Where has the CITF Money Gone?

Continued from "Shaking the Gaming Money Tree"

We can evaluate the $9.2 million doled out this far through the CITF by number of projects, type, and location to see if there are any discernible trends shaping up.

There have been 57 projects that have received a CITF award. On average, that works out to $161,000 per project. Of the projects, 23 received above the average amount, with 17 receiving the maximum $250,000 and one project receiving $1,000,000 under a special waiver of the Authority.

And there have been some recipients that "double dipped" for CITF money. Data shows that Stephen Foster Community Center received two disbursements (one for $75k, one for $60k) for window replacement and four disbursements totaling $675,000 were given to Green Innovators Center, Pittsburgh Green Innovators 2, Green Innovation Campus, and Pittsburgh Green Innovators. It is possible that these are four separate and distinct organizations but the close proximity in names makes that seem unlikely. In addition there are at least three recipients that have received money from either the Regional Asset District tax or the hotel/motel tax in the last decade.

About one-fifth of funds have been related to purely public infrastructure. As stated in the program guidelines described earlier the purpose of the money is to fund infrastructure. What this word means varies from person to person. When looking at what one could consider purely public infrastructure-a bridge, a street, a road, a sewer line-we can trace $2 million of the $9.2 million (20%) to this area of spending. Close to $5 million appears to be for projects that involve a building or structure. This could be considered tangible and physical space but may be a step removed from what one would classify as infrastructure, especially public infrastructure.

The remainder of the money ($2 million) is connected to parks, a fountain, a memorial, branding and marketing for the Monroeville Visitors’ Bureau, and loan initiatives that would be further removed from infrastructure.

There has been a near 50/50 split of the money between City and non-City locales.

Aside from one award that was identified as a countywide loan initiative, all other awards went to either a specific municipality or a group of multiple municipalities. $4.3 million was awarded within the City of Pittsburgh and $4.6 million went to municipalities outside of the City. Pittsburgh represents about 25 percent of the entire County population. Of the non-City share, Monroeville received close to 30 percent of the distribution. Swissvale received one stand alone award and was involved in two other multi-municipal awards. Edgewood and Verona likewise followed this trend.

What the Mayor’s China Trip Means

If hosting the G-20 conference last fall was to tell the world Pittsburgh had changed-the spokesman for the region’s premier economic development agency said at the time that it was "an opportunity to dispel the smoky-city image once and for all"-then why did the Mayor of Pittsburgh and economic development officials have to travel to China to tell them that Pittsburgh is no longer a "smoky city"?

Sure, the Mayor was extended a personal invitation and should not pass up the opportunity to "sell" Pittsburgh. Apparently from press reports he is the only elected official to go on the trip.

So should the junket bear fruit in the way of development opportunities, we’re sure the Mayor will be first to celebrate. That would even be true if a Chinese company decided to locate anywhere in western Pennsylvania, say, in the airport corridor, Cranberry, or Westmoreland County, right? Sure, the City would not get property taxes from a development (but neither would any other community if there was a subsidy or abatement involved) or wage or payroll taxes, but there would be spin-off benefits for the City somewhere. And what exactly would be built? Manufacturing is doubtful, so perhaps a distribution facility for imports. Or maybe there could be a closer look at some of the other assets the City has at its disposal.

Does East Liberty Need a NID?

One of the agenda items that City Council had this past month was a petition from residents of East Liberty to establish a Neighborhood Improvement District (NID) in that section of the City. Under the NID law, a petition is not binding and it is ultimately the decision of the governing body to create a NID. If 40% of the affected property owners submit written opposition about the district then the NID is nullified. We last wrote about the mechanics of the NID in two pieces in 2002.

The purpose of the NID is to levy additional special assessments on the property owners within the district in order to promote economic growth and development.

