The Da Vinci Science Center is building a new museum in downtown Allentown to offer three times the exhibit space and more interactive educational programs.
Lin Ericson, CEO, said the 60,000 square-foot facility on Hamilton Avenue between 8th and 9th streets, will offer exhibits only found in major cities.
The center, a $65 million project, is looking to the Allentown Neighborhood Improvement Zone Development Authority (ANIZDA) for help with reaching the funding goal.
Tuesday night, the public review committee recommended the project to the full board, which will vote on the allocation of funds at 5 p.m. Sept. 1, said Michelle Reid, executive assistant for the ANIZDA.
To date, the science center has raised $42 million toward the goad. Ericson said funding from the ANIZDA will be a major boost for the project.
The NIZ is a special taxing district created by state law in 2011 to encourage development in center city Allentown and other cities across the state. According to the NIZ website, projects get money up front and are granted tax relief to pay debt services on bonds and loans they receive for the projects.
Ericson explained that the taxes a business would normally pay get funded back to the company to pay down the loan. “We will pay the money back over nine years with the taxes we would normally pay to the state and federal government,” she said. “All taxes (except real estate) can be used to pay down the loan, even during construction.”
The science center, she said, will have three times more exhibit space with immersive programs in health care and manufacturing, the two major industries in the Lehigh Valley.
“We will also be recreating the Pocono ravine with river otters,” she said. The Lehigh River Shed is an important natural resource and the science center will be a good educational tool for children to learn about it, she said. “We will even have a 30-foot waterfall.”
There will be an exhibit where people can see themselves in a three dimensional 60-foot state, she said. “We are working with Olympus (Center Valley), a local health care company to educate people about the body,” she said.
“We have been working closely with the ANIZDA from the beginning. The nice thing is that we get the money up front. It’s a wonderful program,” she said. “Even as a non-profit, we pay taxes. That includes all the taxes we pay for contractors and caterers, almost everything.”
The science center will break ground in March and Ericson said she expects the new center to open in early 2024. “It’s a great location and walkable from neighborhoods. We project more than 400,000 visitors a year which will bring people into downtown during the day, which will boost other business.”
The current science center, 3145 Hamilton Blvd Bypass will remain open through the construction of the new facility. “We haven’t decided about the future of the location, but we might keep the facility for more programming space,” she said. “We are not slowing down at all. We are pushing as hard as ever. We want to inspire kids to be curious, just like Leonardo Da Vinci.”
Brinker Lofts in South Bethlehem, completed this year, is an example of one local redevelopment project that was funded through the federal Opportunity Zone program. (Submitted) –
In December, the U.S. Treasury Department and the IRS issued final regulations implementing the federal Qualified Opportunity Zones Tax Incentive. Now, many developers and investors are waiting to see how these regulations will help them with projects that will revitalize distressed areas.
Created by the Tax Cuts and Jobs Act of 2017, these zones offer capital gains tax relief for investments in economically distressed regions.
The program gives investors breaks on federal capital gains taxes in exchange for investments that support small businesses and housing projects in low-income areas. Investors can avoid federal taxable capital gains on investments in those areas if they retain ownership of a project for at least a decade.
These Opportunity Zones include areas in Allentown, Bethlehem, Easton, Reading, West Reading, Stroudsburg, Pottstown, Tamaqua, and Phillipsburg, New Jersey.
Slow start
Though Gov. Wolf identified the Opportunity Zones in 2018, since that time there has not been a large-scale rush of investments to capitalize on the program. It’s questionable whether the Opportunity Zone program will actually benefit distressed areas.
“I think that the program is potentially very impactful, but I think it’s too early to tell,” said Steve Bamford, executive director of the Allentown Neighborhood Improvement Zone Development Authority. “The final regs were anticipated by investors so there’s a real good chance that a lot of capital sat on the sidelines because of the uncertainty until the final regs were issued,” he said.
The final rules should provide clarity for opportunity funds and their eligible subsidiaries in determining qualification and levels of new investment in Opportunity Zones. They also provide guidance regarding the types of gains that qualify for Opportunity Zone investments, as well as gains that investors could exclude from tax after a 10-year holding period.
