Tax-increment financing successful, city data indicate - Pittsburgh Tribune-Review: "An often criticized financing tool used by local governments to spur private development appears to be working well in Pittsburgh, according to data provided by the city's redevelopment agency.Sure, tax breaks work for the URA and for the special interests. Tax breaks and TIFs suck for the city as a whole and for the little guys. TIFs suck for the poor. TIFs suck for the one's who already invested here. TIFs suck for the home owners. TIFs suck for the school children. TIFs suck for the urban fabric of the city.
TIFs are great for churn. TIFs are great tools to strip away the authentic characteristics of a once great city.
TIFs are great for the old guard trying to keep its power.
TIFs are great at driving the overall decline of the region to new speeds of depression.
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Tax-increment financing successful, city data indicate
By Bonnie Pfister
TRIBUNE-REVIEW
Sunday, May 18, 2008
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An often criticized financing tool used by local governments to spur private development appears to be working well in Pittsburgh, according to data provided by the city's redevelopment agency.
As some communities across the country begin to more closely scrutinize the use of tax-increment financing, and seek better definitions for projects to be eligible for such bonds, the Tribune-Review analyzed figures provided by the Urban Redevelopment Authority for these so-called TIFs in the city dating to 1993.
Since that year, Pittsburgh has completed 14 tax-increment financing projects that created 12,225 jobs, which exceeded projections, and last year generated $12.8 million in property tax-increment revenues, nearly 10 percent more than anticipated, according to the URA figures. Some of the jobs, however, were shifted from other business locations within the region.
An additional five TIFs are under development.
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Individually, half of the projects exceeded tax revenue projections, and nine topped job projections.
Successful TIFs have transformed land dirtied by Pittsburgh's former heavy industry into open-office settings that nurture high-tech and bioscience jobs. Others have fallen short, particularly those tied to Downtown retail development and ex-Mayor Tom Murphy's doomed Fifth & Forbes master plan.
Still, said URA economic development director Robert Rubinstein, "We think every one of our TIF projects meets the intended purpose of not only state legislation, but the TIF concept in general."
TIFs allow local governments to borrow money for infrastructure improvements as a way to spur private development on a "blighted" property. Once a project is completed, the property is reassessed. A portion of this new property tax -- the "increment" -- is used to pay down the public debt while the rest goes to local taxing bodies. In Pittsburgh, between 60 and 90 percent of the increment pays off the TIF bond. The rest goes to the city, county, school district and, in some case, the Parking Authority.
If the increment falls short of the bond payment, the developer must pay the difference.
Development experts like TIFs because the loans are repaid with tax money they say otherwise would not exist. But some municipalities are restricting the use of TIFs, and several experts on land use, as well as the Cleveland-based Council of Development Finance Agencies, a professional association, are calling for greater detail in laying out what TIFs should achieve -- and whether they do so.
Skeptics worry that TIF decisions tend to be driven by developers, not community or elected leaders, and that the term "blight" is open to interpretation.
"In Knoxville, in Madison (Wis.), in Milwaukee, in several places in Texas, you're seeing more focus on accountability of what the developers are saying," said Toby Rittner, executive director of the Council of Development Finance Agencies. "Cities are starting to take a closer look at the incentive, and making sure they get returns on them."
Pittsburgh Councilman Bill Peduto said he is drafting legislation that would define "blight," and to direct tax-increment financing to be part of work force development plans for specific industries.
The city's first TIF, the Pittsburgh Technology Center in South Oakland, often is cited as its most successful.
On the site of a former Jones & Laughlin Steel Corp. plant, the URA issued a $4 million TIF bond in 1993 to pay for a parking garage for Union Switch and Signal, which moved its engineering and technology group there from the North Hills. Eventually Union Switch's headquarters moved to the center as well.
That location now is home to more than 1,800 jobs, nine times more than originally projected, according to the URA. They include skilled workers for such businesses as Sunoco Chemical Corp., the University of Pittsburgh's Center for Bioengineering and Biotechnology and Carnegie Mellon University centers for the study of entertainment technology and advanced fuel technology.
The bond was paid down 12 years early, in 2001. A second, $20 million TIF bond to build more parking lots and infrastructure such as roads and utility lines in support of 1 million square feet of planned development at the technology center was issued in 2006. That expansion is under way.
Across the Monongahela River on the site of another former J&L facility is one of Pittsburgh's most publicly visited TIFs. SouthSide Works is drawing on a $25 million TIF bond -- the city's largest. Approved in 1999, it has financed infrastructure and parking for a sprawling complex that includes upscale shopping, loft apartments, local FBI and Homeland Security offices and UPMC's Sports Performance Complex.
Construction giant Dick Corp. is moving its headquarters from Jefferson Hills to offices there, and a $48 million luxury hotel, condo and retail complex is planned along the riverfront.
At completion, SouthSide Works is expected to exceed its projected $6.9 million in annual tax-increment revenues. Last year it hit the $6 million mark, the URA says, creating 3,069 jobs. Officials anticipate 2,500 more.
Among the less-heralded TIFs are those tied to resurrecting Downtown as a retail destination. A $9.3 million TIF in 1995 paid for a 600-spot parking garage under what briefly was a Lazarus department store at Fifth and Wood streets. The building is being converted to luxury condos called Piatt Place.
Although the parking was needed and that TIF brought insurer Highmark -- and 2,000 jobs -- into the old Lazarus space at Stanwix Street and Penn Avenue, retail-heavy TIFs now are considered a bad idea, said Eric Montarti, an analyst with the Allegheny Institute for Public Policy.
"Using (TIFs) for retail is a pretty dangerous proposition because it's so faddish," Montarti said.
Half of the TIFs for the Mellon Client Services Center and PNC's First Side offices -- about $14 million in total -- went to purchase properties for Murphy's Fifth and Forbes project. The former mayor planned to raze several buildings in favor of a master-planned retail development. Historic preservationists and small business owners opposed the deal.
Others, such as the $10 million TIF for Bakery Square in Larimer, raise questions about developer control. That project at the old Nabisco factory, approved in December, is the latest Pittsburgh TIF.
At the request of developer Walnut Capital, City Council determined that only the first floor of a planned hotel -- as well as the parking garage, offices and shops -- would be in the TIF district. From the second floor up, the hotel is a TIF-free zone, council agreed.
That allows Walnut Capital to skirt a city ordinance requiring hospitality operations getting tax breaks to allow unions to organize. In exchange, the unions agree not to strike, picket or boycott.
"To us, that belied common sense," said Sam Williamson, Western Pennsylvania director of hospitality union Unite Here. He said such deals argue for greater scrutiny of how such tax breaks for development are doled out.
"Traditionally, development is something that happens to communities, rather than with them."
Bonnie Pfister can be reached at bpfister@tribweb.com or 412-320-7886.
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