Rivers Money Dries Up

"PITG’s commitment to the community included a $1 million contribution per year for three years to a neighborhood redevelopment project in Pittsburgh’s Hill District, a $7.5 million contribution per year for 30 years toward the funding of a new arena in Pittsburgh and a $1 million per year contribution for three years to the Northside Leadership Conference"-Adjudication of the Gaming Control Board, 2008.

We won’t know if the Rivers Casino lived up to its obligation for the hockey arena until the Penguins’ star center is the ripe old age of 53, but the time is up on the three year community redevelopment agreements, and it does not look like the casino is looking to extend what was agreed to by the original winner of the slots license. It noted in a prepared statement that "Rivers will continue supporting Pittsburgh’s neighborhoods through its ongoing community outreach programs." It has met its commitment, and there have been projects undertaken with the money from the agreement, and it should not be expected to do more.

That’s not going to stop the beneficiaries of the agreement from making the case for more and, one could argue, they are free to make an appeal to the casino the same way they would the state, the Federal government, the URA, the County Redevelopment Authority, etc. that their good and noble work needs to continue. One official stated "What they said is not a surprise. That doesn’t mean to our minds that that’s the end of the conversation. That doesn’t preclude future plans. So we’re happy to talk to them about the future". But it is fair to ask if community groups could become addicted to gaming money-if so, do we need to start "Redevelopers Anonymous?"

OK, A Guy Walks into a Bank…

Maybe not a bank, but what is to become office space for one of the nation’s biggest banks that has several new structures around town. But let’s call it a bank.

So the guy finds out that the bank was once a department store that was part of a strategy to make a city’s downtown area a hub of retail activity by having not just that department store but at least four department stores, including a really new one. Through a complicated financial arrangement the agency in charge of redevelopment basically gave the parent company of the department store a gift of a loan because the terms of repayment were based on the store achieving sales activity that were well in excess of the norm for the company.

Then the guy learns that before the stylish old building was a department store it was a real genuine bank with architectural character and had to be completely gutted to accommodate the store. The store was around for five years and has sat vacant since then (one local real estate expert opined in 2003 "that’s not a corner you would want to have empty for long") although another developer bought it for $2.5 million in 2005 and hoped to do something with it.

As a kicker, the guy finds out that the new owner-the one that wants to make it back into offices for banking operations and have employees in it by 2013 or 2014-won’t "make any alterations to the building which would in any way affect its historical significance or exterior architecture", even though the building was made over for its department store debut.

So the guy says "wouldn’t it have been preferable to save the character of the building and spare the city from another intervention in the marketplace in the name of urban planning"?

Extraordinarily High Cost Redevelopment

On December 21 Allegheny County’s Chief Executive, in one of his final acts in office, released an announcement of a plan to redevelop the former Braddock Hospital site.  And what a plan it is. The plan calls for the use of $20.3 million, most of which depends on taxpayer dollars or tax credits, to be used to build low income housing. 



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The Sports and Exhibition Authority (SEA) has announced it is seeking $3.1 million from the Commonwealth to pay for design work necessary to begin the redevelopment of the 28 acre Civic Arena site. And we all thought the Penguins would have the redevelopment rights. But that obviously does not mean they will be expected to pay all the costs of the redevelopment-no matter how much money they stand to earn from the site’s redevelopment.

Then, after the design work is completed, the SEA will want tax increment financing (TIF) to help fund the new construction on the site. Did it ever occur to these folks that the site is a very valuable piece of real estate and maybe should be sold to a developer who will fund the new construction itself? But having assigned the redevelopment rights to the Penguins, the SEA obviously feels compelled to find the money to help them redevelop the site. Call it the urban renewal project that never ends.

Now what all of this actually reveals is the unfortunate mindset of public officials and coddled sports team owners who hold the view that they have an inherent right to use other people’s money (OPM) to subsidize their pet projects. Nice deal if you can get it but it fosters a cynical and ultimately destructive view of government. Favoritism creates calls for more favoritism and it engenders a sense of entitlement in private sector players who are constantly looking for taxpayer money in the form of economic assistance. It weakens the very fabric of the free market entrepreneurial system. It makes for cronyism and mutual backscratching between business and politicians, the exact opposite of what should be happening.

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?