This is truly an alarming public policy statement regarding economic development in downtown Pittsburgh. It comes from the Nov. 22 Pittsburgh Post-Gazette:
“Right now, there’s an imbalance between the cost of doing those projects and the potential revenue that you’ll get if you do. They don’t pencil out.
“The only way to have those projects work is with some form of public subsidy. There’s no deal that I can think of [Downtown] that’s moving forward on what I call pure market parameters.
“In the Strip District, they’re building buildings left and right. Everyone’s wondering, why can you do it in the Strip District and you can’t do it Downtown? It’s a great question, and the answer is very obvious: the cost to build a new building in the Strip District is lower because ground-up development is less expensive than redevelopment. And number two, people are willing to pay a higher rent to live in the Strip than a lower rent Downtown.”
Those are the words of Aaron Stauber, said to own the most Downtown properties of any single developer. Oh, indeed, he has invested millions of his and/or investors’ dollars into his many projects, from beginning to convert iconic Downtown skyscrapers into residential units to, at least in one case, attempting to turn around the business and commercial fortunes of another, to name but two.
But the simple fact of the matter remains that in a market economy that is the hallmark of the American economy (though seriously threatened as of late on so many levels), taxpayers should have no skin in the game. If we’ve said it once, we’ve said it a thousand times: Taxpayers are not venture capitalists and they should not be abused in such a manner.
If the only way private projects can work is with a bolus, small or large, of public money, they are not economically efficacious. They should not be built. Period.
It was back in 2014, in the University of Baltimore’s Journal of Land and Development, that scholar Mark Knapp laid out the sound public policy case against taxpayers subsidizing private developers.
It came in a white paper titled “Promise vs. performance: Why public subsidies of private development are not likely to produce fair returns to the taxpaying public.”
From Knapp’s conclusion:
“When it comes to public subsidies of private development, the tax-paying public has not gotten, nor is it likely to get, the return on investment it was led to expect. [The public] has been, and likely will continue to be, misled by unsubstantiated ‘motherhood and apple pie’ promises of jobs and lower taxes.
And, in Pittsburgh’s case, a new Downtown “renaissance.”
“Rarely, if ever, will the tax-paying public receive an above-board accounting of costs incurred and value received when it comes to public subsidies of private development. Our system is designed in a way that makes this virtually inevitable.
“Too many inside interests benefit when projects are subsidized – the developers who shepherd the projects through, the organized labor that builds them and, most of all, the elected officials and bureaucrats who use these projects to further their careers.
“If the taxpayers that provide the subsidies were to get fair value for their money, it will be by happenstance and not by design.”
Asks Knapp, in further conclusion:
“Is there anything that can be done to remedy this situation? Without major changes to our political system, the answer is no. As long as those entrusted with guarding taxpayers’ interests — their elected and appointed officials — have interests that don’t align with those of the taxpayers, the interests of the officials will take precedence.
“We have put a fat kid in charge of the cookie jar. That there are no cookies left for us is the obvious result.”
This self-serving notion (repeated so many times that politicians and developers truly believe gullible taxpayers now consider it an article of faith) that diving deep into taxpayer pockets somehow makes respective projects economically sound is, as we’ve repeatedly stressed, a delusive sophism.
That developers are not willing to risk their capital, fully, to develop or redevelop anything is a signal clear as a pristine day that the marketplace is shouting that it’s not economically sound.
And no amount of corporate wealthfare makes it so. Projects that don’t “pencil out” don’t magically “pencil in” just because taxpayers were ripped off to reduce private developers’ risk.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
