If Bethlehem is the jewel of the Lehigh Valley, its Historic and Southside shopping districts are its two brightest stars. Iconic shops like the Aardvark Sports Shop and Donegal Square blend nicely with the Moravian Book Shop, arguably the oldest operating bookstore in the world. Across the river, Homebase Skate Shop, the Southside 313 Bar and Cutters Bike Shop are just a few destinations dotting the Greenway between Third and Fourth streets. Anchoring both these districts is Hotel Bethlehem, site of Bethlehem’s first house, where 14 Moravian missionaries huddled on Christmas Eve 1741 to sing in honor, not of Jerusalem, but “Lowly Bethlehem.”

“O little town of Bethlehem” has survived pandemics, the Great Depression and even the collapse of steel industry. But can it survive the CRIZ? Can downtown and Southside merchants compete against publicly subsidized merchants in a third downtown at Martin Tower? That’s the question being pondered by Bethlehem City Council.

Martin Tower development

It’s hard to miss the 21-story Martin Tower, former headquarters of Bethlehem Steel, where 1,800 employees once worked. In 1990, it generated $1.5 million in taxes. It’s vacant today, and in 2015, only produced $25,000 in city taxes. The cost to renovate the 900,000-sqaure-foot structure would be at least $12 million.

That property was acquired in 2006 for the tidy sum of $12 million by a consortium of three developers including Lou Pektor, Lewis Ronca and billionaire Norton Herrick. But contrary to what most people think, it’s much more than a large building. Martin Tower is just a part of a sprawling 53-acre tract of land that extends to Eaton Avenue, Schoenersville Road and Burnside P

lantation.

In 2006, developers proposed a new zoning overlay that would leave Martin Tower intact, but add a 945-unit residential development, the largest ever in Bethlehem, along with 50,000 square feet for a dry cleaner, coffee shop, and salon. Pektor predicted that construction would start that year or by January 2007 at the latest.

Lured by the temptation of a $300-million development that would generate $8.7 million a year in real estate taxes, city council bit. By a 4-3 vote, the zoning overlay was adopted, with then council member Jean Belinski calling it a “Trojan horse.”

Although a final plan was approved for the first phase of this project, no spade ever broke ground. Herrick and Ronca instead squeezed Pektor out.

Getting favorable zoning was just the start. Developer Ronca next spearheaded an unsuccessful effort to get a TIF at the site. That’s a tax incentive under which a portion of future tax dollars is used to pay for development. This was rejected in 2010 by the Bethlehem Area School Board. Director Aurea Ortiz argued it was their job to educate children, not back private developers in a bad economy.

Enter the CRIZ

Whether any real effort was made to market Martin Tower for tenants is unclear. The property was never even listed in the massive portfolio of properties available at the Lehigh Valley Economic Development Corporation.

While Martin Tower continued to crumble, Allentown developer J.B. Reilly, with a little help from childhood chum Senator Pat Browne, was quietly working on the mother of all tax breaks. It’s called the NIZ (Neighborhood Improvement Zone). Adopted by the state legislature in 2009, this law was written so it could only ever apply to Allentown. It’s like a TIF on steroids.

Reilly is using state tax revenue, even cigarette taxes, to fund the cost of improvements within a 130-acre noncontiguous parcel in downtown Allentown and along the Lehigh River waterfront. As originally written, he could use local EIT taxes, too, but that provision was changed after a group of municipalities, led by Hanover and Bethlehem townships, sued.

An embarrassed state legislature decided to enact a watered down version of the NIZ as a consolation prize for municipalities like Bethlehem and Lancaster, who are too small to participate in the NIZ. It’s called the CRIZ (City Revitalization and Improvement Zone). It allows developers to recoup state and local non-property taxes from new or out-of-state businesses to help finance development within a non-contiguous 130-acre zone.

When Bethlehem was selected, State Senator Lisa Boscola credited a “phenomenal application” that included 11 “shovel ready” projects. This included the Martin Tower development. Bethlehem’s application indicated that the “intended uses comply with current zoning.”