To qualify for the tax incentives, investors must invest in a qualified opportunity fund, a private-sector investment vehicle that puts at least 90 percent of its capital in Opportunity Zones. The model will allow investors to pool their resources, increasing the scale of resources going to underserved areas.
Charles Jefferson, principal at Jefferson-Werner LLC, a real estate development company in Allentown, said he has not had the opportunity to review the new regulations. However, he said the Opportunity Zone program has potential to revitalize distressed communities. Jefferson, through PNC Bank, invested $4 million in Brinker Lofts in South Bethlehem, the first Opportunity Zone project in Pennsylvania.
Jefferson completed that project this year, which involved renovating a former cold storage building on Adams Street between Third and Fourth streets into a residential project with 30 market-rate apartments with a courtyard and a retail space.
He also has plans for Bethlehem’s former Boyd Theatre on Bethlehem’s north side. He plans to select an architectural firm shortly that would transform the long dormant property into a $22 million apartment project with new retail space. That project too would benefit from funding through the Opportunity Zone program.
Bamford said he believes more capital will flow into qualified Opportunity Zone funds.
Revitalization options
Investors can capture other tax incentives, such as the City Revitalization and Improvement Zone incentive in Bethlehem and the Neighborhood Improvement Zone benefit in Allentown in addition to tax benefits from Opportunity Zones in these areas.
Brinker Lofts in South Bethlehem, completed this year, is an example of one redevelopment project that was funded through the federal Opportunity Zone program – PHOTO/SUBMITTED.
Allentown’s NIZ has helped rejuvenate the city by spurring more than $1 billion in new construction and renovation in downtown Allentown.
A community like Allentown has been able to demonstrate a successful track record in attracting investment and communities like that will continue to be attractive to investors, Bamford said.
“It’s possible that you could have real estate development projects that could utilize the NIZ and Opportunity Zones,” Bamford said.
The NIZ is not particularly useful for residential development projects but the Opportunity Zone program is, so the two incentives complement each other, he said.
Bamford said he has researched and read about Opportunity Zone projects in other areas of the nation and quite a few have been residential ones.
“Often, I am reading about activity in larger communities,” Bamford said. “If we do see more capital flowing into the qualified opportunity funds, you would think they would look at other markets like the Lehigh Valley.”
Benefit as an add-on
Jeff Brown, owner and operator of Bell Hall restaurant in Allentown is also founder and principal of Charles Street Capital, a real estate developer and advisory firm. He said he has looked at both the NIZ and Opportunity Zone programs and noted how the NIZ can change the fundamentals of a project.
Meanwhile, the Opportunity Zone program can make it easier to improve the return on equity, Brown said.
With an Opportunity Zone program, an investor has to have a project in mind, he added.
“I haven’t heard of any communities being benefited by it,” Brown said. “Those projects have to work on their own.”
Brown said he is not planning to invest in any Opportunity Zone projects right now. “I have looked at projects in South Bethlehem but we are not doing any right now,” Brown said.
Still, he thinks South Bethlehem could be good for Opportunity Zone investments.
“You’ve got to have a project all put together,” he said. “The Opportunity Zone is one way you get potential equity capital that you couldn’t get otherwise. They certainly can’t hurt, but someone has to be a project champion and put that together or a municipality has to have some capital improvement project in mind.”
However, he believes that anyone with a capital gain has an interest in Opportunity Zone projects.
“It’s not going to turn a loser into a winner, it will just add a little bit of gravy,” Brown said.
Jefferson said he remembers how investors sat on the sidelines when the government introduced another tax incentive program 20 years ago, the New Markets Tax Credit Program, which also was an incentive for investment in low-income communities.
The educational process for these incentives, including the Opportunity Zone program, involves getting the attorneys, consultants and accountants up to speed, which takes time, Jefferson said.
Though the federal government introduced the Opportunity Zone program two years ago, investors did not have clarity until the release of the new regulations in December, he added.
“You can’t judge success or failure in the first two years, given that fact,” Jefferson said.
There’s no question that the business of rental real estate is in the distressed areas that the Opportunity Zones include, he added.
“Everybody sits on the sidelines waiting,” Jefferson said. “Investors are notoriously cautious. They are going to learn how to structure the deal.”
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