Luxor seeking 5-year tax phase-in
Apartment developer cites cost of environmental cleanup
The developer behind the planned “Lansdale Luxor” apartment building has returned with a new proposal to phase in the taxes on that property, a slow increase they say is needed to help cover costs of contamination cleanup below.
“What we’re looking at is a $34 million or $35 million investment by Westrum into the community. What we need is a LERTA,” said attorney Joe Clement.
Starting in fall 2018, developer Westrum has shown and refined plans for “Lansdale Luxor,” a five-story building containing 205 apartments, to be built east of Broad and Vine Streets and south of the borough freight station. Those plans were approved by the borough’s planning commission in late November after lengthy vetting, council’s Code Committee in early De
cember, and full council later that month.
Financing for the project has been part of the discussion since last September, when Westrum’s team approached the North Penn school board about a LERTA, or Local Economic Revitalization Tax Assistance Act incentive, to phase in the increased property taxes over the next ten years. At that time, North Penn’s board said they would be open to granting the LERTA, but for a period shorter than the proposed ten year phase-in, and asked the developer to have that conversation with Lansdale’s borough council first.
Clement and Westrum COO Jon Herzog outlined that background to Lansdale’s administration and finance committee on Feb. 5, arguing that the project had seen higher-than-expected costs due to underground contamination from prior industrial uses there, plus required relocation of a stream running through a corner of the property.
“It’s a challenging parcel to develop, because it is environmentally contaminated,” Clement said.
“It hasn’t been developed for some time, and really, its highest, best use isn’t as industrial, but as a residential, high-density development that will help finish off the core downtown, and provide some disposable income for the businesses downtown,” he said.
If the LERTA and all other needed approvals are granted, Clement said, construction is projected to start in August 2020, and run for roughly 18 months until completion in February 2022. The apartment units within the building would be roughly 65 percent one-bedroom, with about 133 units in the range of 600 to 955 square feet; about 23 percent or 47 units would be studios of roughly 575 square feet, and about 12 percent or 25 units would be two-bedroom units of 990 to 1,035 square feet, with rents ranging from roughly $1,250 to $1,750 per month.
Currently the property generates roughly $4,500 in real estate property taxes per year, Clement told the committee, an amount that would remain level if the LERTA is not passed and the project not built. The fiveyear proposed LERTA would phase in the new tax level by 20 percent each year, roughly corresponding to about $20,000 in increased tax revenue for each of the five years to Lansdale Borough, or a net gain of $1.2 million over the first five years.
“The misconception with LERTA is that it’s ‘tax free’ It clearly is not — it’s just an abatement program to help the developer be able to finance the project, especially in a very difficult environmental condition,” he said.
Over the first ten years of the project, total taxes to the borough would increase by roughly $700,000 to the town even with the LERTA, Clement said, in addition to roughly $650,000 in one-time fees from connecting to the town’s sewer and other utility lines, and an estimated $425,000 in annual revenue from electric and water customers in the building once it’s built.
“We just didn’t want to make too many assumptions. We wanted to show you some hard numbers,” Clement said.
Councilman Leon Angelichio asked if the developers had studied the possible traffic impact on Broad Street and the surrounding neighborhood from the new development. Clement said a traffic analysis was done as part of the project’s land development plan approvals, and changes to the entrance and egress to and from Broad Street were made after input from borough police.
Councilman Denton Burnell asked for details on the underground contamination, and Herzog said ground testing revealed an underground hydrocarbon plume below the property, which can be contained as the project is built, but has required roughly $300,000 so far on soil testing and evaluation.
“The good thing about our building is that the parking is on the ground level, so there are no units that are on the ground level. That helps provide another layer of protection,” Herzog said.
Angelichio asked about connections to pedestrian improvements like the adjacent Liberty Bell Trail, and Herzog and Clement said the building would have connections in its parking lot to the trail, and easy access to Main and Broad Streets just north and to the Pavilion shopping center just south.
“In reality, this is almost as close to the Pavilion, if not closer, than the core downtown, so we’re looking at it feeding both of those areas,” Clement said.
“I think, mentally, when people go out of the driveway, they’re going to head more to downtown because it just looks closer, but both of those areas should see some of that disposable income,” he said.
Councilwoman Carrie Hawkins Charlton asked what green energy features the building would use. Herzog said the lighting throughout would be energy-efficient LEDs, and the outdoor parking area would include an electric vehicle charging station, while the stream relocation will involve adding greenery as buffering from nearby houses.
“On the back side of that stream, we have to reforest that area, so there is a little area that we’ll end up planting heavily,” Herzog said.
“I would argue the whole project is green, because you’re reclaiming a space that’s doing nothing — it’s providing no value to the borough, of any kind,” Burnell added.
Angelichio asked about stormwater runoff from the site, and Clement and Herzog said water percolation tests revealed surprisingly absorbent soil, and said underground basins would be built below the parking area.
“We are able to infiltrate, even though there is contamination, since there are areas we can infiltrate the ground water,” Herzog said.
Neighbor Carole Farrell asked about the cost difference between early versions of the plans, which would have put the stream into pipes instead of rerouting it. Clement and Herzog said the added costs total more than $1 million, since the U.S. Army Corps of Engineers reclassified it from a ditch to a stream during the approval process, thus requiring an open channel with walls and buffering, rather than putting it in pipes.
Former councilman Jack Hansen asked if the developers expect much stress on local infrastructure from the project. Clement and Herzog said the customer demographics will likely yield few school age children from the development, and only a handful of emergency responses per year, while the building will feature security cameras indoors and out to provide more eyes on that part of town.
Hawkins Charlton asked if they thought the Luxor project would compete with the nearly-complete apartments atop the Madison Parking Lot, and the two said they saw the projects as complimentary instead.
“Once we’re open, they’re going to be filled, and we’ll just try to pluck from them,” Herzog said.
All three administration and finance committee members said they were open to hearing the Westrum team make the case to council for the five-year LERTA.
“I think it’s a great-looking project. I appreciate that you guys are doing what you’re doing,” Burnell said.
Angelichio added that residents as well as council members should be ready to ask for more specifics.
“Be prepared to ask questions. Westrum will be prepared to answer those questions,” he said.
Lansdale’s borough council next meets at 7 p.m. on Feb. 19 at the borough municipal building, 1 Vine St. For more information visit www.Lansdale.org.
“What we’re looking at is a $34 million or $35 million investment by Westrum into the community. What we need is a LERTA.”
— attorney Joe Clement