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Pennsylvania city pays big bucks to buy off businesses, clear way for arena

arena_allentown.jpg

Shown here is a rendering of the proposed arena in Allentown, Pa. (City of Allentown)

Often when a city starts talking about using eminent domain powers to seize private property, the owners of that property claim they're being cheated. 

But in Allentown, Pa., questions are being raised over whether the city actually paid too much for a string of business buildings in the push to clear out owners and build a new hockey arena. 

In order to plow ahead with the planned $160 million multi-purpose complex, the city paid $15 million to property owners in the zone. Some were offered far more than what they originally paid for the buildings. 

"Ultimately, the taxpayers are the ones that are going to foot the bill for what was paid to those existing property owners," said Stephen Thode, a finance professor and real estate expert at Lehigh University. 

Thode said he couldn't say for certain whether the city overpaid, but he noted the city hasn't been forthcoming with the appraisals for the properties. 

"If they didn't overpay, they'd be more than happy to show the appraisals," he told FoxNews.com. 

WFMZ-TV reported that one business owner who paid $150,000 for his building five years ago received $852,000 for the building and relocation expenses. 

Another who reportedly paid $400,000 received $747,000 from Allentown a year later to leave the block where the arena is to be built 

That business owner, tax preparer Paula Paredes, confirmed to FoxNews.com that she was paid $650,000 for two properties and an additional $97,000 for relocation expenses. 

Asked about the transactions, a city spokesman said Allentown paid "the appropriate amount" for the properties, noting that the pending development made prices in the district jump. 

"This project and the Neighborhood Improvement Zone will be transformational for the city," he said in an email. 

The city's economic director also told WFMZ that taxpayers are still getting a good deal.  

The arena and entertainment complex are part of a special district aimed at revitalizing business in the city. Those who got money to move out of the zone -- some of whom originally protested the plans -- could end up reaping the benefits, picking up business from foot traffic once the arena opens. 

Thode said the reason the city paid so much is probably because it wanted to "avoid litigation." 

"They didn't want anybody saying, 'no that's not enough'," he said. "Time is the enemy of any project like this." 

Though the City Council authorized the mayor of the city to use eminent domain powers to seize the properties, they ended up just striking deals with property owners -- and avoiding court. 

Thode, though, questioned whether an arena in a mid-sized city with a minor-league hockey franchise would spur the kind of investment the city's aiming for. Thode said it's not like Allentown is bringing in a major pharmaceutical company or other major employer. 

"There is no tangible evidence that there's going to be any net job growth because of this," he said. 

The complex is set to open next year.