Luzerne County Council weighs proposed tax break for Hazleton project

Luzerne County Councilman Robert Schnee said a proposed project on a nearly 400 acre tract of badly scarred mineland is a “once-in-a-lifetime opportunity” for landlocked and financially struggling Hazleton.

“It’s very risky, and I applaud you for your commitment to the city of Hazleton and the people of Hazleton,” Schnee told Bethlehem-based project developer Robert Kiel during a 45-minute council work session discussion last week about his request for a tax break.

Kiel told county council his company — Hazleton Creek Commerce Center Holdings LLC — will invest $450 to $500 million in private funds on the project, which includes state-mandated environmental reclamation work to cap a section of an old city landfill and relocating and capping ash that had been dumped there in the 1940s or 50s.

More than $10 million must be spent bringing in one of the utilities alone, and there are costs for extensive earth moving, building construction and roadways that will remain privately owned instead of burdening the municipalities involved — Hazleton and Hazle Township, said Kiel and his attorney, Raymond Rinaldi.

Hazleton Creek plans to construct five buildings totaling 5.5 million square feet, ranging from 550,000 to 2.2 million square feet at the site along Routes 309 and 924 that had been used for both surface and deep mining in the past.

Kiel asserted it will be the largest single private investment in the county.

Schnee said nobody else “will be putting that kind of money out.”

“I will tell you, there’s a good chance if I don’t go through with this project, you’ll be sitting on it for another 50, 60, 70, 80 years. You’ll get nothing again,” Kiel said.

Council won’t vote on the request until January, which will allow time for possible negotiations about an alternate proposed tax break structure.

Hazleton Creek is seeking full county real estate tax forgiveness for a decade on new construction — not the land — under Local Economic Revitalization Tax Assistance, or LERTA, legislation intended to spark development in areas local governments have deemed distressed.

Several council members warned the developer they likely would only support a break that provides the county with some payment on the buildings during the decade.

All three other taxing bodies — the township, city and Hazleton Area School District — have approved the full 10-year tax break for the project. However, the municipalities will receive revenue from building permits, and the school district negotiated an agreement to receive $30,000 annually during the abatement period and demolition of a structure in Freeland.

Taxing bodies would continue to collectively receive $15,700 on the land throughout the break.

The developer projects total real estate tax payments will range from $3.5 million to $6 million annually after the LERTA expires.

If the county break is approved, the project is expected to begin construction this spring. Rinaldi said discussions are underway with Fortune 500 companies interested in locating warehousing and manufacturing facilities at the site. He projects 3,000 to 5,000 jobs will be created.

Rinaldi said more developers and companies are locating here because they are getting “pushed out” of the Allentown and Bethlehem market due to the rising cost.

But Kiel said he was drawn to this project for the challenge and the reception he received from Hazleton area leaders.

He said he has constructed about 70 million square feet in structures across the country in his more than 30-year development career, including 35 million square feet in Pennsylvania.

Kiel said he never sought or received a government tax break before because he believes they should be reserved for extreme cases, and he believes this is one of them.

The tax break is essentially passed on to tenants to attract them, he said.

“I am personally taking a very significant risk,” he said. “The city of Hazleton needs a lot of help, and this is a piece to help turn that city around.”

Councilwoman LeeAnn McDermott asked if he plans to hire local construction companies to complete the work.

Kiel said he always uses local labor first and plans to assign this project to a local contractor who completed work in Hazleton and the region and is familiar with labor trades in Northeastern Pennsylvania.

“That’s very good to hear,” McDermott said.

Councilman Stephen J. Urban asked Kiel why he selected a site that needs so much work.

Kiel said he developed more than 4,000 acres in his career, about 85% to 95% of it farmland. But one of his most fulfilling projects was bringing two tenants to the troubled former Bethlehem Steel site, he said.

“That to me was rewarding,” he said. ”When I came across this site in Hazleton, it became more to me about doing something that should be absolutely rightly done for the city of Hazleton.”

He compared it to the ripple effect of dropping a pebble in water, saying it would boost other businesses, such as eateries and gas stations.

“That’s why I’m putting my money into this site,” he told council.

Urban questioned if this region can sustain more warehouses due to growth in the industry in recent years, saying some are having trouble finding truck drivers and selectors. He noted the competition is helping workers by driving up hourly rates, which is a benefit for employees.

“I’m concerned about having enough people to work in these open box facilities and the competitive environment it brings with not having enough population here,” Urban said.

Kiel said he believes there are still enough unemployed to meet the demand and said he plans to work with area education institutions on job training to attract workers with the necessary skills. While recruitment of drivers is a challenge nationwide, he said the site he wants to develop has an advantage because more than half of the tract has “great rail access.”

“With the way the industry is going and how Covid-19 has changed things, we feel that will be a big plus for this development,” Kiel said of rail transport.

Hazleton Creek Properties owns four parcels at the site, while the remaining two must be purchased from Natural Coal Co. and Pagnotti Enterprises Inc.