Construction activity in Butler declined last year following a boom in 2018, but a recently created federal tax-deferred investment program could lead to more development.

The value of construction projects based on the costs developers, contractors and homeowners paid for construction permits rose for several years, peaking at $14.4 million in 2018, but declined sharply to $6.7 million last year, according to figures from the Butler Office of Business and Community Development.

Permit fees for commercial and residential construction projects grew from $8.5 million in 2015 to $9.8 million in 2016 and $10.6 million in 2017 before the recent peak in 2018.

City officials could only speculate about reasons for the decline last year, preferring to point to 2018 as an exceptional year.

“2018 was a busy year,” said John Evans, Butler code enforcement official.

Major commercial construction projects completed that year include the Butler County Government Center renovation, Save A Lot Grocery Store in Pullman Center Business Park, and a Butler Area Sewer Authority pump station replacement.

Springhill Suites opened in 2018, but permit fees were paid when construction began in 2015.

Construction permits for the Allegheny Health Network Cancer Institute and the Butler Transit Authority's compressed natural gas station, both in the Pullman Center Business Park, were issued and paid for in 2018, but the projects were completed in 2019.

“It was a good year,” Joe Saeler, executive director of the Community Development Corporation of Butler County, said about 2018.

Opportunity zone

The outlook for future development in the city looks promising due to the creation of an opportunity zone, he said.

Developers are considering investments in several projects in the city's opportunity zone in which investors can defer almost all federal capital gains taxes by investing profits in commercial or residential projects.

“Several projects are being discussed at a higher level with developers. They're looking at numbers to see if it makes financial sense. We're just at the beginning stage,” Saeler said.

Nearly 9,000 opportunity zones were created in lower-income areas across the country through the Tax Cuts and Jobs Act of 2017.

Saeler said he worked with Mark Gordon, Butler County chief of economic development and planning, to nominate 15 parcels in the county for zone designation, but the state selected only the city.

Butler's zone includes most of Main Street and extends east along East Jefferson Street to Butler Memorial Hospital.

Developments in the zone are subject to local property taxes and city construction permit fees, Saeler said.

He said he hopes a light manufacturing or artificial intelligence business takes advantage of the city's zone.

“I see things getting busy again soon (in the city),” he said.

Joe Gray, the city engineer and a downtown business property owner, said the zone could attract buyers to the city, which is attractive to investors because of the amount of business and commercial development outside of the city.

“It is the most beneficial legislation for business that has come in a long time,” Gray said.

Stan Kosciuszko, executive director of the Butler County Chamber of Commerce, said business in Butler is booming and the zone could lead to further development.

When he hosts meetings of officials from other area chambers, the guests always tell him they had difficulty finding an open parking space.

“When every parking space is taken, that's good,” Kosciuszko said.

People looking for long-term investments might consider developing in the zone, he said.