Booze used to boost development in NIZ, CRIZ

With tax season comes good news for some restaurant developers in downtown Allentown: The taxes they paid on alcohol last year can be recaptured and used to pay off their construction loans.

But their gain is the state's loss, critics note, as millions in newfound tax revenue are removed from the public coffers.

The gaggle of new restaurants that opened last year in Allentown's Neighborhood Improvement Zone around PPL Center can file for the first time to apply the 24 percent tax they paid at state stores to their building debts. And the benefit, which the state Department of Revenue spelled out in guidelines in November, doesn't just apply to Allentown's NIZ.

It also will help developers in Bethlehem's City Revitalization and Improvement Zone as they try to emulate the success of the NIZ.

"Twenty-four percent that's a big number and a big help when you're trying to make the financing come together," said Dennis Benner, whose proposed developments along Third and Fourth streets in Bethlehem's CRIZ could have as many as 10 restaurants. "It's really important that the state has made this decision."

Giving developers access to the alcohol tax money is appropriate, said state Sen. Pat Browne, R-Lehigh, who wrote the NIZ law. That money wouldn't exist, he noted, if not for the restaurant and bar sales inside the NIZ.

"This is not a windfall for those developers, and it's not a change in the law," Browne said. "It was in the law, and always the intent of the law from its inception."

It's a tax some developers worried they could not tap because it was generated outside the special taxing zones, but they were reassured last fall after the Department of Revenue reviewed the matter. The state hasn't made any major change but clarified the intent of the NIZ law adopted in 2011, Browne said.

Most state tax revenues generated within the 127-acre NIZ can be harnessed by the property owner to pay off building projects that create jobs. It's perhaps the most generous tax incentive ever offered by Pennsylvania and has spurred $1 billion of new development in Allentown, including a hockey arena at Seventh and Hamilton streets.

It's been so successful that it served as the model for similar tax zones in Lancaster and Bethlehem, where the CRIZ features similar tax incentives, with a few added restrictions.

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Booze used to boost development in NIZ, CRIZ