Why No State Reports on the TIF Program?

“The Department of Commerce, in cooperation with other State agencies and local governments, shall make a comprehensive report to the Governor and the General Assembly every two years commencing January 1, 1992, as to the social, economic, and financial effects and impact of tax increment financing projects.” –53 PS 6930.10, Tax Increment Financing Act

 

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Going to the RACP Well

How far removed the City seems to be from the New Year’s rush to avoid a state takeover of the pension system, how plan after plan was tried until Council settled upon using the infusion of value of parking tax monies over the next three decades. All because the state would have been iron-fisted in its treatment of pensioners, at least according to proponents who pushed for the alternative plans.

Since that time the City has authorized the Urban Redevelopment Authority not once, but twice, to apply to the state’s Budget Office for permission to obtain funding from the Redevelopment Assistance Capital Program (RACP) to help prevent the spread of blight and promote economic development. This week Council will give the URA its blessing to pursue $15 million for redevelopment of the Produce Terminal in the Strip, $4 million for the "Downtown Preservation" project, and $1.5 million for projects in Lawrenceville and the North Side. The RACP has assisted many projects around the state for 25 years.

When the previous Governor visited Pittsburgh in December bearing $84 million in RACP "gifts" he indicated that some of the money was committed but not all of it and "he said he was hopeful that [the] incoming governor…would honor all of the requests". Well, now that the new Governor’s administration has begun we will see how the RACP is viewed. The borrowing limit of the RACP increased 179% on the previous Governor’s watch (it took 16 years from the time RACP was created in 1986 to grow at a pace somewhat close to that) and now stands at $4,050 million.

What’s a Six-Letter Word for Handout?

The City’s Planning Commission has declared a section of land (176 acres altogether) next to the Summerset Park home development blighted. Doing so allows for the City and its related entities, along with the County and the Pittsburgh Schools to sign off on a tax increment financing package for the developer.

Only officials want to redefine the term because, of course, nothing says move to a housing development like a blighted area. The Commission chairman said in a newspaper article that "the term blight is the wrong term…I think it’s really an area in need of redevelopment."

That’s what previous planning officials, redevelopment advocates, and elected officials said when the Summerset project began over a decade ago. By now, with 256 high-priced homes built and more planned on the now blighted area, the public should expect that the time for subsidies and special tax treatment would be over.

But that’s not the case, since a URA official noted that the TIF package will be necessary since the state’s help through the Redevelopment Assistance Capital Program-which provided close to $18 million to the development-is likely dried up. What the official did not note is that during the 20 year life of a tax increment package part or all of the incremental taxes won’t go to pay for the public services necessitated by new homes, families, vehicles, etc. but will go to pay off the debt to build the new high-priced homes.

In fact, the new phase of development might be in line for an $11 million loan from PENNVEST, which is another arrow in the state’s development quiver.

Remember that lots for the new development were once decided by a lottery. The Mayor at the time noted that the housing plan was "going against the popular misconception that people don’t want to live in the city". As recently as 2008 an official of the development company indicated "we’ve continued to have steady interest and good sales despite the economic downturn…we sell about two units each month just as we’ve been doing for years. I currently have a list of over 20 perspective buyers from around the region who want to move into the city." So when does the public get to opt out as a silent development partner?

Challenges for Land Task Force

The Mayor has asked for permission to create a 25 member task force that will deal with the City’s vacant properties. The panel, if created, will have two years to write a plan.

How extensive is the problem? The Act 47 plan contains data on vacant housing units as a percentage of total housing units. Pittsburgh has some 29k housing units that are vacant: with 160k total housing units, that works out to 18%.

That percentage is higher than other PA cities looked at by the recovery team-Philadelphia (14.9%), Allentown (9.5%), and Erie (14.7%)-but not as high as Buffalo (21.2%), Cleveland (23.3%), or St. Louis (21.3%). Pittsburgh exceeded the overall U.S. average of 11.6%.

To be sure, data shows that the rate of condemnations far outpaces the rates of demolitions, thus making the backlog grow annually. And though we have been told that the Pittsburgh region by and large did not partake in the housing boom (thus implying there has been no housing bust here) there has to be a good portion of stock that fell into foreclosure. To be sure, there are examples out there of what other cities have done to combat vacant housing and most certainly the task force will have to address the operations of the Bureau of Building Inspection, which was examined by both the Act 47 team (in the amended report) and a separate oversight board study.