City maxing out tax breaks - PittsburghLIVE.com Pittsburgh is preparing to save PNC Financial Group $18 million on a new $170 million skyscraper with a special tax-financing offer, and that plan -- almost guaranteed approval by local taxing bodies -- would edge the city closer to a state-mandated limit on such deals.I've been against TIFs for years. Back in 2000 I ran on a platform that said, "NO MORE TIFs." In 2005, I said we should change the laws for TIFs in Harrisburg. In 2006, I still say -- NO MORE TIFs. None.
TIFs are very clever. They were master-minded and perfected by Tom Murphy. People from around the world have come here to see how it has been done - and they've done a decent job in duplication of the desired effects -- ripping off taxpayers who pay their fair share.
TIFs take away from school kids who are in schools today.
TIFs take away from police presence, garbage collection, rodent control and traffic engineers who need to keep our streets and sidewalks operational.
TIFs take away from home owners who then have to pay more because a downtown skyscrapper pays $18-million less than it should. And, PNC Plaza already got a $30-million GRANT from Harrisburg's Rendell anyway. The $18-million goes on top of the $30-million. The subsidization of that building is greater than $1-million per floor.
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By Jeremy Boren
TRIBUNE-REVIEW
Thursday, February 16, 2006
Pittsburgh is preparing to save PNC Financial Group $18 million on a new $170 million skyscraper with a special tax-financing offer, and that plan -- almost guaranteed approval by local taxing bodies -- would edge the city closer to a state-mandated limit on such deals.
PNC and Pittsburgh's Urban Redevelopment Authority say the 25-story office building, hotel and condominium tower is a bargain that could spur Downtown redevelopment and produce much-needed property tax money later for the financially strapped city.
PNC plans to invest $122 million in Three PNC Plaza, but has said it couldn't afford to proceed without public assistance.
"We believe that over a period of time the investment we're making will bear fruit" for the bank's shareholders and Downtown commerce, PNC Senior Vice President Gary Saulson said of the signature Fifth Avenue building.
In early March, City Council and two other taxing bodies -- Allegheny County Council and Pittsburgh Public Schools -- are expected to award PNC a 20-year tax-financing package commonly known as a TIF, which uses the difference in tax money before and after construction to retire government-issued bonds.
Critics -- including a councilman and the president of the city's building owners association -- counter that PNC is Pennsylvania's largest bank and had a record-setting profit of $1.3 billion last year. PNC shouldn't need $30 million from the state and $18 million in tax-increment financing, opponents say.
"Why is the public becoming an investor in luxury condos and a luxury hotel? That defies logic," said Jake Haulk, president of the Allegheny Institute for Public Policy, a Castle Shannon-based think tank. "We don't need more hotels and more office space in a market that's over-saturated with hotel rooms and office space. For taxpayers to be subsidizing this is foolhardy."
The state requires cities to keep the worth of all tax-increment financing at or below 10 percent of the combined market value of taxable property in the city, said Julie DeSeyn, a URA spokeswoman. Currently, the city has TIFs totaling $1.08 billion, or 8.1 percent of the value of the city's $13.3 billion in taxable land.
If the PNC plan and a separate TIF to build three parking garages at the Pittsburgh Technology Center in South Oakland are approved, the city would almost hit its limit on TIFs. The TIFs then would total about $1.31 billion, or about 9.7 percent of $13.5 billion -- the new combined market value of city properties, assuming no other major changes in the tax base, DeSeyn said.
That would leave about $44 million available for other projects before Pittsburgh hits the ceiling. A typical large TIF in Pittsburgh is about $20 million.
Robert Strauss, a Carnegie Mellon University economics professor, said the state limits TIFs to stop local governments from "giving away too much of its taxable land," a practice that ultimately raises the property tax burden for homeowners.
"If you ask PNC or anyone looking at major new construction, 'do they need a TIF?' they're obviously going to say yes, because they will prefer paying less tax to more," Strauss said. "My guess is, if the subsidy weren't there, somebody would come in and do it anyway."
City Council voted preliminarily Wednesday to allow the URA to accept a $16 million state grant for Three PNC Plaza. The remaining $14 million in money promised by Gov. Ed Rendell will come later and won't need council's approval, said URA director Jerry Dettore.
But council does have to give final approval to the tax package the URA designs.
"If council votes to support PNC, it will deny all other projects the ability for tax-increment financing," said Councilman Bill Peduto, who believes other projects might benefit more Pittsburghers -- such as infrastructure work to support a new arena or improvement projects in blighted residential neighborhoods.
All three taxing bodies preliminarily gave the URA approval to proceed with a plan to borrow money to help pay for construction. The development would increase taxes on the land from the combined $181,000 that now goes to the city, county and schools to $3 million by the end of the 20 years, according to URA estimates.
PNC plans to use much of the office space in the skyscraper. The only other announced tenant is Downtown law firm Reed Smith, which would relocate from a Sixth Avenue building the law firm owns.
"We would prefer to see each development stand on its own merit and not require public funds," said Jim Ayers, president of the Pittsburgh Building Owners and Managers Association. Ayers is vice president of property management for developer J.J. Gumberg.
Jeremy Boren can be reached at jboren@tribweb.com or (412) 765-2312
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