They don’t.

The Martin Tower development was just re-zoned in 2006 to host the largest-ever residential neighborhood in city history. But that would make little sense as part of a CRIZ property. A developer can recoup construction costs for retail, but not for residential.

To make matters worse for the city, it’s impossible to move a CRIZ area to a more logical location like Broad Street without obtaining the agreement of the impacted developer, who would want compensation.

So by the time the CRIZ was approved, plans were already underway to drastically alter zoning at Martin Tower again. This time, instead of residential, there would be destination retail uses to take complete advantage of the tax incentive

‘We were blindsided’

The first indication that the winds had changed came in a July 7 news account indicating that the Martin Tower project was going to the planning commission. The city was seeking a new “Office Mixed Use Ordinance” that would allow both residential and unlimited retail development, including many of the same kinds of destination shops that already exist in the Historic downtown and Southside.

Now the Downtown and Southside merchants have monthly meetings with the mayor. But he never hinted that a third downtown was coming.

“We were blindsided,” complained Hotel Bethlehem’s managing partner, Bruce Haines. He and a number of local businesses like Donegal Square’s Neville Gardner and Moravian Book Store’s Dana DeVito went to the planning commission and heard Director Darlene Heller state, “The administration is being proactive to give the developer every tool he needs.” This would enable Ronca, backed by a billionaire, to build a third downtown, all of which would be subsidized by taxpayers.

The new zoning ordinance would allow Ronca to tear down Martin Tower as well.

While allowing all the uses permitted for destination retail in the downtown and Southside, the proposed ordinance interestingly prohibited uses that are permitted at The Sands, like a conference center and auditorium.

This was disturbing to shopkeepers like Moravian Book Shop’s DeVito, who has market studies projecting flat sales.

“Look outside, do you see anyone on the sidewalk?” she asked on a Friday morning. “Bethlehem is at a tipping point. We need to pay attention to what we have down here and take care of it.”

After several informal meetings with a small group of merchants that included Haines and DeVito, Planning Director Darlene Heller declined to schedule a separate meeting with the mayor.

“Your forum is the public hearings,” Heller told them. The mayor has monthly open door meetings, but it appears that merchants were unaware of this opportunity.

Planning commission

During two contentious meetings at the planning commission, the number of merchants worried about a new, publicly subsidized Promenade at Martin Tower began to grow. In August, planners recommended a cap under which no more than 50 percent of the property could be developed for retail use. But that recommendation was ignored when the administration presented its ordinance to city council for a public hearing.

While merchants already besieged by the Allentown NIZ expressed frustration, Bethlehem City Council President J. Willie Reynolds complained that the administration needed to be doing more.

“This city needs to start finding ways to say yes, rather than saying no,” he said at a planning commission in July. He blasted Mayor Bob Donchez and DCED Director Alicia Karner, whom he said should have been at the meeting, advocating for the new ordinance. Planning Director Heller responded that no mayor or DCED director has interfered with a planning commission meeting for 15 years.

The hearing

City Officials told merchants to express their concerns at the public hearings. So on Oct. 6, when city council was supposed to conduct its public hearing on this Mixed Use ordinance, over 100 people crowded into city hall and adjoining hallways, hoping for a chance to be heard. Apollo Grill owner Rod Holt had circulated a petition signed by 50 merchants. But a majority of council had already told daily newspapers that they support the ordinance, without having heard a word from the public.

When the hearing began, nearly three hours would pass before a single merchant could speak.

This was because Darlene Heller, the very person who had told merchants that the public hearings would be their forum, was down in the weeds with a lengthy description of the ordinance. For two hours and 15 minutes, she discussed side yard setbacks, rear yard setbacks, misspelled words and the difference between fast and fresh food restaurants. She even discussed deleted provisions.

After Heller was finally finished, Council President Reynolds called a 10-minute recess that lasted 15 minutes. Then, before allowing the pubic to speak, he opened the floor to questions from council members.

It was now 9:30 p.m.

