Cocalico School Board OKs tax break for UGI

By on June 21, 2017

The Cocalico School District followed the lead of its municipal neighbor, agreeing Monday to give UGI more than a 50-percent tax break over the next 10 years if the utility moves its headquarters to an undeveloped parcel adjacent to Route 222.

A proposed, 100,000-square-foot building in East Cocalico Township would house 300-plus UGI employees, providing “operational synergies” for the energy provider, UGI Vice President Kent Murphy told the school board.

But the company faces several expensive environmental and engineering obstacles that it says would make relocating to the 32.7-acre tract less feasible without a tax break.

Earlier this month, the East Cocalico Township supervisors agreed to certify the property on Colonel Howard Boulevard a LERTA site, entering it into a state program intended to spur development at blighted or economically disadvantaged sites.

If it builds on a LERTA property, UGI would pay no new taxes on any development in the first year, and would see its obligations phased in slowly over the next nine. The utility would, however, continue to pay taxes on the land’s assessed value.

Cocalico Superintendent Dr. Ella Musser said the district has long aimed to attract more businesses to the area, which draws 68 percent of its revenue from residents through real estate, earned income, and other taxes. More businesses, Musser said, would help shift the burden in the long-term.

With member Randall Renninger absent, the school board voted 8-0 to approve its own LERTA resolution, essentially waving $3.173 million in tax revenue over the next decade.

Murphy said they the township’s LERTA approval waives $285,000 during the same period. The county, which has yet to hear a formal LERTA request from UGI, could potentially give up $519,000 for a total of $3.97 million in savings to UGI.

But Murphy points out the utility will pay $3.476 million to the three jurisdictions in those 10 years, revenue none will see if the land remains undeveloped.

Paula Leicht, an attorney for UGI, said the site has been zoned for light industrial use since 1975 but other potential builders found it “prohibitively expensive to consider developing.”

“This really is an appropriate use of the benefit of the (LERTA) act,” she said.

Business Manager Sherri Stull said she researched the LERTA cost savings given different valuation scenarios with guidance from county officials and the district’s engineering firm. She found the per-year break to UGI fair, considering the district gave $2.3 million in rebates to local landowners through the state’s Clean and Green program last year.

“This is a utility that brings a lot to the table for us,” Stull said. “When I look at the numbers, it makes sense to me.”

Even before UGI entered a purchase agreement with Reading Hospital, which currently owns the parcel next to Pepperidge Farm, Stull and Musser were considering LERTA as a possible tool to facilitate commercial growth in the Cocalico region.

Musser said the addition of UGI, with its long-standing success and a healthy outlook, will bring jobs to the region and could attract other new businesses too. UGI will extend utilities and upgrade the intersection with Pepperidge Drive, costly endeavors that have likely discouraged others from developing what board member Doug Graybill called a prime parcel with access to the Pennsylvania Turnpike.

Land development and construction, still in the planning process, would cost an estimated $23.8 million. Officials previously said they would break ground late in 2017 and move in during 2018.

In 2019, UGI would pay 10 percent of the assessed value on the development. Each year after would bring an increase of an addition 10 percent, with 100 percent of the tax bill-about $700,000 for Cocalico schools-due in year 11 and every year following.

Not everyone was pleased with the approval. Stevens resident Ken McCrea attended a previous meeting and the one Monday night asking the board to limit the amount of relief provided to UGI. While the utility asked for a 10-year break, municipalities can offer a shorter tax-advantaged time frame.

McCrea argued that UGI low-balled its valuation by several million dollars and that the tax break was unnecessary given the company’s success. UGI Corp. reported net income of $364.7 million for 2016, up from $281 the previous year.

“The LERTA tax break goes pretty much directly to their bottom line,” McCrea said. “That possibly represents a conflict of interest if any board members own stock or have a mutual find that owns stock in the publicly traded utility.”

Board members did not respond to McCrea’s concern about any personal benefit they might gain from the approval.

But Musser later said UGI has a solid reputation for supporting local schools’ education foundations and Cocalico “won’t forget that.”

 

 

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