Benefits & Challenges

ofEconomic

Development Zones

Spring ConferenceApril 21, 2015

Panelists: Linda Goldstein Harrisburg Regional Chamber & CREDC

Pat MillerAltoona Blair County Development Corporation

Gail LandisGreater Reading Chamber of Commerce

Enterprise Zones and Keystone Opportunity

(Expansion) ZonesPat Miller

Altoona Blair County Development Corporation

PEDA Spring Conference

April 22, 2015

Program Intent (Legislative Goals)

• Increase Employment• Increase Capital Investment• Reuse of blighted properties and brownfields in

specific designated “blighted”, “abandoned” or “deteriorated” areas

• Stimulate “free-market” investment in the sites and properties through a combination of tax incentives, financial incentives and “REGULATORY RELIEF”

EZ Program

• Enterprise Zone Program established in 1983 as a stand alone program

• Program element within Keystone Communities Program and “is designed to encourage the creation of partnerships between the public and private sectors in communities to support joint local initiatives that foster growth and stability in neighborhoods’ and communities’ social and economic diversity and a strong and secure quality of life.”

Enterprise Zones

• Currently 13 designated zones with access to Enterprise Zone Revolving Loan Funds, NAP-EZ Tax Credits, Greater PIDA Participation ($2.25 million)

• 12 additional zones can still apply for Enterprise Zone Tax Credits (2 years after exit)

Pat Miller’s Opinion:• The #1 long term benefit of the Enterprise Zone

program is “Local Capacity Building”• Since 1990 – Enterprise Zone Grant to Loans

and RLF 54 Loans Paid Off $10,849,500.00 31 Current Loans $8,870,900.00 $19,720,400.00 Current Balance Due $5,514,082.00 Cash Balance $3,695,961.48 8 Loans Approved Awaiting Closing $3,825,000.00

The #1 Challenge: Funding

2013-14 $11.251 Million 2014-15 $6.1 Million 2015-16 (Gov.) $21.150 Million

• Note: Includes Housing and Redevelopment Assistance, PA Accessible Housing Program, New Communities appropriations including Main Street, Elm Street and Enterprise Zone)

Keystone Opportunity Zones

• Keystone Opportunity Zones were originally designated in 1999 (remember one & done) with expansion zones designated in 2001, with extensions approved in 2008, with new extensions, decertifications and substitutions approved in 2009, with more extensions and new designations in 2013.

• House Bill No. 559 – DCED may designate up to 10 additional KOEZ

Question:

• Who was responsible for the KOZ Program within DCED in 1999?

Answer:

The Honorable DAVID E BLACK, Deputy Secretary for Community Affairs and Development

You Know the Program• Business property owners and residents that are

located in KOZ/KOEZ are eligible to receive significant state and local tax benefits

• Projects in KOZ/KOEZ are given priority consideration for assistance under various state programs

• Thresholds must be met for existing businesses that move into KOZ/KOEZ’s.

Lessons Learned• Site targeted economic development can raise

employment and business growth if incentives are large enough to off-set any major site disadvantage such as lack of labor, lack of adequate transportation, infrastructure, environmental, distance to market

• Incentives for capital investment can sometimes work against job creation – technology investment in lieu of jobs

Lessons Learned• Job & firm growth in both EZ’s and KOZ’s tend to

be concentrated in smaller firms (less than 100 employees) and among firms already located in zones (retention and expansion strategies)

• Urban zones do better simply because they are in urban areas with better access to markets, transportation, labor, etc. Rural zones and subzones must contend with disadvantages such as need for access and infrastructure

Lessons Learned• Sites do best when the environmental issues are

dealt with up front (PA Industrial Sites Reuse Program)

• All zones can make use of modern web technology for site promotion, thus leveling the playing field regarding marketing

• Both EZ & KOZ programs are truly targeted economic development aimed at very specific but more importantly “Locally Prioritized Sites"