So how many NIDs are out there? According to data from the PA Downtown Center in Harrisburg, there are 32 including districts in Downtown Pittsburgh and Oakland. A third of them are located in Philadelphia. All but two are active and assessing their particular levy according to the Center. The Center did not count a few tax increment financing projects (Victory Center, Pittsburgh Mills) that utilized the NID legislation to provide additional financing, even though their use was a complete perversion of what was intended by the legislation. The proposed WEHAV program for the West End of Pittsburgh underwent similar scrutiny in 2002 for its aim and focus.

What City Council and East Liberty need to decide is this: will higher fees and more government intervention promote the type of future the community desires?

Saks Salvo Smacks of Past

Downtown Pittsburgh, September 24, 2010. The department store Saks Fifth Avenue has intimated that it needs help for renovation of its store, preferably from its landlord, but it would not turn down assistance from the City or its agencies, either.

"If it is important to the community for us to remain a viable retail presence in Downtown, it is necessary that the city and/or the landlord provide Saks an economic incentive for us to continue to operate" said the store’s spokesperson.

She also noted that "we are not looking to expand, but to comprehensively remodel both the interior and exterior of the store to meet the standards of both our customers and our design partners". The chain does not want to invest much in the building "because it’s unlikely there would be a reasonable return on investment because of reduced sales".

Downtown Pittsburgh, October 12, 1995. In a proposal outlining projects that would comprise the Center Triangle Tax Increment Financing District in Downtown, the Urban Redevelopment Authority (URA) noted that "the retention of a major department store in the downtown is considered to be very important" and a tax increment finance arrangement was critical to make the project viable. The development costs of that store totaled $78 million. Five years later the URA’s chairman noted that "…this store will become one of the most popular places to shop in a revitalized Downtown". Four years later it was gone.

It probably won’t come as much of a surprise that the store was Lazarus and is now a condominium project, which itself has received a fair share of public subsidy to help with its conversion. Is history repeating in Downtown?

Taxing Bodies in a TIF…or Two

We’ve said it before, we’ll say it again: subsidies beget subsidies. Instead of doing what proponents of publicly-funded development believe will happen-that a publicly-funded anchor or targeted area will stimulate private, non-subsidized development, it is the inverse that we see happening. More developers line up looking for their fare share and when prior subsidies don’t stimulate development then officials simply dole out more preferential tax treatment.

Just this week Pittsburgh and Allegheny County discussed participating in two new tax increment finance districts, one in the lower Strip District and one at the Summerset development at Frick Park. Bear in mind that the lower Strip is in close enough proximity to the economic engine that is the new convention center and Summerset has received a lot of state and local incentives to get it up and running including costs related to acquisition, site preparation, and infrastructure.

Are the subsidies worth it? It depends on the cost to benefit ratio. Realize that a tax increment finance package deprives taxing bodies of the full increase of real estate taxes attributable to the new development for a fixed period of time. That means the costs associated with providing municipal services to these areas will largely be covered by some other taxpayers for the duration of the districts.

Times are Tough, But, It’s State Money

We’ve written about the Redevelopment Capital Assistance Program (RCAP) before: it is one of many arrows in the state’s quiver aimed at eliminating blight and stimulating economic development. The General Assembly not long ago authorized increasing the cap on how much the state could borrow to fund projects through this program, and in July the Governor handed out $600 million through the Commonwealth.

Just yesterday City Council discussed entering into various cooperation agreements with the Urban Redevelopment Authority, who acts as the applicant for RCAP dollars.

Perhaps City, state, and URA officials are aware of some good economic news as several RCAP requests were amended to reflect increased dollar amounts:

  • A grant for Phipps Conservatory was increased from $250k to $500k
  • A grant for the Pittsburgh Ballet was increased from $750k to $1,250k
  • A grant for the Pittsburgh Zoo and Aquarium was increased from $875k to $2,000k
  • A grant for the Carnegie Library modernization project was increased from $7,500k to $8,500k

And although it was not specifically amended, a grant for the Connelly Tech project-which was announced as an $8 million project in July-is now up to $12 million.

