Did you know that if your redevelopment project is located on a "deteriorated property" there may be an opportunity for special tax provisions to encourage its development?
The Local Economic Revitalization Tax Assistance Law, 72 P.S. § 4722 et seq. (“LERTA”), allows local taxing authorities to exempt new construction in deteriorated areas of economically depressed communities and improvements to certain deteriorated property, including industrial, commercial and other business property.
In order for LERTA to apply to a property, each local taxing authority must, by ordinance or resolution, exempt from real property taxation the assessed valuation of improvements to deteriorated properties and the assessed valuation of new construction within the designated deteriorated areas of economically depressed communities. However, the municipal governing body must first identify the boundaries of the deteriorated area or areas during at least one public hearing where interested parties will have the opportunity to comment and provide recommendations concerning the boundaries. Of course, the boundaries may not be arbitrary and must take into consideration certain criteria set forth in the LERTA regulations.
The actual amount of taxes exempted shall be in accordance with the schedule of taxes exempted established by a local taxing authority, subject to the following:
- The length of the schedule of taxes exempted shall not exceed ten (10) years.
- The schedule of taxes exempted shall stipulate the portion of new construction or improvements to be exempted each year.
- The exemption from taxes shall be limited to the additional assessment valuation attributable to the actual costs of new construction or improvements to deteriorated property or not in excess of the maximum cost per unit established by a municipal governing body.
LERTA provides local governing bodies and developers with an effective tool to increase the opportunity for revitalization and improvement of deteriorating properties.