Pittsburgh Mills TIF comes back to bite
Once upon a time, in a universe far, far removed from reality, developers and government jurisdictions were wont to argue that “But for the TIF, this project would not be possible.”
But as time is telling more and more often, TIF, or tax-increment financing, perverted how projects came to fruition that simply were not sustainable to begin with. Thus, the “but for” argument takes on a new, and more accurate, import.
TIF long ago became a common (though too often imprudent) way to finance new developments. The “too often imprudent” part is applicable when TIF proceeds – from bonds sold to be paid off by respective projects’ expected increased property tax-generating capabilities – are used to subsidize the fickle, churning world of retail development that has little or no multiplier effect.
Which brings us to the Galleria at Pittsburgh Mills mall in Frazer. It was built nearly two decades ago along Route 28 north of Pittsburgh with the aid of $50 million in tax-increment financing.
“But for” this TIF, backers argued the mall could not be built and, oh, the region would lose out on multiple millions of dollars in direct and ancillary economic development.
Paraphrasing one editorial writer of the day, the new mall would change life as it had been known in the Alle-Kiski Valley. But not as that scrivener imagined.
And never mind that the massive new retail complex was opening as the mall form of retailing already was on a trajectory to reach its nadir.
Long story short, Pittsburgh Mills never performed as touted. And by 2015, it was a certified bust. Wells Fargo foreclosed on the property. Last January, the bank took possession of the badly struggling mall for $100. And the TIF mess is a mess that only begets new messes.
As the Post-Gazette detailed in a painstakingly reported Nov. 30 story, property owners that are part of the mall and nearby retail developments “could be facing a total of $5.4 million in special assessments next year if property tax revenues fall short of what is needed to make the debt payment on the TIF bonds that were floated as part of the mall’s development.”
In a Catch-22 nutshell, the values of the mall-related properties have fallen with the fortunes of the mall. Property owners have appealed their high assessments. Should they win those appeals, there will be less money generated to pay off the outstanding TIF bonds, now valued at about $23 million.
One real estate mogul with skin in the game laments that the special assessment that could be coming – a requirement of an ancillary neighborhood improvement district established to guarantee TIF bond repayments – could have further devastating consequences, the P-G reports.
And then there’s this hardly unexpected spate of hubris from the same real estate retail broker: He hints that perhaps “the state and/or county step in to assist with these impending special assessments.”
But taxpayers at large have no business being expected to come to the rescue. Those who entered into this TIF deal knew the risks – or at least they should have – and agreed to the guaranteeing neighborhood improvement district.
The Allegheny Institute has pointed out the inherent problems with retail TIF over the years. Yet, simply put, backers chose to swim with the TIF sharks and they alone should be held responsible.
As the Allegheny Institute again noted in September 2016, when it was becoming evident that the fortunes of Pittsburgh Mills were flagging, “This just calls into stark relief the problem with subsidizing retail ventures.”
And it was prophetic about market values being reduced and the ability to repay the TIF bonds being in doubt, noting such a scenario “should serve as a warning to development officials seeking to go down this road again.”
But as so often, too often, happens, the warning will be ignored and taxpayers, in one form or another, will be left holding the bag.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (email@example.com).