polluted water run-off.
Councilman Greg Wolovich asked how much “quote-unquote crap land” is left for development in the county.
Augustine said he will work on a response. At this time, there are plans for 20 million square feet of potential new development in the Hazleton area, 2- to 3 million square feet in the Hanover Township area nd 2 million square feet in the Pittston area, he said.