Allentown Parking Authority, City Center ask to redevelop bus terminal
With a previous financing plan in doubt, the Allentown Parking Authority wants to tap a line of credit reserved for public improvements to pay for the $3 million redevelopment of the LANTA bus terminal.
City leaders agree the project is vital to improving commuter safety, mitigating crime and beautifying a prominent downtown block. The financing request, however, spotlights the ever-blurring lines between public and private entities involved in downtown Allentown’s transformation.
The Allentown Neighborhood Improvement Zone Development Authority oversees the $10 million public improvements line of credit with Peoples Security Bank. It’s supposed to make debt payments using leftover NIZ tax revenue. But because tax revenue is somewhat volatile year to year, the leftover funds aren’t always available.
Enter City Center Investment Corp., the private developer responsible for most downtown development over the last decade.
City Center recently agreed to pick up the check whenever ANIZDA can’t pay down the Peoples Security line of credit. In return for its guarantee, City Center nowhas veto power over which public improvements are financed.
The Allentown Transportation Center project involves a property swap with City Center, which plans to build a 260-unit apartment complex along the 100 block of Seventh Street, where buses enter and exit the existing transportation center.
Earlier this year, City Center agreed to commit some of its development-generated NIZ tax revenue to guarantee the parking authority’s $3 million loan with ESSA Bank & Trust for the bus terminal redevelopment. On Monday, City Center CEO J.B. Reilly joined the parking authority in asking ANIZDA to use the public improvements credit card instead.
ESSA is concerned about extending additional credit to the parking authority despite City Center’s guarantee, parking authority Executive Director John Morgan said. The parking authority is already financing two large decks, in the 100 block of South Seventh Street and in the 900 block of Maple Street, and its operational revenue came in under budget this year because of the pandemic. Plus, the bus terminal redevelopment won’t create a source of revenue to repay the bank.
Because City Center’s guarantee uses NIZrevenues, the ESSA loan would also require approval from Moody’s, the credit rating agency looking out for investors in NIZtax revenue bonds. Reilly worries Moody’s may reject the arrangement until it gets a better sense of the pandemic’s impact on NIZ tax revenue.
The pandemic has exacerbated Moody’s concerns about the narrow base of taxpayers generating most of the revenue dedicated to City Center’s bond payments. Last year, the 10 largest taxpayers accounted for 88% of all revenue. If key taxpayers were to take a significant economic hit, City Center would struggle to make bond payments, Moody’s wrote in a Dec. 9 report,. It suggested the developer should be careful about taking on more obligations.
The bus terminal redevelopment project can avoid these hang-ups, Morgan and Reilly argued, if it’s instead financed using the line of credit reserved for public improvement projects. City government officials and LANTA’s executive director joined them in pitching the project as a crucial public improvement.
The Allentown Transportation Center serves as the primary hub for the LANTA network of bus routes. Prior to the pandemic, approximately 3,000 transit riders boarded or exited buses at the terminal daily.
The new terminal would feature a center island for pedestrians, and buses would enter and exit from Sixth and Church streets rather than from the 100 block of Seventh Street, along which City Center would build its 260-unit apartment complex featuring street-level retail space.
Peoples Security Bank would only extend the public improvements line of credit if City Center offered a 100% guarantee of payments, which it has, Reilly said, expecting the bus terminal would be among the projects benefiting. Next month, ANIZDAwilldecide if the terminal project will be included.
If not for the security offered by City Center, ANIZDA would have insufficient funds to complete previously approved public improvements, such as the redesign of Center Square or landscaping and sidewalk renovations along Hamilton Street. It would also be unable to consider future projects.
Reached Tuesday, ANIZDA board Chairman Sy Traub said City Center’s oversight of public improvement projects made sense given its loan guarantee and its significant role in downtown redevelopment. He also noted that City Center has often proven best-suited to manageNIZ public improvement projects, such as the downtown ArtsWalk.
“We have a wonderful public-private partnership, that’s the way I view it,” Traub said.
He acknowledged the criticism that ANIZDA has given its biggest developer too much sway, but said “optics have to give way, sometimes, to getting things done.”
“The city can’t afford to do it. LANTAcan’t afford to do it. The parking authority can’t afford to do it,” Traub said. “Fortunately, ANIZDAcan—andonlybecause City Center is willing to guarantee the loan. Andit’s in their best interest to do so because they have a lot invested in downtown. So, this makes sense all around.”
City Center’s main influence over public improvement projects going forward won’t be to identify them but to weigh in on financing, Reilly said. And that, he said, will be based on leftover NIZ revenues.
The guarantee, he emphasized, is “a pretty strong statement for City Center to make about its long-term confidence in the NIZ program.”