Wednesday, May 24, 2006
Downtown Development—Hold on to Your Wallet
To say there is a lot of fanfare surrounding development in the Fifth and Forbes area of Downtown would be an understatement. Condos, retail, green space, offices, hotel rooms, and even a new skyscraper—all of these projects seem to be coalescing to deliver on the promises of revitalizing the decaying downtown.
Smiles abounded when the Mayor selected Millcraft as the master developer for properties on Fifth and Forbes owned by the URA. The grins got even bigger when it was announced that the developer would not seek subsidy from the City or the County. This signaled that perhaps the days of developers coming to Pittsburgh with hat in hand were over.
Not so fast.
Even though the City and County won’t be tapped, signs are pointing to the state being asked for help, and don’t be surprised if the state obliges. The state is already kicking in $30 million in assorted funds to the PNC Tower proposal (on top of a TIF) and, given that the Millcraft project will cost about $71 million, subsidies from the state for PNC and Millcraft’s developments could exceed $42 million if the state funds about 20 percent of Millcraft’s plan. Whether it comes from the city or the state, public money is public money.
The problem is that grants to downtown construction of office and retail space inevitably create subsidized competition for existing businesses and property owners. This is never a good thing. It only leads to more cries for subsidies until nothing gets built without one. The return to taxpayers, which in many cases is nil to begin with, falls with each new subsidy. But in Pennsylvania, officials will not look beyond the ribbon cutting to see the long-term consequences of their ill-conceived behavior.
Smiles abounded when the Mayor selected Millcraft as the master developer for properties on Fifth and Forbes owned by the URA. The grins got even bigger when it was announced that the developer would not seek subsidy from the City or the County. This signaled that perhaps the days of developers coming to Pittsburgh with hat in hand were over.
Not so fast.
Even though the City and County won’t be tapped, signs are pointing to the state being asked for help, and don’t be surprised if the state obliges. The state is already kicking in $30 million in assorted funds to the PNC Tower proposal (on top of a TIF) and, given that the Millcraft project will cost about $71 million, subsidies from the state for PNC and Millcraft’s developments could exceed $42 million if the state funds about 20 percent of Millcraft’s plan. Whether it comes from the city or the state, public money is public money.
The problem is that grants to downtown construction of office and retail space inevitably create subsidized competition for existing businesses and property owners. This is never a good thing. It only leads to more cries for subsidies until nothing gets built without one. The return to taxpayers, which in many cases is nil to begin with, falls with each new subsidy. But in Pennsylvania, officials will not look beyond the ribbon cutting to see the long-term consequences of their ill-conceived behavior.
