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If that happens, a city official said it will "cripple" development and growth.
The school board will vote Monday on repealing the Local Economic Revitalization Tax Assistance program, or LERTA, effective Dec. 31.
LERTA, which provides graduated property tax abatement for new or expanding businesses, has been in existence in St. Marys since 1983. Over a five-year period, it offers 100 percent tax-exemption in the first two years, 75 percent in the third year and 50 percent in the fourth year. In year five, the business pays its full tax bill.
Any LERTA participation must be approved by the county, municipality and school district in which the business is located.
St. Marys City Manager Dave Greene received a letter from district Business Manager Cindy FinGado that had been sent to the Elk County Chief Assessor, John Samick, saying the LERTA application for the St. Marys Hospitality Association was placed on the board's Oct. 12 agenda for information only.
The letter said the board will consider adopting a resolution that will repeal the existing LERTA resolution at its meeting Monday.
After Thursday's school board workshop, FinGado said "the LERTA program served its purpose."
"We can't afford it," with the restrictions the school district faces under Act 1 concerning tax increases, she said. Act 1 limits how much a school district can raise taxes without putting the issue on the ballot for voter approval.
Asked why the decision was made to end the program so soon after the resolution is voted on, FinGado said, "It's not really quickly."
Board President Joe Goetz said directors have had discussions for several years on LERTA, beginning when Sheetz applied for LERTA when it was building in St. Marys. Sheetz later withdrew its LERTA application.
FinGado said it is not an issue of not being able to choose which projects receive tax breaks. She said the district understands that as long as it takes part in the program, any eligible business can be approved.
The St. Marys Hospitality Association, which will construct a hotel on Depot Street, was entered into the program.
Board member Patty Rezmerski said that with the problems the district is facing financially, it can't continue to participate in LERTA. Those problems, she said, include stimulus money being used by the state to provide required funding to school districts - which will leave districts short in the future - and the restrictions placed on districts when it comes to raising taxes.
"I think anybody that wants to come will come," Rezmerski said.
There haven't been a lot of LERTA applications in recent years, FinGado said. .
Jay and Fox townships, both in Elk County had LERTA at one time and they let their programs expire, FinGado said.
Board member Jim Baumgratz said the issue will be discussed Monday, but it is his opinion that the Keystone Opportunity Zone programs are available, so LERTA is redundant.
It doesn't matter if the board approves of a project; if it meets the qualifications, it has to approve it, he said.
Baumgratz said he doesn't feel eliminating LERTA will hurt economic development in St. Marys.
City council members feels differently.
"I think it's outrageous. The school district is losing nothing by accepting LERTA; they only gain," Councilman Sean Gabler said. "By backing out of LERTA, you only lose."
He said he is concerned that the school board may not understand the program and that it is different from the KOZ program, where tax money is lost when land is entered into it until the KOZ expires.
Under LERTA, the business continues to pay the current taxes on the property, only the improvements are eligible for the tax breaks.
"People think that when you give a company a tax break they will pack up and leave when it ends, but that doesn't happen," Mayor Sally Geyer said.
City Manager Dave Greene said although the city was contacted earlier this year about meeting with the school board to discuss the program, which he said they would be happy to do, the request never came. This time, the city wasn't asked; it was just told the district is voting on a resolution to repeal it.
Councilman Denny Nero said the city needs to get a letter to the school board before Monday and ask it to wait to vote on the resolution until the city can meet with the board and explain the program.
Not having the program will "cripple" the city, Greene said. Both the Best Western and the Comfort Inn received LERTA when they built and now they are paying taxes for the improvements. "It works," Greene said.
"The school district ought to start thinking about working for the community," Councilman Dick Dornisch said.
"There's no short-term loss, there's long-term gain," Councilman Rick Gabler said.
Ray Klaiber, executive director of the Ecomic Development Commission in St. Mary,s said he feels "The LERTA program is absolutely essential." He said the company gets a tax break at the beginning, but the taxes benefit the community in the future.
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Reported by JoAnn Seltzer, staff writer. E-mail:jseltzer@thecourierexpress.com.
