Our view: To fuel development, tweak Harrisburg tax incentive
Corporate welfare is rarely a good idea. It often leads cities and states to treat new businesses better than the businesses already within their borders, and the results can be less than impressive.
But we recognize there are situations in which well-designed government incentives can play an important role. Urban revitalization is one. Developers are understandably loath to sink money into cities where costs are high, challenges pile up and investment returns may be slow in coming.
Harrisburg is one of those cities needing some help. So, like its neighbors, both urban and suburban, Harrisburg offers a tax incentive known as a LERTA, which stands for Local Economic Revitalization Tax Assistance Act. The idea is to temporarily reduce the property tax bill for properties that are new or renovated.
The capital city had gone without a LERTA Program for more than five years before adopting a new one last summer. It was a smart move for a city struggling to overcome a near-bankruptcy, not to mention the aftereffects of the 2008 financial crash.
However, city officials added some questionable provisions that have made the LERTA incentive less than appealing to private-sector developers, as you will read in our story this week on the city’s LERTA program. Chief among them are requirements to hire city residents and pay prevailing wages.
It is understandable that Harrisburg’s leaders want to improve the economic prospects of their constituents – and that is certainly one reason why they were elected in the first place. But they over-reached when they decided to saddle developers with additional burdens even as they sought to confer greater benefits.
Harrisburg’s program is indeed more generous than those of its neighbors, including Lancaster. But so far, it has fewer takers, suggesting the negatives outweigh the positives.
The city appears to be forging ahead with its revamped LERTA program, holding seminars and handing out applications. But officials should pause for a second and listen to what the market is telling them. If they truly want a program that spurs development while creating well-paying jobs for city residents, they should go back to the drawing board.