Pennsylvania’s Favorable Tax Climate

22 Nov, 2013

By Rachel Duran

Businesses expanding and/or relocating to Pennsylvania will find a tax environment where taxes haven’t been raised in the last three years. Since Gov. Tom Corbett took office three years ago, the state has eliminated inheritance taxes on small businesses. The cap on net operating losses has been raised. The state has also eliminated the tax on corporate loans. The business tax appeals process has been overhauled. What’s more, the state offers a $5,000 startup business tax deduction.

The state’s economic development officials have clearly been busy building a pro-business climate. Additionally, programs such as Innovate in PA creates a pool of investment capital for entrepreneurs and startup companies. The pool expands funding opportunities in the state, including the Ben Franklin Technology Partners, which is also a venture investment program.

“We also have new programs called Discovered in PA and Developed in PA, which award grants to help companies expand; it looks for synergies and companies working together to expand their creative concepts,” says C. Alan Walker, secretary, Pennsylvania Department of Community and Economic Development.

Walker says Pennsylvania is also stepping up its international trade initiatives, increasing funds to World Trade PA, which lost some of its federal funding. This year, the state’s 30 trade representatives spent two weeks in Pennsylvania visiting with industry leaders throughout the state to learn what products could be exported to foreign markets.

Industries and Innovations

Walker says Pennsylvania’s fastest economic growth is along the Delaware River, which is the state’s border with New Jersey. The area sees a lot of logistics-related projects because of its location to the major metro areas of the Northeast United States.

The south central region of the state, north of Baltimore, Md., is attracting business expansions beyond the state line into Pennsylvania. In the northeast and southwestern regions of the state “we are seeing a huge expansion in the natural gas industry, which is the Marcellus Shale effect,” Walker says. “We are now the No. 3 leader in gas production in the country.”

Breaking things down to specific regions, Lancaster County continues with a nice balance of agriculture and manufacturing, with growth in the food processing sector. In Pittsburgh, the energy industry is thriving. “It is really the center of energy development in the Appalachian region,” Walker says.

In regard to industry announcements, Royal Dutch Shell has an option on a property in Beaver County, but has not made an official announcement that it will move forward with a petrochemical cracker facility. “If that project takes place, it will be a $5 billion project that will have a huge impact in that area of Pennsylvania, which was at one time a large steel producer,” Walker notes.

Pennsylvania’s industry clusters include technology, advanced manufacturing and materials, agribusiness, tourism, life sciences, film, and of course, energy. “In regard to oil and gas we have the infrastructure, pipelines, and the equipment to drill the wells and distribute the gas and oil once it comes out of the ground,” Walker notes. “We have a lot of new manufacturing coming out of that. Our manufacturers and consumers are benefitting from the fact that we have driven down energy costs in this state.”

Project activity in 2013 includes the relocation of PPG Industries’ administrative operations from Ohio to western Pennsylvania. The company, a manufacturer of glass, coatings and special materials, has two locations in the state in addition to the new operation. The company will retain 2,500 employees and create 309 new jobs.

This fall, Procter & Gamble announced a new warehouse project for Franklin County, which is near Harrisburg. The company will create 963 new jobs, investing $113 million in the project.

Manufacturing firms are doing well in Fayette County, says Michael Jordan, executive director, Fay-Penn Economic Development Council. Recent growth announcements include Gerome Manufacturing Co. Inc., a steel fabricator, which has consolidated its operations to the county, building a new 150,000-square-foot facility, investing $9.7 million in the project, with an additional $1.5 million investment to upgrade equipment.

Johnson Matthey, based in the UK, has located its first plant for the production of catalytic converters for diesel engines in Fayette County. They are running three shifts, employing 150 people.

Fayette County is also home to the regional headquarters for Chevron, which employs 200 people. CalFrac, a Canadian firm, has a 42-acre complex in the county where it employs 350 people.

Fayette County’s energy sector is thriving due to the developments taking place at the Marcellus Shale and Utica Shale formations, which are located in the region.

