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Council considers tax relief for L&C Railroad

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By Chris Sardelli

A plan to reduce taxes by thousands of dollars for L&C Railroad received unanimous first approval at Lancaster County Council’s Nov. 12 meeting, though council members still have several questions about the proposal. 

Council voted during the meeting to approve first reading of two ordinances related to the Lancaster & Chester Railroad, including one to place the company in a joint industrial and business park and another to approve special source revenue credits for the company. 

The vote for each was 6-0, with Councilwoman Charlene McGriff absent from the meeting. 

The ordinances were added as part of a tax relief request from railroad representatives, including Steve Gedney, who oversees the L&C Railroad and presented the request at the meeting. 

Gedney said the plan was developed in response to recent state tax law changes made by the state Legislature, which resulted in a dramatic tax surge for the railroad company. 

During his presentation, Gedney showed how the company’s taxes shot from $34,169 in 2010 to $206,033 in 2012. Each number includes taxes owed to both the city of Lancaster and the county. 

He told council the new tax burden could harm the railroad company, especially since it already incurs significant maintenance costs. 

“We have 100-plus railroad crossings that we have to pay for maintenance, we have 19 bridges we have to take care of and we have 68 miles of track, which all requires a significant investment,” Gedney said. “We can’t get behind the curve of investment.”

In order to provide tax relief for the company, Gedney presented a two-part plan, which includes the joint park designation and the revenue credits. As part of the plan, Gedney asked council to reduce the company’s annual taxes to an amount that is only a 15 percent increase over its 2010 tax amount, for a period of 20 years. 

He said the plan will help keep the railroad running smoothly. 

“It’s been a fixture in Lancaster County for 125 years,” he said. “We’re a small business that does a lot of good things for the community we serve.”

A few questions

During the meeting, council first tackled the joint industrial and business park ordinance. 

If approved, it would establish an incentive agreement between Lancaster and Chester counties. These types of agreements generally allow one county to receive 1 percent of revenue generated by the park through payment of fees-in-lieu-of-ad-valorem-property taxes on property in the other county. 

County Administrator Steve Willis said the second ordinance, involving special-source-revenue credits, can only be approved once the railroad is in the multi-county park. 

He said if both are approved after three readings, tax savings for the company would equal about $167,000 in the first year. The total includes a savings of $77,710 on city taxes and $89,031 on county taxes. 

Willis said this proposal would cause a loss in revenue for the city, county and school district. Revenues from county taxes are generally split, with two-thirds of revenue going to Lancaster County School District and one-third to the county. 

After hearing the proposal, Councilman Larry McCullough asked how much money the county and school board would lose as part of the agreement. 

“I question how much the county is giving back of county money, instead of the school board,” McCullough said.

He said his questions did not preclude his approval of first reading, but said he needed more information before the next meeting. 

“There are additional items I’d like to see explored prior to moving forward,” McCullough said. 

Councilman Larry Honeycutt supported investigating how to help the company. 

“I do sympathize with the railroad and hope we can help them do something,” he said.  

Several council members also had questions about the revenue-credit ordinance. 

“Much as I hate title-only (ordinances), for the railroad and what it means to the county, I will make a motion,” said Councilman Cotton Cole. 

Though she also voted in favor, Council Chairwoman Kathy Sistare asked for a more detailed breakdown of the proposal before council’s next meeting. 

“Prior to second reading of these ordinances, I want to see what position this leaves Lancaster County in and what is the school district’s concern,” Sistare said. 

A complicated process

Willis said he recommended a few changes to the initial proposal presented to council. 

“We don’t want to see 20 years (in the agreement),” Willis said. “But say you do a 10-year agreement, the tax bill should go up 10 percent a year, so they eventually pay what they should.”

He is also recommending adding an “escape clause” to the agreement, in case the state Legislature passes comprehensive tax reform and lowers tax rates. 

Though the proposed plan sounds simple enough, Willis said it will get complicated, especially since there are so many parties involved. 

He said Lancaster City Council has authority over railroad property within its borders, including the L&C depot and locomotive shop. The county cannot approve a joint park for the city’s property without City Council’s approval. 

If the county approves the plan and the city does not, this could result in a tax break only on railroad property in the county. Willis said that property is mostly rail lines. 

As for the school district, Willis said County Council will ask the school board for its recommendation, though council could ultimately proceed without its approval. 

“Legally, Lancaster County Council doesn’t have to ask the school district, but we recommend asking them because it involves money they would get next year,” Willis said. 

Ultimately, he said any combination of the three groups could approve or reject the plan. 

Lancaster City Administrator Helen Sowell also shared her thoughts on the plan Monday. 

“I do not know (city) council’s opinion on this matter since they have not discussed the issue. I believe they will take into consideration the fact that new industries coming to the area usually receive tax incentives for locating here,” Sowell said. “They also will acknowledge the L&C’s contribution to our economy by shipping products in and out of the county.”

She said City Council could discuss the matter after County Council approves final reading.  

County Council will hear second reading for both issues Nov. 26. If they are approved, council will hear final reading of both ordinances at its Dec. 10 meeting. 

 

 Contact reporter Chris Sardelli at (803) 416-8416