“Pittsburgh URA ups the ante in bid to reshape Downtown.”
That’s the headline on a Wednesday Post-Gazette story detailing how the city’s Urban Redevelopment Authority “officials are pitching a plan offering 10 years’ worth of property tax abatements to developers willing to undertake residential projects in the Golden Triangle that include affordable housing or commercial or industrial ventures that create at least 50 new jobs.”
The URA board gave formal approval of the plan on Thursday.
But a better headline would be “Pittsburgh URA ups the insanity in a sucker’s bet to reshape Downtown.”
The story has been oft-told how the URA wants to address the growing plethora of business tenant-bereft Downtown high rises by throwing millions of dollars at developers to convert such spaces into residential units.
As the P-G reports it:
“It would supplement a $6 million URA program already in place designed to increase the stock of affordable housing in Downtown — one the authority is planning to fine-tune in an effort to increase participation.”
Translation: Even more taxpayer dollars.
It’s a program, by the way, that thus far has one approval in a doozy of a deal – for the developer: nearly $3 million in public assistance in one form or another to a $13.2 million project, or nearly 22 percent of the total cost.
A 10-year property tax abatement, that must be approved by local taxing authorities, of course, would raise the taxpayer assistance, ostensibly in return for higher tax returns a decade out. But given the vagaries of the marketplace, that sounds like a sucker’s bet.
Not only do these programs’ “affordable housing” components raise the price tag for such conversions – somebody else will be forced to cover those costs, either tenants in market-priced housing or taxpayers, right? – the very premise of converting office space into residential space has been deemed cost-ineffective time and time again.
And in typical government fashion, if something is not cost-effective, taxpayers are forced to make it so (talk about an Orwellian supposedly), which, of course, it does not.
In testimony this past April before the Washington, D.C., City Council, Erica Williams, executive director of the DC Fiscal Policy Institute, citing national research, noted that converting downtown office space into residential units using tax abatements “is an ineffective use of public dollars.”
“Tax abatements often go to companies that already are prepared to engage in a particular business activity, subsidizing activity that would have happened anyway and thus wasting public funds,” she said.
“A comprehensive analysis of business incentives for economic development offered by state and local governments found they are often costly yet not highly correlated with unemployment or income levels, or with future economic growth,” the think tank scholar testified.
And yet Pittsburgh’s URA wants to “up the ante” on such conversions by proposing a decade’s worth of tax abatements?
Downtown Pittsburgh’s office vacancy problem is complex. But too many public officials would have you believe the COVID-19 pandemic and resultant work-from-home habits created it.
While the pandemic certainly exacerbated the problem, high office vacancy rates pre-dated it. But regardless of the cause, taxpayers have absolutely no business being turned into government’s venture capitalists.
For as a Moody’s Analytics white paper concluded last year:
“Finding an obsolete office building at the right price and asking rents, with high vacancy and the right floor plates to convert into an apartment building is great in theory, but very hard to execute in today’s market.”
Taxpayers must not be forced to assume the risk that building owners, and building owners alone, should bear.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