In Reading and Berks County, the food manufacturing cluster continues to thrive, and inquiries from businesses are steady. Community officials are focused on developing more USDA quality facilities to add to the roster. Logistics-related activities are picking up. Dollar General Corp. and PetSmart Inc. are both building large operations at Berks Park 78, which is a 328-acre site in Bethel Township, with basically four lots available. The site is located off of Route 78. A third lot at the park was purchased by Dermody Properties LLC.

Talent and Education

In Berks County, stakeholders are working collaboratively to ensure the talent base will be able to fill technical and manufacturing skills sets required for available jobs in the region. Reading Area Community College (RACC) has added the Schmidt Training and Technology Center, which has a mechatronics program that has “been touted as perhaps the finest in the country, but is consistently recognized as one of the top two in the country,” says Jon Scott, president and CEO, Greater Reading Partnership.

Berks County is home to five colleges and universities, including Kutztown University. Penn State Berks continues to expand its campus, and has built a new facility focused on engineering. Berks County also features the Careers in 2 Years campaign, which promotes the benefits of trade skills and vocational degrees to meet the demands of the county’s job market. Under the initiative, the Berks Career and Technology Center (BCTC), the Reading-Muhlenburg Career and Technology Center and the RACC have partnered to create technical academies focused on areas such as welding, mechatronics and machining.

The BCTC recently held a ribbon cutting for a CDL program. Officials spent several years putting the program together, including the physical training space. “Existing employers have already said they will take at least two full classes of people who graduate,” Scott says.

Moving to the oil and gas sector, the cluster is a newer industry in Pennsylvania. As such, economic developers are taking an active interest in workforce development for the industry. “The skill sets these natural gas industries are looking for are not readily found here, which is generally manufacturing and coal mining,” Jordan says. “When the gas industry moved in here five years ago they were bringing in workers from other areas. They all have a goal of getting 70 percent to 80 percent of their workforce hired from the local workforce. We have many programs in place for the required training.”

Assets

Logistics activities are important in Pennsylvania and state officials are working to expand the capabilities at the Port of Philadelphia. The U.S. Army Corps of Engineers is dredging the Delaware Bay. “It is 112 miles from the mouth of the Delaware Bay to the city of Philadelphia and the entire river will be dredged to a depth of 45 feet, which will allow larger vessels to pass,” Walker notes. “It will be a great match up when the Panama Canal expansion opens next year. We will see a real resurgence at the Port of Philadelphia.”

When it comes to land transportation, railroad companies are building new intermodal yards in the state, including Norfolk Southern and CSX. In the Fayette County region, three rail lines serve the region: CSX, Norfolk Southern, and Canadian National through an agreement between Wheeling & Lake Erie Railway. The region is also served by Southwestern Pennsylvania Railroad, a short line. Fayette County is located 50 miles southeast of Pittsburgh.

The rail assets figure prominently in a new 311-acre business park in Fayette County. Rail will service more than 100 acres of the site, which is going through the final permitting process, with a scheduled groundbreaking the first quarter of 2014. In addition to access to numerous interstates, the park is also located adjacent to the county’s airport, which has undergone a multiphase expansion program.

Jordan says this business park will ideally serve energy-related companies, as well as manufacturing firms.

Lifestyle

Fayette County’s assets and amenities are attractive to people who have had careers elsewhere and are moving back to the county, Jordan says. “It is because of the diverse terrain, mountains, skiing, whitewater rafting, and a lot of hunting and fishing,” he says. “Our health care services are also expanding.”

Scott says Berks County’s quality of place assets include hiking and biking trails, minor league baseball, hockey, soccer and arena football. Millions of people continue to visit Reading’s outlet shopping centers. The county is also home to a world-renowned jazz festival, and a symphony. The Reading Public Museum hosts an amazing array of items for a community of its size, Scott notes, which consists of 411,000 people. “And we are located within two-and-a-half hours of New York or Washington,” he says.

More Info

Pennsylvania Department of Community and Economic Development

Fay-Penn Economic Development Council

Greater Reading Partnership

Illustration by Salvatore Vuono at Free Digital Photos.net

Rachel Duran

Rachel Duran is the editor in chief for Business Xpansion Journal. Contact her at rduran@latitude3.com.

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