After learning that no audit of finances in Allentown’s unique tax zone has been performed since it was created in 2011, state Sen. Jarrett Coleman, R-Lehigh, on Tuesday accused Revenue Secretary Pat Browne and the Allentown Neighborhood Improvement Zone Development Authority of breaking the law.
“I am disgusted to have learned today in testimony from Secretary Browne that the Allentown Neighborhood Improvement Zone Development Authority has been violating state law for over a decade,” Coleman said. “In a zone that is shrouded in so much secrecy and has diverted over $700 million from things like child care, education, transportation or senior services these audits were a critical component of oversight that never happened.
“This new information reinforces and makes more urgent the need for further examination. As we continue to review today’s testimony we will determine which next steps or referrals need to be made.“
The accusation came after Browne spent nearly two hours on the state Senate floor answering questions about the NIZ.
Browne was prompted to appear after the body voted 28-22 on Oct. 8 in favor of Senate Resolution 334, which was introduced by Coleman, who defeated Browne in the 2022 primary election. Coleman has been trying to bring to light specific sources of revenue in Allentown’s unique tax district, while Browne has repeatedly said he legally can’t disclose that information because of changes made to the Fiscal Code of 2021.
That same information was requested in a subpoena issued by the Senate’s Intergovernmental Operations committee.
Coleman asked Browne about annual audits, noting that in the NIZ legislation an independent firm would be hired to verify such things as the amount of local tax revenue and how much is transferred to the state.
Browne said the audits haven’t taken place because of limitations on confidentiality.
“It has not been contracted because in promulgating the function of the audit, developing the scope, deciding what was going to be audited, it was determined that in order to do it, there would be need to access to by the contracting authority to tax information for purposes to audit,” he said.
Coleman asked if any audits have taken place since the law was passed in 2011.
“The Senate and House would have to agree that the language of the Neighborhood Improvement Zone needs to change in order for that to happen,” Browne answered.
The Senate unanimously approved a NIZ audit in December.
In addition to Coleman, chair of the Intergovernmental Operations Committee, Browne was questioned by three senators.
The exchanges were mostly cordial, though Minority Leader Jay Costa, D-Allegheny, objected to Coleman’s line of questioning regarding The Morning Call’s two-year attempt to obtain information about the NIZ’s finances. The newspaper’s effort was struck down by a Commonwealth Court judge in late 2021, citing language inserted into the fiscal code bill.
Browne, who wrote the legislation creating the NIZ in 2011, introduced the language that he says prevents him from disclosing the information when he was a state senator representing the Lehigh Valley. Those changes included adding “reports” on taxes to a section defining “confidential information.”
“Following that Office of Open Records decision [in October 2019, saying the state needed to release information The Morning Call sought], the 2021 amendment was passed and made effective,” Coleman said. “It was dated back until January of 2014 in order to protect certain NIZ records from disclosure to the public.”
Costa made a point of order at that point. “I believe the implication of the question is that certain legislation was passed to protect folks,” he said. “I’m not sure where that’s going, and maybe ask the member to clarify the question. If it relates to any individual in this chamber, or any individual anywhere else in the other chamber who served here, or some business entity, I have concerns about where this is going.”
Lt. Gov. Austin Davis, who was presiding officer, had Coleman move along.
In his closing questions, Majority Leader Joe Pittman, R-Indiana, circled back to the open records case and asked if the paper’s request was turned down because of the code amendment.
“The opinion issued by the Commonwealth Court provided that tax returns are subject to confidentiality, but tax reports are not,” Browne said. “And my opinion, with all due respect to our members of the court, that was a distinction without a difference.”
To open his line of questioning, Coleman wanted to know if businesses inside the NIZ are under a confidentiality agreement.
“You mentioned confidentiality,” Coleman said to Browne. “You mentioned not being able to get information when you reached out to local businesses inside of the NIZ and they were unable to provide that information. Why were they unable to provide that information to you? Why couldn’t they disclose that information to you under their own free will?”
Browne said the only NDA is between an allocation agent that helps businesses fill out compliance forms and the Department of Revenue.
During his initial line of questions, Pittman emphasized that the Senate was not asking for individual taxpayer information. However, Browne said that even aggregate data could reveal an individual because some categories only have one or two taxpayers.
Browne said the department exceeds Internal Revenue Service standards that holds back categories with 100 taxpayers, while the NIZ uses only two or less.
“The Department of Revenue wants to be as transparent as possible,” Browne said.
Pittman asked why the information couldn’t be reviewed by the state’s Independent Fiscal Office, or the bipartisan Legislative Budget and Finance Committee. Browne said the IFO could access NIZ information if the Legislature acts on it.
“That’s the beauty of this entire moment,” Pittman said. “This is all about us as a body, trying to decide what is next in this process.”
In conclusion, Browne said he’s confident in working with the Legislature.
“We want to be transparent as important this program, like the other programs, is very important, and we want to make sure that they’re successful,” Browne said.
Pittman said he appreciated Browne’s testimony.
“What I find most encouraging from this process is that we now have some areas where you are coming to the table and agreeing to either recommend changes in statute or providing us updated opinions that we were not previously aware of,” he said.
Morning Call reporter Evan Jones can be reached at ejones@mcall.com.
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