Mount Pocono Warehouse Developer Says Refusing Tax Relief Could Cost the Borough Millions

Changes Tune on  Whether Tenant is”Secured” & “SIgned”  – Claims ‘No LERTA, No Tenant, No Warehouse’

APR 1 2023, 8:15PM

“Mount Pocono Crossings” as depicted in the developer’s presentation to the Borough Council seeking tax relief for the massive project.

MOUNT POCONO – The developer of the proposed 1.2 million square foot warehouse on Route 940 in the borough wants to try again for tax relief. They warned that if property tax abatement were denied, the borough stood to lose millions in revenue and benefits from the project.

At the March work session of the Borough Council, representatives of Newland Capital Group, which acquired the property in 2022, argued in favor of granting the project LERTA tax relief.

LERTA, the “Local Economic Revitalization Tax Assistance” program, is intended to encourage development where it might not otherwise happen. As usually applied in Monroe County, 100 percent of the assessed value of the new development (but not the land itself) is exempted from property taxes in the first year. That exemption decreases by ten percent each year until the assessed value is fully taxed in year eleven.

Ty Newland, Newland Capital’s CEO, told the board that the tenant is a third-party logistics company servicing retail chains like Walmart, Costco, and TJ Maxx. Two years ago, he said, that officially unidentified tenant moved some operations to a “nearby” Poconos facility of 350,000 square feet. There they created 350 new jobs, according to Mr. Newland. That single tenant would occupy the entire warehouse they want to build, which they are calling “Mount Pocono Crossing,” and create 550 new full-time jobs in the process. (Those familiar with the project have told The Boro & Towne News that the tenant will be warehousing clothing.)

Tenant or no Tenant?

Speaking of the tenant, he walked back last year’s assurances of a “secured” and “signed” tenant.  This time around he said it was merely “located” last year, not “secured.” Introducing the project to the council at the work session, Mr. Newland said “we were able to secure – I shouldn’t say ‘secured’ – we ‘located’ a tenant who could utilize the entire 1.2 million square foot facility.”

In announcing the land acquisition last year, they were more definitive.

The developer’s Managing Director, appeared on a local television news station last year to tout the signed of a tenant to a seven-year lease of the as-yet unbuilt warehouse. (Screengrab of WYOU interview)

According to the Monroe County Recorder of Deeds, Newland acquired the former golf course property in late August 2022, for $10,562,930. Their press release announcing the acquisition said that before “closing on the land Newland signed a 7-year lease with a tenant who will fully occupy the 1.2 million square foot building upon completion.” Around the same time, Rocio Budetta, Managing Director for Newland Capital Group, appeared on local television news confirming “it has a tenant in place for at least a seven-year lease.”

They closed on the land over two months after LERTA treatment for this project was rejected. In June, the Pocono Mountain school board was asked to hear tax break requests for several projects, including this one. The request died when no one from the board would make a motion on the proposal.

It was not until the March council meeting this year that the developer for the first time said that the lease announced in 2022 was contingent on tax abatement. They added that their construction financing is predicated on there being a lease in place. “It is unlikely,” they said, that the warehouse would be built absent property tax relief.

‘Why Start Destruction without LERTA?’ – ‘The Indiana Bat’

Council member Deb Fulton asked how the project progressed as far as it has without LERTA in place if that was such a necessary ingredient. Mr. Newland blamed a “prior developer” for the confusion. He said his company stepped in “last spring or summer,” thinking a LERTA deal was going to be handed over as part of the package. As is typical in these matters, neither the lease nor the financing documents are made public. The school board’s decision in June was public.

A resident asked, “why would you even start the construction – or the destruction – without having any approvals?” They said it was because they needed to avoid the “nesting season of the Indiana bat.” No one from the developer could answer the resident who shouted out near the end of the meeting, asking “if you don’t build the warehouse, will you replant the trees?”

Warehouse Revenue to Borough Over 20% of Current Budget

The Newland group listed for the borough all of the financial benefits they claim the warehouse would bring to the town – and therefore what it stands to lose if the developer does not get tax relief. They project $452,631 in annual real estate taxes alone going to the borough from this project (that is at 100%, which does not happen until ten years down the road). This is compared to the approximately $7,500 the borough receives annually on the vacant land.

Estimated net earned income tax revenue from the expected 550 workers adds another $12,540 (from year one) to the town’s coffers; the local service tax revenue of $52 per full-time equivalent worker adds another $28,600 each year (again, this is not reduced by LERTA).

With other miscellaneous receipts related to the project, the Newland group said that the borough stands to receive a projected total of $497,393 each year once LERTA expires. That is more than 20% of the entire 2023 Mount Pocono budget.

Other one-time benefits that would go away if the warehouse is not constructed include over half a million for the parks and recreation account in development fees, about $636,000 in the partial construction, with a right of way grant, for what the borough hopes will be an eventual access road from the Pine Hill intersection on Route 611 to 940 West, allowing commuter traffic to by-pass the Five Points intersection. The developer will also be committing $365,741 in cash to be used on the intersection improvements for that access, should it ever come to be.

Even With LERTA in Place, Town Would See $3 Million More Income Over Ten Years

The Newland group offered to begin the first year with a 90% abatement, instead of a full waiver. Under that scenario, the developer’s financial impact expert calculated that Mount Pocono would receive cumulative revenues of over $3 million during the ten years with LERTA in place. Net of expenses allocable to the warehouse, even after granting tax relief, according to the developer’s financial impact analysis, the town’s budget would enjoy a surplus of $2,364,734 over ten years. The Pocono Mountain School District cumulative take over the same period was projected at more than $8 million.

The developer’s fiscal impact analysis projects Mount Pocono could receive $3 million in additional revenue over the course of LERTA.

The developer told Mount Pocono that the first step was for the borough to place the property into the “LERTA Zone.” That would not grant relief, only allow them to request relief. Then, the borough, school district, and county would each make decisions on whether to grant the tax breaks.

No decision was made at the meeting as it was a work session. The developer was invited to submit a proposed ordinance placing the property in the LERTA Zone. No timetable was discussed for any further action by the council.

The Mount Pocono borough council meets in regular business sessions on the first Tuesday of the month and for work sessions on the third Tuesday. All meetings are at 6:30 pm on the second floor of the borough offices. The public is invited to attend and participate.