Washington County Gets Lots from Slots

Just having written about the off ledger nature of the Redevelopment Capital Assistance Budget, how its debt ceiling has been raised often since the 1990s, and the projects it has funded we have to give some attention to the economic and community development industry that is being created by gaming money.

We have written before about the money that was handed out from Act 53 to Pittsburgh and Philadelphia but just today Washington County got $11 million in funding for development projects from audio/video equipment at California University to the Washington County Marketing Initiative to soccer fields to sanitary sewer improvements. There’s money for municipal plans, traffic plans, and home repair.

None of the $11 million is directed at property tax relief, which is a separate pot of money from gaming.

What Else will RACP Fund?

By now we’ve heard that the Redevelopment Assistance Capital Budget (RACP) will fund a public policy center and a library for two of the Commonwealth’s biggest political names and that Allegheny County will get $30 million for a biologics center and $8 million for a green products and research center.

Two other counties in the metro area-Beaver and Washington-will partake of the RACP bonanza. There is $5 million for a mixed-use development in Ambridge and $5 million for a hotel at California University in the bill that itemizes projects funded by the capital budget. If we include Lawrence County as part of the metro-it will get $2 million for expansion of an industrial operations center in New Castle-the southwest PA area is in line for $50 million from the RACP.

That amount is almost half of what the City of Philadelphia is slated to receive under the program at $96.5 million. And though the Governor was quoted in print this week that "all of the RACP projects are legitimate uses of state funds and will be matched with private money" that may not necessarily be true: the state’s budget office notes under its RACP guidelines that 50% of the project cost must be match participation, and "sources of match funds can be local, private, land, and/or federal."

Raising the Redevelopment Roof

The Governor came to Pittsburgh this week bearing gifts from the state’s Redevelopment Assistance Capital Program (RACP) which is a capital budget that is for "the acquisition and construction of regional economic, cultural, civic, and historical improvement projects". Allegheny County will receive $38 million from the program this year for a green jobs center and a biologics center. We wrote a full length report on the RACP in 2003.

The state plans to spend $225 million from the RACP this year, which is slightly more than its capital expenditures on transportation assistance ($212 million) and bridge projects ($200 million) and far more than what it will spend on furniture ($25 million) and flood control ($35 million). RACP spending represents about 14% of all capital spending this coming fiscal year.

Not surprisingly, the state has used the RACP as a credit card, consistently raising the borrowing limit through the years. According to the state’s budget office the RACP began in 1986 with a $400 million cap on borrowing authority. That upper limit was increased five times starting in 1993 through 2002 to $1,450 million, a growth of $1,050 million, or 163% over 16 years.

The current Governor has signed legislation authorizing an extension of the RACP borrowing limit five times, including this past week, since 2003. Beginning with the $1,450 million level reached in 2002, the RACP borrowing limit today stands at $4,050 million, a growth of $2,600 or 179%. That percentage increase bests the growth rate from 1986 through 2002 and did so in half the time. Surely Pennsylvania will be rocketing to the top of the growth charts in no time.

Urban Planning Missed the Mark

The City development community is celebrating a big win today with the announcement that national retailer Target is going to set down roots in East Liberty after a seven year effort to lure the company began. There is a loan ($20 million) and a tax credit backed investment ($12.6 million) on top of $14 million in site development from U.S. Housing and Urban Development funds.

One official noted that "if we were able to stay on the short list during one of the world’s largest global recessions, I think that proves there’s a really good market in East Liberty".

What it might prove is that communities might be able to overcome the huge mistakes made by urban planners of decades past. East Liberty’s pedestrian mall was labeled as a prime example of "…Pittsburgh’s cockeyed urban planning" in a 2000 op-ed piece in the PG. Five years later when announcing plans for a pedestrian bridge near the development the head of the URA noted that the structure would go a long way toward "undoing 30 years of bad urban renewal".

Unfortunately there are no repercussions for bad urban planning or bad urban renewal, only vows to do better the next time.