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LERTA: Hot word in tax abatement

With less state funding and more competition for those limited funds, local economic development officials have been looking for new financial incentives to lure business to the region.

They may have found it in a program that’s been around for decades.

The Local Economic Revitalization Tax Assistance Act has been on the state books since the 1970s, but midstate development officials recently have dipped into its magic tax-forgiveness waters, supporting the approval of a number of LERTA property designations.

Lebanon County officials have approved two LERTA designations in the last six months, the north end of Lebanon was approved as a LERTA district in 2012 and Lebanon Mayor Sherry Capello is hoping to expand the designation to other parts of the city, development officials said.

“It’s the new buzzword,” said Susan Eberly, president of the Lebanon Valley Economic Development Corp. “Taxes are very big things to companies. They want to know how they can bring their company to an area and make sure it is still profitable. LERTA is one of those ways.”

LERTA forgives taxes on property improvements on a sliding scale for a period of up to 10 years, depending on the local agreements. The three local taxing bodies — the municipality, the county and the school district — are all asked to approve a LERTA designation, which, depending on the local ordinance, can be for a specific property or a geographic area. The three taxing bodies do not have to agree on the LERTA, and separate taxing bodies can apply LERTA designation without the others.

A LERTA is attached to the property or an area, not the property owner, so that once it is approved by the taxing bodies it stays with the property regardless of a change in ownership. As long as whatever company comes in fits LERTA criteria, it is eligible for the LERTA program.

The property owner continues to pay taxes for the unimproved property through the duration of the LERTA, but the taxes on the improved property are partially forgiven. For a 10-year plan, the owner would pay no taxes on the full improvement taxes the first year, 10 percent the second year, up to 90 percent the final year, then full taxes after that.

Plans can be tailored to what a taxing body is comfortable with, however, and that plan is controlled by the local governments.

“That’s the nice thing about the LERTA law,” said Darrell W. Auterson, president and CEO of the York County Economic Alliance. “It can be very flexible. And it’s one of the few locally controlled type of incentives.”

While areas of downtown Harrisburg, Lancaster and York have held LERTA designations for years, the practice hasn’t been as popular outside the cities. Harrisburg’s LERTA designation expired in 2010, and the city’s Strong Plan recommends renewing it. City, school district and county officials have been discussing the terms of a possible LERTA renewal.

Michael Sadowski

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