Sunday, August 1, 2010
General Dynamics- Tax Free Scranton Site Comes With Earmarks Too!
Today's Times Tribune features a news analysis article by Josh Mrozinski detailing that 1,204 properties in Scranton out of 27.037 enjoy tax-exempt status. One of those properties houses General Dynamics, a self described, market leader in business aviation; land and expeditionary combat vehicles and systems, armaments, and munitions; shipbuilding and marine systems; and mission-critical information systems and technologies. The Scranton facility is listed as a "Land Systems" plant.
Between 2006 and 2009, mammoth defense contractor General Dynamics secured more than $380 million in government contracts for its nearly 700,000-square-foot facility on South Washington Avenue in Scranton.
With an assessed value of more than $5.5 million, the former Chamberlain Corp. property would generate nearly $694,000 annually in taxes for the city, or about $2.7 million over four years. Lackawanna County and the Scranton School District would annually receive about $220,882 and $603,529, respectively.
The Virginia-based multibillion-dollar contractor pays no property taxes on its Scranton facility, however, because the land is owned by the federal government, rendering it tax-exempt. It also does not pay the city's mercantile tax, which exempts manufacturers. General Dynamics is also exempt from paying sales tax, because it makes products for the federal government.
Aside from being off the tax rolls, the facility, which employs 349 people, has cost the city in additional services, including heightened police protection after the Sept. 11, 2001, terrorist attacks, Mayor Chris Doherty said. The mayor said he plans to approach the company about making payments in lieu of taxes, a longstanding issue in the city that was thrust back into the headlines by city council's recent clash with the University of Scranton over an easement needed for a $33 million dormitory project in the 900 block of Mulberry Street.
The university withdrew its request for the easement after council made approval contingent upon the school increasing its payment in lieu of taxes. The university raised its voluntary payment nearly 60 percent to $175,000 a year, far short of council's demand of $1 million over four years.
Council President Janet Evans and the lawmakers' solicitor, Boyd Hughes, did not return phone calls for comment. The council majority previously has said that it intends to seek payments in lieu of taxes from the city's tax-exempt organizations. Scranton School Board member Chris Phillips said the school district does not receive payments in lieu of taxes from any tax-exempt organization.
General Dynamics' position as a for-profit company operating on a tax-exempt property highlights the complexities of local property taxation and exemptions in Scranton. It also is part of a system in which regulations and limited resources hamper local authorities in their oversight of tax-exempt properties.
Mrzonski penned another article pointing out new legislation introduced in Harrisburg to address some of the concerns of municipalities with tax-exempt properties.
State Rep. Robert Freeman, D-136, Easton, has authored HB 2018 - known as the Tax Exempt Property Municipal Assistance Fund.
The bill would direct state liquor tax revenue to a fund for municipalties to offset revenue lost on tax-exempt properties.
The measure is a "very reasonable use of the money" because the tax is no longer used for its original purpose, rebuilding Johnstown after disastrous flooding in 1889, Mr. Freeman said. He plans to reintroduce the bill in the next session.
The Senate Finance Committee is also considering a measure that would amend the state Institutions of Purely Public Charity Act. The bill, which was introduced by Sen. Wayne Fontana, D-42, Brookline, would allow local governments to levy an "essential services fee" annually on exempt property claimed by a purely public charity. The fee can't exceed $100 per every 1,000 square feet under the legislation.
Yesterday I wrote about Paul Kanjorski and the earmark he secured for SCHOTT North America despite the fact the company settled an EEOC complaint of sexual discrimination for $1.45 million last year.
A look at the same report from OpenSecrets.org shows that General Dynamics was a beneficiary of a 2.8 million earmark supplied by Paul Kanjorski for fiscal year 2010. For fiscal year 2009 there is a $1.92 million earmark to General Dynamics as well as $3.2 million for 2008.
While the property housing General Dynamics, a for profit company, enjoys tax free status the City of Scranton remains under Act 47 since 1992 losing out on millions in lost tax revenue. Taxpayers have funneled $380 million in government contracts to General Dynamics at the same time.
I am sure Kanjorski's district isn't the only one with this issue but he surely can't be blind to it either. I hear alot of chatter about KOZ but isn't this a similar situation?
Under Freeman's proposal General Dynamics would have paid $2.1 million to the City of Scranton while it earned $380 million in government contracts. Not a bad trade off. I am sure the Firefighter's Union which hasn't had a pay raise in years would benefit from such a requirement.