With tax abatement on the back burner while Harrisburg navigates its lingering debt crisis, an interim solution for development in the capital city might be on the rise.
Last month, Harrisburg-based GreenWorks Development announced a partnership with Harrisburg Area Community College and plans to finish the former Capitol Heights townhouse development in Midtown as part of an exclusive student housing agreement.
Started by Baltimore-based Struever Bros., the townhouse project was left unfinished when the economy soured. GreenWorks stepped in and purchased the debt in 2010.
But lack of a new tax incentive program that phases in property taxes over a period of time — typically 10 years — kept the project from being financially viable, the developer said (see "A closer look at tax abatement" at www.CPBJnow.com).
"There are economic opportunities still available. It's just a narrower band of opportunities without tax abatement," said Matt Tunnell, senior vice president at GreenWorks.
GreenWorks is planning to invest nearly $1 million to finish three townhouses and construct four new ones along the 1600 block of North Fourth Street as part of the first phase of Midtown Campus Village. That project is slated for completion by Aug. 1.
The initial units will house 26 students. The Midtown project could end up housing about 400 students.
Since speculative space is risky in a down market, many developers, including GreenWorks, have said they are only looking at tenant-specific projects.
"This is a very specific deal with a specific partner for their specific need," Tunnell said. "Those kinds of partnerships don't emerge every day."
Tax incentives still need to be part of the city's long-term economic development toolbox, he added.
"That needs to happen if we're going to see any significant real estate development in the city," Tunnell said.
In the short term, student living in Midtown should drive retail and restaurant activity, developers and business leaders said.
"If the argument is do we want more young people and students moving in? Yes," said Eric Papenfuse, owner of the Midtown Scholar Bookstore. "Isn't that a solution for long-term growth of the city? It would be a huge boon for the retail businesses that exist and would attract additional businesses."
In fall 2001, HACC had 7,901 students in Harrisburg, according to the community college's enrollment reports. Last fall, Harrisburg students totaled 10,467.
Across all campuses, HACC enrollment has doubled since 2000.
"I think higher education institutions really support our cities on growth and development," said Sheila Ciotti, executive director of HACC's Midtown site.
About one-third of Midtown students surveyed last fall by the college said they were interested in student-only housing, she said.
Meanwhile, downtown student housing continues to grow around HU.
"It is too early to determine how this opportunity will play out in Harrisburg, let alone at other campuses," said Ron Young, HACC's vice president of academic affairs and enrollment management and provost. "I'm sure if student response is high, we would be open to replicating the model elsewhere."
Dan Deitchman, president of Cumberland County-based Brickbox Development Ltd., is currently adding a second student housing building for the university.
When Market View Place opens in the fall, HU will have housing available for about 180 students, said Eric Darr, the university's provost and executive vice president.
Deitchman developed the Residences on Market last year and plans are for a third student housing building in 2014, Darr said.
The university brought in more than 100 new students last fall and could add another 200 in August, he said. Eighty percent of those incoming fall students live more than 50 miles away, he said.
Like in Midtown, the student housing buildings are owned by the developer, which keeps them on the tax rolls. Harrisburg was home to about 90,000 people in 1950. Today it has a population of nearly 50,000, according to the 2010 Census.
"Certainly over the next five years we're going to need more housing," Darr said. "Where and how that housing gets built, it's a terrific opportunity to redevelop and reuse some of the buildings (downtown)."
With the right product, there is demand, said Brad Jones, vice president of community development for Harristown Development Corp., which owns and operates Strawberry Square.
"I don't know if there are a lot more demand generators on the student housing side," he said. "It remains to be seen if community colleges can be drivers of student housing."
International House Harrisburg, the nonprofit affiliate of Harristown, already is serving some of the student intern and transitional housing needs.
"The idea of creating more living units, whether rental or sale, whether students or young professionals, that's all a net gain for the city," Jones said. "The growth of new residential in Midtown and downtown will help secure a more stable retail base. Retail tends to follow the residential."
New development projects have all but dried up in Harrisburg since the city's last tax abatement ordinance expired at the end of 2010.
Projects under construction or nearing completion largely are the result of the abatement incentive sanctioned under the state's Local Economic Revitalization Tax Assistance program, also known as Lerta.
Many redevelopment projects also have benefited from the Keystone Opportunity Zone, a state-sanctioned tax incentive, usually for 10 years, that exempts developers and property owners from most city and state taxes in defined areas.
Discussions to renew the Lerta, which in the past phased in property taxes at increments of 10 percent annually for 10 years, have been few and far between as the ailing capital city works through reviews on asset deals to begin paying down its massive debt, which includes more than $326 million of incinerator debt.
A seven-year forgiveness period was approved by the City Council in December 2010, but that was found to be unworkable by Dauphin County. A revised version of that ordinance proposal has been worked out, said Jeffrey Engle, solicitor for the county Board of Assessment Appeals.
However, with the city school district dealing with its own debt issues, legislative attempts have languished. The council is not expected to take up the issue any time soon, said City Clerk Kirk Petroski.
Each taxing authority must sign off on a Lerta.
A tax abatement strategy is part of the city's approved preliminary debt recovery plan.
GreenWorks is one of several city developers that have said building in the downtown doesn't make financial sense without a new ordinance.
Tax abatement levels the playing field in cities like Harrisburg where taxes, parking and utilities generally are higher, developers have said. The cost of buying and redeveloping vacant and blighted properties also exceeds market value, they said.
Advocates argue that tax incentives would expand the city's tax base and keep tax rates down. They also help focus redevelopment efforts on the vacant and blighted properties, they said.
Critics have said the local governments give up valuable tax dollars for an extended period of time.
Harrisburg-based GreenWorks Development last month announced plans to invest nearly $1 million this summer to finish three townhomes and construct four new ones along the 1600 block of North Fourth Street in Midtown Harrisburg.
The project will be phase one of a student housing partnership with Harrisburg Area Community College. The development is known as Midtown Campus Village.
In total, GreenWorks owns 43 lots bounded by Hamilton, North Fourth, Harris and Fulton streets. Additional three- and four-bedroom units are planned in subsequent phases.
Meanwhile, Harrisburg University of Science and Technology has partnered with Cumberland County developer Dan Deitchman, president of Brickbox Development Ltd., to create student housing.
The first student-housing project was the Residences on Market, which opened in August. The developer is working on Market View Place, which will be in the former home of the Susquehanna Art Museum, also known as the Kunkel Building. That project is slated for a fall semester opening.
A third HU student-housing building is in the works for 2014, said Eric Darr, the university's provost and executive vice president. The university would like to keep student housing within two blocks of the academic center, he said.