Nearly two years after Harrisburg Mayor Eric Papenfuse first proposed it, the Harrisburg School District has approved a new, ten-year tax abatement program for residential and commercial development in the city.

As reported by The Patriot News:

The program would provide a 100-percent tax break for 10 years to improvements on residential properties citywide. It also would provide at least a 50-percent tax break for improvements or new construction for commercial properties for a decade. Depending on the number of permanent jobs created, commercial developers could earn a higher tax break of up to 100 percent.

The tax abatement program that is being considered in Harrisburg is authorized under the Local Economic Revitalization Tax Assistance Act, or LERTA. LERTA is available to municipalities throughout the Commonwealth and is intended to spur the development and redevelopment of qualified parcels of real estate by offering targeted real estate tax exemptions on new construction. The program only exempts from taxation the value of the new construction; the owner continues to pay all existing real estate taxes. No other taxes (federal, state or local) are affected by the program.

To take advantage of the program, each taxing authority in the jurisdiction must separately designate the particular area as a LERTA zone. For Harrisburg, that means the City, the School District, and the County governmental bodies each much approve it. It’s not an all-or-nothing proposition; each taxing authority is autonomous and exercises independent authority in determining whether to create a LERTA zone. Thus, to achieve complete tax abatement of a particular property in the City, all three of the taxing bodies must separately approve the creation of a LERTA zone that includes the property.

The ten-year abatement being considered in Harrisburg is the longest-term benefit that can be granted under LERTA – although shorter terms can be used.  The governmental bodies can also provide for any portion of the new construction to be exempt. The most common exemption schedules include: a complete, 100% exemption for each year of the LERTA designation; or a staggered “phase in” of the taxes on the value of the new construction (e.g., 100% exempt in year 1, 90% exempt in year 2, etc.).

With the School District’s approval of Papenfuse’s 10-year abatement plan, all that remains now is for the Dauphin County Commissioners to approve it.  The abatement program could start as early as 2017.