Adam Waldron asked about the tree canopy. That prompted a 15-minute response from Heller. Then Bryan Callahan, Mike Recchiuti and Reynolds all took turns to say they support the ordinance, something they had already announced.

Finally, three hours later, the public was given an opportunity to speak at what was, after all, supposed to be a public hearing. Four of the people who had signed on to speak had already left. But there were still 28 merchants who spoke against the ordinance. They believe they will be adversely affected by a third downtown at Martin Tower.

Only one person spoke in support of the ordinance - the treasurer of the Bethlehem Democratic Committee.

Haines confrontation

Hotel Bethlehem’s managing partner, Bruce Haines, condemned the ordinance as one that will lead to 1.3 million square feet of retail development, about four times the size of the Westgate Mall. He criticized the use of public tax dollars that will permit a single developer “to dramatically increase the use of his property at the expense of existing businesses.”

He asked why none of the $8 million in RCAP funding for Martin Tower was ever used to renovate the $12 million asbestos and sprinkler problem. He scoffed at the notion that this was ever a “shovel ready” project, and added that none of the 112 projects identified in the Bethlehem CRIZ were ever shovel ready, but were misrepresented as such in the application to the state.

Haines also criticized both Reynolds and Recchiuti for accepting $4,000 from Martin Tower developers Lew Ronca and Norton Herrick. That money was contributed this year, and accounts for 10 percent of Reynolds’ funding and 20 percent for Recchiuti.

“Your five minutes are up,” announced Reynolds, but then allowed Haines to go on a bit before cutting him off and responding.

In a rambling speech, Reynolds blasted Haines for daring to “attack the integrity of the people up here.” He noted Haines had received over $14,000 in 2013 for campaign events conducted by Mayor Bob Donchez at the Hotel Bethlehem. He asked Mayor Donchez to vouch for him, and Donchez obliged. Reynolds called the very idea of there being a quid pro quo both ridiculous and insulting. He threatened that he would stop any additional speaker who dares to question his integrity “because we all love Bethlehem.” He also tried to minimize his own role, specifying that the city, and not he, proposed a new zoning ordinance.

An independent review of Reynolds’ campaign finance makes very clear that 24 percent of the money he raised in the primary came from the Martin Tower developers or the unions who will be doing the work at the site because a CRIZ project requires prevailing wage. In Michael Recchiuti’s case, it’s even more, at 29 percent of his total campaign contributions.

Reynolds responded to Haines far beyond the five minutes that Haines was allowed to speak.

“Methinks he doth protest too much,” mumbled one thespian in the audience. Finally, audience members began yelling out to Reynolds, “Your five minutes are up!”

Haines asked to rebut Reynolds, but was denied the privilege. He was told he could speak again at the end of the meeting, when no one would be there.

Officials ‘are listening’

According to DCED Director Alicia Karner, the creation of a new zoning district should be a “very public process. In addition to all the public hearings, It begins with review by the city’s Planning Commission, then introduction at council, review by the Lehigh Valley Planning Commission and then consideration by council at a public hearing and then public comment on two voting sessions of council at the meetings subsequent to the public hearing.”

In addition to these public meetings, Karner said the city met with the merchants individually and collectively on several occasions, and encouraged discussion and made changes to the ordinance after listening to the merchants. But she added, “We must weigh the concerns of the city has a whole when presenting a proposal to council.” Reynolds pledged to “find ways to support our downtown areas no matter what happens with this proposal. I look forward to continuing to hear from all of the stakeholders involved in the project to see if common ground can’t be found to move Bethlehem forward.”

Recchiui defended his fundraising. “I have always put the interests of the entire City of Bethlehem first, and will continue to do so for the remainder of my term,” he said, adding that the percentage of Martin Tower contributors is really only 13 percent. “I am confident that this zoning change will benefit the entire city for years to come.”

Recchiuti, who was defeated in this year’s primary, went on to say, “I firmly believe that the fears of the merchants are unfounded and based solely on speculation. Changes such as this inevitably lead to fear, but as we have seen with projects such as the casino and Lowe’s, most of these fears never come to fruition.”