While the Farrell Area School Board agreed Monday that much of the redeveloped Steel City Terrace in Farrell can be exempt from property taxes, the district still will reap more financial rewards from it than it does now.

The board also agreed to a contract for what is called a payment in lieu of taxes.

Mercer County Housing Authority and developer Ralph A. Falbo Inc., Pittsburgh, are demolishing the existing Steel City public housing apartment buildings and plan to build 74 public housing units, 45 apartments for rent at closer to the market rate and 26 homes for sale.

Some of the work will be done on property in the surrounding neighborhood.

The agreement covers the 90 rental units that will be built on property owned by the housing authority, making them eligible for tax-exempt status.

"There is no doubt that they are entitled to the tax exemption," said district solicitor James Nevant II.

The authority and the district had an agreement that the authority would make a payment in lieu of taxes (PILOT) in recent years, but the income of residents who lived in Steel City there was "so low" that no payment was made, said Frank Gargiulo, HOPE VI coordinator for the authority.

The payment will be based on the amount of money collected minus operating costs, and will amount to about $240 an apartment a year, $21,600.

That money will be divvied up between the school district, Mercer County and city of Farrell, based on their tax rates, Gargiulo said.

"There's no reason financially not to go for it," Nevant said, noting the district will be receiving more than it does now.

Gargiulo said the first residents are expected to move into the new buildings in the spring, with full occupancy projected for 2004.

The homes for sale and 19 apartments that will be built on property not owned by the authority will be fully taxed.