Lehigh Valley International Airport looking to attract business through state tax break

By Edward Sieger | The Express-Times
April 24, 2015 at 6:00 AM, updated April 24, 2015 at 6:07 AM

Officials with the Lehigh Valley International Airport traveled to Florida last week in an effort to drum up business courtesy of a tax break approved by Pennsylvania lawmakers in 2013.

Representatives of the Pennsylvania Department of Community and Economic Development and the Harrisburg and Lehigh Valley international airports attended the MRO Americas aviation trade show in Miami Beach touting the elimination of the state’s 6 percent sales tax on aviation parts and service. The change means overhauls and repairs can be performed tax-free in a state with access to six of the 10 largest markets in the U.S. and six international airports, according to DCED spokesperson Heidi Havens.

Darren Betters, business and commercial services director for the Lehigh-Northampton Airport Authority, told the authority’s economic development committee last month that the state reached out to LVIA about attending last week’s trade show, where officials looked to connect with firms searching for maintenance space along the Northeast corridor.

State taxpayers picked up the tab for the registration fees, he said.

The idea would be to attract maintenance providers to the Hanover Township, Lehigh County, airport, where they would build a facility or rent space from the authority, Betters said. Along with attracting business to the area, it would offer residual effects such as fuel sales for the airport, he said.

Authority officials did not immediately return phone calls and emails seeking additional comment.

Major savings

The costs for aircraft maintenance — they include labor, parts, inspections and the overhaul of components — vary widely based on the aircraft size and engine type, Havens said in an email. But industry data suggests average annual maintenance costs can range from $16,000 for light aircraft to $482,000 for a jet, she said.

“Aircraft owners will see significant transportation savings by having aircraft serviced in Pennsylvania,” Havens said.

The DCED also worked with the Pennsylvania Department of Transportation to create an interactive airport map that includes fuel options, communications, accommodations, nearby attractions and runway information, according to Havens.

Jarrett Witt serves as director of business development for the Lehigh Valley Economic Development Corp. DCED has just started ramping up the marketing of the aviation tax incentives, and LVEDC will certainly begin using the incentive in its marketing of the Lehigh Valley, he said.

The area should be well positioned to take advantage of a tax incentive like this, considering it’s within a few hours’ drive of some of the busiest airports in the region, according to Witt. In a service industry, you want to be where your customers are, he said.

Staying competitive

Generally speaking, every state has some type of incentive package — whether it’s grants, tax abatement or financing mechanisms — to lure companies from one state to the other, Witt said. Mid-Atlantic and southern states long offered strong incentives to attract industry, and New York and New Jersey in recent years have been putting bigger dollars behind their incentive packages, he said.

Destination Maternity, for instance, announced in August 2014 that it would relocate its corporate headquarters from Philadelphia to South Jersey thanks to a 10-year $40 million benefits package from the Grow New Jersey Assistance Program, according to the Philadelphia Business Journal.

The Lehigh Valley hasn’t lost much to other states, but it’s important to stay competitive, Witt said. A very specific tax incentive like the one on aviation parts and services can create a niche and be a very intelligent way of recruiting industry, he said.

And once a region lands the first new business, it can have a domino effect, Witt said. Competitors within specific industries all have an idea of what the others are doing and where they’re relocating and expanding, he said.

“It really clusters after that,” Witt said.

He pointed to the beverage industry in which Lehigh County is home to more beverage manufacturers than any other county in Pennsylvania. Once Ocean Spray announced it was opening a facility in Upper Macungie Township, other companies took interest and started asking about the project, which really validates the market, he said.

“Some of our greatest marketing is simply being able to tell a story about, This is how a company relocated here and here’s how it went,'” Witt said.

Such a specialized industry could also create a ripple effect on the area, according to Witt. Aviation is a specialized industry that could spur new training programs at the Lehigh Valley’s community colleges to assure a skilled workforce relocating companies can utilize, he said.

Need for revenue

The authority is currently working on a five-year airline use agreement, which is a per person, per plane fee the airport charges airlines to use LVIA. Authority Executive Director Charles Everett Jr. said the agreements are an industry standard that the authority is putting into place in an effort to better the airport’s financial stability. He’d like to have the agreement in place by December.

Everett reported to the authority board last month that airlines in the early talks are opposed to the authority continuing to “subsidize” the Braden Airpark in Forks Township with a small portion of the fee.

Allentown Mayor Ed Pawlowski said the fee is a major revenue generator for the airport, but at nearly double that of Philadelphia International Airport can put LVIA at a competitive disadvantage.

“The more we push this on them, the more they’re going to balk,” he said.

The more non-aviation-related revenue the authority can generate the more the costs to the airlines go down, Pawlowski said, noting 50 to 60 percent of Philadelphia International Airport’s revenue is non-aviation.