KOZ Example

Sheetz Brothers Kitchen / Sheetz Distribution CenterWalter Business Park

KOZ/EZ Example

American Eagle Paper MillTyrone, PA

KOZ/EZ Example

DeGol Industrial Center(Former Hollidaysburg Car Shops)

Hollidaysburg, PA

EZ / KOZ

Gardner DenverI-99 Industrial Park

Enterprise Zone

Sheetz Center for Entrepreneurial ExcellenceDowntown Altoona

Enterprise Zone

Devorris Center / Aaron BuildingDowntown Altoona

EZ Tax Credits

Vicini Realty, LLC (Former Casanave Building)

Downtown Altoona

East Juniata Housing KOZ

East Juniata Housing KOZ

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You are now entering . . .

THE

KEYSTONE

INNOVATION

ZONES

The KIZ Program, established in 2003, creates designated geographic zones to:

• foster innovation & create entrepreneurial opportunities

• align combined resources of educational institutions and the private sector to create knowledge neighborhoods (zones): – improve and encourage research– business development – technology commercialization efforts

he program shall provide economic assistance to KIZ companies for the purpose of improving and encouraging research and development efforts and technology commercialization efforts resulting in employment growth and revitalization of communities.

Keystone Innovation Zone Program

• 29 KIZs located in rural & urban regions

• over 91 institutions of higher education (IHEs)

• research universities to community colleges

Keystone Innovation Zones

Map Slide Pending

KIZ Coordinators

KIZ Program Focus

– accelerate the growth of young technology-based companies (less than 8 years old)

– spur the creation of high-paying, high-technology jobs attractive to recent college graduates

– provide micro grants to offset costs of R&D and interns

– create an opportunity to sell tax credits based on revenue growth for much needed capital

KIZ Companion Programs

• Keystone Innovation Grant (KIG)

Technology Commercialization

• Keystone Innovation Starter Kit (KISK)

Faculty Recruitment

• Keystone Innovation Network (KIN)

KIZ Tax Credit Program

• incentive program that provides tax credits

• for-profit companies less than 8 years old

• specific targeted industries segments (or sectors)

• within the boundaries of a zone

• total pool of up to $25 million in tax credits annually

• applications submitted by September 15 of each year

• tax credits awarded December 15 of application year

• used to offset certain state tax liabilities

KIZ Impact Keystone Innovation Zones Inception to date 2014 Calendar Year

Jobs created 7,567 461Jobs retained 20,574 593Businesses assisted 6,848 184PA graduates hired 2,266 379Patents filed 2,398 52Patents awarded 660 21Software copyrights filed 137 7Software copyrights awarded 74 0Licenses granted 29,614 137Licensing revenue $ 113,017,909 $ 2,219,075 New product innovations 1,071 76RDT&E expenditures $ 674,135,895 $ 15,414,479 Leveraged funding $ 3,519,841,188 $ 917,547,361

Tax Credits Awarded (2006 to 2014) $ 102,812,497 $ 17,001,702

KIZ Success Story

Urban Innovation21 (formerly the “Pittsburgh Central Keystone Innovation Zone or PCKIZ)

utilized KIZ incentives to spur areas economic revitalization projects including the Hill District, Energy Innovation Center

and Uptown sections of Pittsburgh.

Urban Innovation 21

Leverage funding & investments: – $687,275: PA KIZ – $1,612,500: its affiliates – $3,667,370: local, national and global foundations

CEO is a member of the National Advisory Council on Innovation and Entrepreneurship (NACIE)

Internship Programlargest and most diverse in the region;

60% women & 40% are African Americans

Citizen Science Lab

Community Based Entrepreneurship

KIZ Challenges

– currently no KIZ administrative-operational dollars– competing tax zones – requiring decertification– geographic zone coordinator’s resources– ability to offer additional programs– facilities and infrastructure limitations– engaging IHEs and obtaining reports – ensure KIZ company reporting

http://www.newpa.com/

Keystone Innovation Zone Tax Credit Program

You are now leaving all the

ZONESQUESTIONS