ALLENTOWN — When Allentown’s PPL Center opened in 2014, the dream scenario was that Billy Joel would usher in the city’s rebirth by returning to sing his 1982 hit that seemed to signal its decline.
As it turned out, having a star with Joel’s draw perform “Allentown” at an 8,500-seat venue was little more than a pipe dream then, but it’s one Sen. Pat Browne, R-Lehigh, has a simple plan to make come true: He’s going to throw money at it.
Thanks largely to creative budget manipulations by Browne and his colleagues, Pennsylvania now has a tax credit designed to funnel big-time acts such as Joel into medium-sized venues such as PPL Center. The plan feeds off a unique situation that has some of the world’s biggest acts spending millions of dollars in tiny Lititz, Lancaster County, to prepare for international tours. Then it offers promoters tax credits of as much as $800,000 to persuade those acts to visit places like Scranton, Reading, State College and, yes, Allentown.
The concept of Lady Gaga appearing on Hamilton Street may bring a chuckle to many, but Browne is convinced the plan will work.
“Oh, it’s going to happen. You’re going to see big acts that would not have otherwise thought about Allentown, playing at the PPL Center,” Browne said. “And you’re going to start seeing it sooner rather than later.”
The $4 million in state money to fund the tax credit won’t be available until July 2017, but the law allows acts scheduled for as early as January to be claimed on next year’s taxes. Written into a new budget tax code in which debate was dominated by school funding, cigarette taxes and gambling expansion, the complex live entertainment tax credit reserves the highest for Class 3 venues that include only state colleges and PPL Center.
Even if it does work as Browne expects, budget watchdogs question whether it should. Should one of the state’s most powerful legislators be committing millions of dollars a year in state tax dollars to get better acts at smaller arenas, including the one in his hometown?
“There’s always been a lot of debate about subsidizing stadium construction,” said Stephen Herzenberg, executive director of the Keystone Research Center, a nonprofit Harrisburg-based think tank that scrutinizes the state budget. “Getting more music acts in the state has some benefit, but is it worth this kind of subsidy? I’d say it’s pretty questionable.”
Browne and his colleagues who co-sponsored the changes say estimates show new business generated in the state will more than offset the tax credit.
The “concert rehearsal and tour” tax credit is among a raft of changes written into the tax code by Browne, chairman of the Senate’s powerful Appropriations Committee. Another prohibits Lehigh County from taxing PPL Center, another allows hotel taxes paid in Allentown’s Neighborhood Improvement Zone to be used by developers that want to build more hotel rooms, and another limits how high the county can set assessment values in the NIZ.
Boost for small venues
Browne believes the live performance subsidy can have a greater impact than those Allentown-based changes because the spectacle, publicity and economic boost that comes with the biggest acts is available to more than a dozen towns with eligible arenas, in addition to state college venues that can handle concerts.
The credit has a $4 million budget cap, so if promoters find a way to take the max it would likely mean about five extra concerts a year at smaller venues.
It may also make Pennsylvania a more attractive place for performers, and all those concert-related companies in Lititz welcome the boost.
“As one of many Pennsylvania businesses who serve the live entertainment industry, Clair Global is proud of its Pennsylvania roots,” said James Hammer, marketing coordinator for the Lititz-based company, which provides audio equipment and live touring support for acts. “We appreciate the confidence the commonwealth has shown in our industry, and we are eager to embrace the opportunities the live event tax credit will provide our communities.”
While the concept is simple, the tax credit structure is not. Detailed in a 15-page addition to the state budget tax code, the law offers promoters of big acts a state tax credit of up to $800,000 per tour for scheduling an act at what the law calls Class 2 or Class 3 venues. A Class 2 venue is any arena or concert facility with at least 6,000 seats that is not in Allegheny or Philadelphia counties, where the state’s biggest venues operate in Pittsburgh and Philadelphia.
A Class 3 venue is any of the state colleges outside Pittsburgh or Philadelphia, or any venue in a Neighborhood Improvement Zone. It’s not a coincidence that there is just one NIZ, in Allentown, and one venue in that NIZ — PPL Center. Nor is it a coincidence that the biggest tax credit is reserved for Class 3 venues.
Gunnar Fox, general manager of PPL Center, didn’t know the tax credit was coming, but he welcomes help in attracting acts to Allentown. With more than 90 dates booked in 2015, the nearly 2-year-old PPL Center is already outperforming its competitors, Fox argues. But city leaders have criticized him for not booking more concerts at a $180 million venue that was built entirely by taxpayers. It had seven concerts in 2015 and has had six so far in 2016.
“Any time we can increase events and generate excitement in Allentown, it’s good for the city, the Lehigh Valley and our customers,” Fox said of the tax credit.
Browne said the financial difference between booking an act at, say, the nearly 20,000-seat Wells Fargo Center in Philadelphia and PPL Center is about $500,000. The tax credit is designed to help the promoter overcome that shortfall.
Because it’s common for big acts to play Pittsburgh or Philadelphia before embarking on the rest of their tour, the law rewards the promoter or performer — whichever decides to apply for the credit — for making that big city appearance, but then making at least one more stop at an eligible smaller venue.
