For four years, technologically oriented companies have had the opportunity to gain up to $500,000 in sellable tax credits, giving communities an additional marketing tool in luring these businesses to their confines, thanks to a program called the Keystone Innovation Zone.
The Keystone Innovation Zone in Delaware County was established May 18, 2006, as a way to encourage innovation and create entrepreneurial opportunities in a specific geographic area, mainly centered around colleges and universities.
Here, that included Villanova and Widener universities.
However, in December, the zones were expanded to provide more business possibilities to surrounding communities.
“We’ve expanded to over seven times our original size,” said John Dixon, KIZ coordinator for Delaware County.
The original specifications concentrated on Chester, Marcus Hook, Trainer and Upland, as well as the site-specific locations of University Technology Park 1 and 2, the Wharf at Rivertown, the Silk Mills, Crozer-Chester Medical Center and Widener and Villanova universities.
The zones have since been approved to include parts of Bethel, Upper Chichester, Lower Chichester, Chester Township, Eddystone, Ridley Township and Tinicum, as well as an expansion of the existing boundary in Radnor. Delaware County Community College has also joined.
This allows applied research and development, engineering services, information technology, homeland security and defense and life sciences companies to take advantage of the available tax credits.
Dixon explained how they work.
“The Keystone Innovation Zone tax credits are designed to benefit businesses after they have been in our zone for two years,” he said. “After a period of two years in the KIZ, companies can earn up to $100,000 in tax credits that are sellable.”
Dixon said the state uses an equation to determine benefits based on the base, second and third years of a company’s revenue.
The idea is that these companies can continue to profit from these credits up to their eighth year of existence.
In other words, Dixon explained, “Under the best scenario, a company could earn upward of $500,000 in tax credits in its first eight years.”
Ablaze Development Corp. in Villanova is a Delaware County business that applied for a $100,000 tax credit last year. It received $87,000, used to create the spin-off company Ablaze Solar, which pays Villanova University students to work on creating next-generation, lower-cost solar systems.
Edmond J. Dougherty, president and CEO of Ablaze Development Corp., spoke of the advantageous nature of this arrangement.
“That’s perfect for us because that allows us to work on our ideas,” he said.
With his company a member of the Delaware County KIZ since its founding year, Dougherty said he’s been pleased.
He praised Dixon for keeping him apprised on a weekly basis of such things as newly available resources.
In addition, Dougherty said the KIZ connects his business to a larger network of businesses and academia.
“It is a community,” he said. “We’re really all trying to help each other.”
His company is one of 11 that comprise the Keystone Innovation Zone in Delaware County. Four of the businesses are located in Chester.
And that fits into the city’s vision to create a larger economic base for Chester, rather than rely on one industry type for jobs.
Dave Sciocchetti, executive director of the Chester Economic Development Authority, explained that the city had relied on a manufacturing base for its work force. However, when that industry transformed, those jobs — and the city’s main economic foundation — were lost.
In re-establishing itself, the city has outlined a different vision for itself — that of a more balanced economy, he said.
This allows a multitude of business types to find space within the city, Sciocchetti said, pointing to the Wharf at Rivertown’s office space attracting Wells Fargo and Synygy and to Harrah’s Chester Casino & Racetrack as a catalyst for tourism, which will be enhanced by the opening of the Philadelphia Union’s soccer stadium.
“It’s all about creating more opportunities and more reasons for businesses to come to Chester,” he said.
And the Keystone Innovation Zone has a part in that.
“It gives us an additional tool to attract technologically oriented businesses to the city of Chester,” Sciocchetti said. “That’s important as part of an overall strategy to diversify our economy.”
The partnership can be beneficial for the participating colleges and universities, too.
Dr. Pritpal “Pali” Singh is an electrical and computer engineering professor at Villanova University and chairman of the KIZ Operating Partners.
He said part of the founding intent of the Keystone Innovation Zone was to promote economic development through attracting companies to the area or creating spin-off ones from research that is being conducted at the universities.
“We’ve been trying to outreach more to companies and build relationships with companies,” Singh said.
One longstanding challenge faced by academia is the transfer of research to commercialization.
“Many faculty members don’t have a lot of knowledge of establishing companies,” Singh said.
The KIZ provides them an option either with hosting seminars to learn how to do that or by connecting them with business partners.
The faculty’s reception has represented both scenarios, Singh said.
In the meantime, he added grants are available to participant universities through the Keystone Innovation Grant, which fund sup to $150,000 for research development accompanied by technological commercialization and the Keystone Innovation Starter Kit, which provides funding to hire a faculty member in an emerging area.
Singh said he looked forward to the evolution of the program.
“What I’m hoping,” he said, “is that we’ll develop the technology further and start licensing some of the technology and some of them may evolve into companies.
The Keystone Innovation Program itself has gotten support from the Pennsylvania Legislature as it survived this latest round of budgetary considerations, despite the tenuous of the state financial situation.
“It’s the only program that (wasn’t) cut because of its effectiveness,” Dixon said of economic development programs similar to it.
However, it’s designed as a phase-out program that’s meant to be self-sufficient. First-year funding for the program was $250,000 and it decreased by $62,500 each year. In April, the local KIZ will be entering its third funding round.
Dixon said the Delaware County KIZ Operating Partners are formally approving a multi-year budget next month that outlines a path to self-sustainability, although, he added, there is a possibility that it can be extended up to eight years.
In addition, the tax credits to businesses remain, he said.
“The prognosis is good,” Dixon said. “The tax credits at this time as we know it are to continue until further notice.”