What is Hazleton’s Economic Future?

KOZ Now Leasing (2)

by Drew Magill

For nearly twenty years, Hazleton’s industrial development organization, CAN DO, Inc., has relied on Pennsylvania’s Keystone Opportunity Zone (KOZ) initiative to lure industries and jobs to the area. KOZs provide ten-year tax abatements on nearly all state taxes such as corporate profits and all municipal, county, and school district property taxes. Under KOZ, there are also no penalties (i.e., “clawbacks”) for a company that leaves after its designation expires.

But this is about to change. Governor Wolf recently declared he would veto any new KOZ initiatives, given the state’s multi-billion dollar budget deficit. (Although current designations will remain in place until they expire; some go until 2025.)

The KOZ era (approximately 1999 – 2017) has coincided with a large and rapid influx of newcomers into Hazleton. People generally assume that these newcomers, mainly Latino, came here for the prospect of finding an entry-level job in the American economy.

Despite the fact that the KOZ tax breaks brought in lots of low paying jobs, increasingly in the warehousing industry, the area ended up attracting more workers than jobs. Unemployment, as of April 2017, is more than twice the national average (9.7% compared to 4.4% nationally) and the area’s poverty rate is a whopping 25.1%, which is well above the national average (14.7%) and higher than at any point in the CAN DO era.

If this is economic development success, it is hard to imagine what failure would look like.

KOZ’s impact on the community has been profound. Low-wage work and attendant poverty have caused the demand for public services to spike, while tax revenue has remained flat. Consequently, the City of Hazleton and the Hazleton Area School District (HASD) are in financial peril. The crime rate has increased (though it appears to be leveling off) and HASD has one of the highest rates of students living in poverty in the state.

Paradoxically, while population in the city has increased, so has the number of abandon homes. This means many residents are living in over-crowded rentals. Despite working long hours at backbreaking, mind-numbing jobs, many low paid workers can’t manage to get together a down payment or qualify for a mortgage.

The winner in the KOZ-era is obviously CAN DO, along with their main accomplice, Robert Mericle, who was notoriously a co-conspirator in the “Kids for Cash” scandal. Mericle has been CAN DO’s main real estate developer and construction company for some time now. He enjoys greater profits for building simple shell buildings for warehouses then he would constructing purpose-built factories that would offer better paying jobs to the local workforce. The City of Hazleton, the HASD, and local property tax payers have borne the cost of this “success.”

But the real losers in Hazleton’s new KOZ-fueled economy are the low-paid warehouse workers themselves – mostly Latinos, but many native-born whites as well. With the KOZ-era coming to an end, CAN DO no longer has tax incentives to offer prospective industries. That means CAN DO will only have low cost labor to lure employers. Without a skilled workforce to attract high-tech jobs, what other resources to they have?

It is in the best interest of the community at large that this new workforce doesn’t remain a permanent underclass of the working poor. The only hope for the CAN DO worker, whatever their educational level or ethnicity, is to find a way to forge a new future that offers them job opportunities. They can only do this by ending their dependence on CAN DO in creating jobs. Unless the community can develop an alternative to the CAN DO method, which probably requires dismantling CAN DO itself, the workforce has the choice of taking what CAN DO offers or leaving the community in search of better opportunities elsewhere.

How can this be done? Well, no one knows because its never been tried. Finding the way forward requires a grassroots visioning process that nurtures new ideas and new leaders. This suggests that educated young people willing to commit their future to the Hazleton Area must step up to the plate. Hopefully, many of these new leaders will emerge from the Latino community, which really has the biggest stake in upgrading the broad base of the area’s economic pyramid.

Otherwise, talented and skilled workers and professionals will continue to leave the community behind, and our quality of life will go into permanent decline. The future of thousands of children, natives and newcomers alike, depends on what happens next.

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