Phoenixville Borough Council cuts tax abatement short following growth

PHOENIXVILLE >> A borough ordinance designed to help spur new growth and development through a tax abatement has been cut short, borough council decided Tuesday night. Officials say the ordinance did its job and is no longer needed.

In a 7-0 decision, council approved an amendment that accelerates the expiration clause of the borough Local Economic Revitalization Tax Assistance ordinance. The ordinance was scheduled to end in 2020. It will now end July 31, 2017.

The 10-year LERTA ordinance, adopted in 2010, is a tax abatement meant to incentivize development in the community, Borough Manager Jean Krack said. This new council decision ends the ordinance after seven years, instead of the full 10 years the borough could have employed.

“We had all of the former steel site property under the LERTA in hopes that we could get new development going on,” said Krack. In 2016 and 2017, Phoenix Village and Riverworks took advantage of the abatement. “That’s 625 new apartments, 30,000 feet of commercial space. It’s a significant investment in new persons coming into the community.”

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The downside of a tax abatement though is the borough must provide services to these newly developed areas without benefitting from the full taxes to cover the costs. Property taxes increase 10 percent each year until they reach the new assessed amount in the 10th year of the LERTA. That means neither Phoenixville, the school district or the county will receive the full taxes for Phoenixville Village and Riverworks until 2026 and 2027, respectively.

With the two communities now in place, council and staff felt a tax abatement was no longer necessary, Krack said.

“We’re of the belief that anything that comes in (now) should be part of traditional growth model,” he said. “(The LERTA) accomplished what it was supposed to do, which was jump start revitalization.”

As for why council and staff felt now was the right time to end the ordinance instead of letting it run the full 10 years, Krack said it came down to different people having different points of view. Some believe tax abatements jump start growth, while others consider them a giveaway.

“We had three years left, we believe we’ve grown,” he said. “We want to be able to afford police services and other programs as they come in. We felt it was not necessary to rely on abatement programs.”

Krack compared it to paying off a loan.

“If you could pay off a loan early to save on interest,” he said, “you would do it.”