Promoters or acts that go to a Class 2 venue can take a tax credit of 25 percent of its total spending in Pennsylvania, while those promoting an act at a Class 3 will get a 30 percent credit. A Class 3 venue that doesn’t sell alcohol — primarily state college campuses — get a 35 percent tax credit. The law tacks on an extra 5 percent for any company promoting a second act in a Class 2 or 3 venue.
Rock in Amish country
So, how does Pennsylvania make sure the promoter or performer taking advantage of the tax is a big one? The performer has to also play at least one date at a venue of at least 14,000 seats in Philadelphia or Allegheny counties. It has to have spent at least $3 million on tour preparation to be eligible and it has to spend at least 10 days rehearsing in Pennsylvania.
Only the world’s biggest touring performers reach that bar.
Ironically, that’s where Lititz fits into the equation. The law is written almost entirely to steer those big-name acts through the historic town of just 9,000 that has built a niche as the place where many of the biggest acts prepare for their international tours. A dozen companies that service the live performance industry have set up shop in Lititz and neighboring Warwick Township. Three companies that lead the industry make Lititz a mecca for pre-tour prep.
Tait and its workforce of 600 design and build the massive stage productions used by 19 of the top 20 highest grossing acts, including the Rolling Stones, Taylor Swift, U2 and Beyonce. Just down the road, Clair Global builds the sound systems for some of the same clients, though like most concert-related contractors in Lititz, it keeps such a low profile to protect its clients that even locals rarely know which acts are in town. Clair doesn’t release its client list.
It was Clair that started this Amish country rock revolution some 50 years ago when Frankie Valli and the Four Seasons liked their product and put Clair, and Lititz, on the map.
Not far away, Atomic Design provides the kind of high-tech scenery and lighting that every major concert tour needs.
As a result, most of the music industry’s grandest tour sets are built there, from U2’s massive 360 tour claw to Phish’s six-story psychedelic hourglass to Rihanna’s flying bridge to Beyonce’s treadmill runway and 70-foot video screen. If it’s big and ridiculously over-the-top, it was probably designed and built in quaint little Lititz.
Tait, Clair and Atomic have been serving the big acts for decades, but those performers usually had to go somewhere else to test the merchandise, often quietly renting an arena in another small town.
That was before some of the same principals that own Clair and Tait partnered to build Rock Lititz to give their clients a place to work out the kinks before they leave town.
Opened in 2014, Rock Lititz is a 96-acre one-stop shop for all staging and tour prep needs that includes a 50,000 square-foot rehearsal facility with a 100-foot high ceiling and a rigging system capable of handling a million pounds. Before embarking on tour, staff — and occasionally even the stars themselves — spend weeks and sometimes months testing, rehearsing and adjusting the production equipment they spent millions of dollars on in Lititz.
Put it all together and Lititz is to concert tour production what Silicon Valley is to the tech world.
“This one-of-a-kind rehearsal studio can accommodate large-scale productions that need to assemble, test and rehearse before taking their acts on tour,” said Andrea Shirk, general manager of Rock Lititz. “Depending on the complexity of the technology and the level of programming, they can spend anywhere from four days to 12 weeks here preparing for a tour.”
You also get a place where millions of dollars are spent by out-of-state performers and heavyweight promoters such as Live Nation and AEG Worldwide. The tax credit would appear to be limited to only the biggest promoters because they are among the few paying enough state tax to take full advantage of the credit.
Lititz is key to launching the tax credit plan because major acts can easily spend the $3 million in-state investment required by the law to have Lititz’s community of concert tour production companies design, build and test their stage productions.
“Providing exciting live music is our goal, so anything that could help us to achieve that in the region is great,” said Geoff Gordon, Live Nation Philadelphia regional president. “We have artists like Twenty One Pilots and Pitbull coming to the PPL Center in Allentown, with more getting announced in the coming weeks.”
Who really benefits?
There’s little question that the state’s new tax credit is specifically designed to drive more big acts though Rock Lititz and into a hometown arena near you. For example, there are few, if any, other places in the state that meet the law’s rehearsal venue requirement of an 80-foot high ceiling and a rigging system capable of supporting a million pounds.
“They’ve created a unique setting in Lititz,” Browne said. “We might as well take full advantage of it.”
The question budget watchdogs are asking is whether this is the right way to take advantage of it.
“So, let me get this straight. We’re going to give perhaps five promoters $800,000 in tax breaks each so that they can schedule a grand total of five big concerts in smaller towns?” said Herzenberg of the Keystone Research Center. “That does not seem like a good use of public money.”
Herzenberg said he’d prefer to see the state’s tax money be pumped into causes that have the potential to help more people, such as raising the minimum wage or workforce development.
But Browne and his supporters say the tax credit isn’t corporate welfare for a few wealthy promoters. It has the potential to boost business for all those companies in Lititz, in addition to shine a spotlight on places like PPL Center, Reading’s Santander Arena and Hershey’s Giant Center. That will put people in the seats of those arenas and fill up hotel rooms and restaurants in those towns.
Not only is Browne not apologizing for the legislative sleight-of-hand, but he’s also hoping to expand it.
“Right now it’s $4 million,” Browne said. “But if this has the impact I think it’s going to have, we may be able to increase that in future budgets.”
Twitter @matthewassad21
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