In Harrisburg, tax incentives could build on development momentum

Six of Harrisburg’s 14 census tracts are designated as qualified opportunity zones, opening up large swaths of real estate across the capital city for new investment.

They include most of Harrisburg’s downtown area south of Forster Street, South and Central Allison Hill and the neighborhoods along the Cameron Street industrial corridor, extending north along the railroad lines around HACC and Wildwood Park up to Linglestown Road.

The zones also push into parts of Midtown above Forster Street with two smaller tracts that run largely between Susquehanna and North Seventh streets and up to Maclay Street, which leads to Cameron Street and Interstate 81.

“I think there are opportunities in each of the areas in their own way,” said Shaun Donovan, director of regional workforce partnerships for the Harrisburg Regional Chamber and Capital Region Economic Development Corp.

But investment funds planning to tap the federal program aren’t pouring capital gains into Harrisburg yet. And some people aren’t convinced the program will have a big impact in cities like Harrisburg.

Donovan has been fielding exploratory calls from national investment groups about Harrisburg, but most, he said, have not been forthcoming on their parameters for properties or businesses they see potential to invest in.

Impact up for debate

J. Alex Hartzler, managing partner in Harrisburg development firm WCI Partners LP, said he’s not sold on the idea that opportunity zones will “move the needle” compared to other popular incentives, such as New Markets Tax Credits, another federal program designed to encourage investors in low-income areas.

Developers often have to spend more to restore vacant and blighted properties than they can expect to earn back in rent. Tax incentives help offset costs so developers can keep rents in line with what a local real estate market can support.

The federal tax credits and other state grant programs, like the Redevelopment Assistance Capital Program, or RACP, help overcome financing deficits and make projects viable, Hartzler said.

“This is not that,” he said of the opportunity zones. “This feels to me more like a tax-shield device for people who already made their money. It’s not clear to me that people with capital gains really want to invest.”

Hartzler said he would have preferred to see the federal government double the size of the New Markets program, a $3.5 billion program.

Nonetheless, Donovan and other local developers expect opportunity funds targeting Harrisburg will look to build on the momentum in areas such as the city’s downtown and Midtown sections.

“It’s easier to follow other investments,” Donovan said.

They include a mix of new apartments, mixed-use projects and plans by Harrisburg University of Science and Technology to erect a new educational tower at Chestnut and South Third streets, which is in one of the designated zones. There also are state plans to reduce flooding along the Paxton Creek, which could open up hundreds of acres around the Harrisburg Transportation Center and along the Cameron Street corridor for development.

But many projects have been occurring because of other local tax incentives, including the city’s tax-abatement program.

The city’s improving financial position after near bankruptcy earlier this decade also has boosted confidence, as has construction of a new federal courthouse at North Sixth and Reily streets and of a new Pennsylvania State Archives building nearby. Both are in an opportunity zone.

Those projects and other factors are likely to drive investment in Harrisburg.

If some business comes because of the opportunity zone, more local people will start to take notice of it, said Harrisburg real estate agent Wendell Hoover of Iron Valley Real Estate.

But so far, he said, “It’s not on a lot of people’s radar.”