Business Law Shorts

Among the recent business law developments at the local and state level were the City of Harrisburg’s adoption of a 10-year property tax abatement program for commercial and residential development in the City; loosening of the Public Utility Commission’s regulations for new household moving company market entrants; and a decision by the Pennsylvania Supreme Court on unemployment compensation that appears will have additional impact in the workers’ compensation realm.

Harrisburg offers property tax abatement for commercial and residential development in the City, with conditions.

Following a dramatic and contentious debate on May 12, Harrisburg City Council adopted a residential and commercial 10-year tax abatement and exemption program for qualifying improvements and new construction in the City. The program under the state’s Local Economic Revitalization Tax Assistance Law, or LERTA, had been a priority of Mayor Papenfuse.

The broad provisions of the program are that 100% of the eligible assessment based on actual construction costs otherwise taxable on new residential construction and improvements will be exempt for 10 years from completion of construction. Improvements are defined as repairs, alterations and additions having the effect of rehabilitating a building so it becomes habitable or attains higher standards of health or economic use or is brought into compliance with applicable laws. It does not include ordinary upkeep and maintenance.

For commercial, industrial or business new construction or improvements, 50% of the eligible increased assessment based on actual construction costs otherwise taxable will be exempt for 10 years from completion of construction. Mixed use properties that have a residential use at 70% or higher qualify for the 100% residential exemption.

Commercial, industrial and business improvements that qualify for and secure the 50% exemption may receive additional exemptions totaling between 70% and 100% through permanent job creation as a result of the construction. Permanent job creation necessary to qualify for the graduated additional exemptions range from a minimum of 10 to over 80 permanent jobs. Annual filings to certify the permanent job creation will be required in order to retain the additional exemption amounts.

Of most concern for the efficacy of the program is that labor forces working on new construction must be paid at the prevailing wage rates in use at the time on a public construction project. Other requirements for new construction are that minority business participation must account for 15% of the total project costs and 15% of the labor force must be made up of City residents. Tax abatement programs that have been successful in other Pennsylvania cities generally do not include such requirements. The requirements do not apply to improvement projects qualifying for the exemption.

The plan still needs to be approved by the City’s other two taxing authorities, the Harrisburg School District and Dauphin County.

Public Utility Commission eliminates “outdated” barrier to new entrants in the household goods moving market

By Final Order published May 23, the Public Utility Commission adopted new regulations that make it easier for new companies to operate in the state as household movers. The PUC had historically required that an applicant establish a public demand or need for the new company’s service. Some companies with established authority in a particular territory might then file a protest to the application, arguing that there was no actual need for the new service and the applicant would only harm present operators. The very act of requiring new entrants to proceed through a sometimes lengthy and expensive hearing process served as a barrier to keep new entrants out of the market and protect present operators.

Citing increased competition in the industry, the PUC has now eliminated the requirement that a new applicant prove a public demand for its service. Rather than determining public need by means of administrative process, the PUC states that “competition among carriers with regard to price, quality, and reliability . . . will determine whether a given carrier’s service is needed by the public.” Lowering these “outdated barriers to entry” will promote competition in the industry and provide consumers with more choices and more competition among carriers as to price, quality and reliability, the PUC noted.

The PUC stressed that household good applicants will still be required to establish they have the technical and financial ability to provide the proposed service safely and legally, and future protests will be limited to those criteria. These requirements include that applicants have at least two years of experience with a household goods carrier or equivalent and a satisfactory safety rating by the U.S. Department of Transportation or successfully complete a safety fitness review conducted by the PUC.

New carriers will be able to operate throughout the state rather than be limited to defined territories, and present operators are deemed to have statewide authority. In addition, the new regulations raise the minimum liability coverage requirements for carriers operating in the state from $300,000 to $750,000 to match federal requirements for interstate carriers. In addition, the regulations delineate more clearly the minimum insurance coverage for loss and damage to consumer’s goods.

PA Supreme Court decision on unemployment compensation could affect workers’ compensation claimants in similar circumstances

The PA Unemployment Compensation (UC) Law provides in Section 402.6 that a claimant “shall not be eligible for payment of unemployment compensation benefits for any weeks of unemployment during which the employee is incarcerated after a conviction.” In Chamberlain v. UC Board of Review, the PA Supreme Court recently decided that a sentence of house arrest under which the claimant was available to work did not render him “incarcerated” under the statute and therefore he was not precluded from obtaining benefits.

In Chamberlain, the claimant was sentenced to house arrest after pleading guilty to the summary offense of operating a vehicle without a valid inspection and driving with a suspended license. The terms of Chamberlain’s house arrest restricted him to the home of his sister, but permitted him to work, run errands, and Christmas shop. Indeed, he actually worked nine of the 60 days while on house arrest.

The Court construed the word “incarcerated” in accordance with its common and ordinary Dictionary meaning of “to put into jail” or “to shut in; confine.” The Court recognized that an individual could be “incarcerated” in an institution other than a county or state correctional facility, such as a psychiatric hospital or an alcohol and drug rehabilitation center.

However, “Pennsylvania’s criminal justice system is premised upon graduated punishment dependent upon the severity of the crime, and generally it is fair to assume that a defendant sentenced to house arrest with work release has committed a less serious offense than an individual incarcerated after a criminal conviction. Absent clear language or legislative intent to disqualify claimants sentenced to home confinement, and considering the remedial purposes underlying the UC law, we hold that Section 402.6’s preclusion of benefits does not apply to claimants on house arrest,” the Court stated in summary of its holding.

The UC Board of Review, in making its arguments, cited several cases construing nearly identical statutory language denying benefits for workers’ compensation (WC) claimants who are “incarcerated.” In one of those cases, Moore v. WC Board of Review, the claimant was denied the continuation of benefits while on house arrest even though he was available for work release. Noting the Moore case was decided under the WC Act and not the UC Law at issue in Chamberlain, the Court stated “we decline to consider the soundness of the Commonwealth Court’s decision in Moore until such time as the issue is squarely before us.” Under the Court’s reasoning in Chamberlain, however, it appears the same determination would be made in the workers’ compensation realm under similar circumstances.

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