Call it "the week that was" in news items related to projects on the drawing board, soon to get off of the ground, or those that failed to live up to promises. The common thread is that all of them somehow involve tax increment financing (TIF) as a funding tool. TIF allows development on a specified parcel (or parcels) of property to move forward by an authority issuing bonds for certain aspects of the project and then allowing, with the agreement of the taxing bodies where the development is located, that a good portion of anticipated taxes on the new more valuable development to be funneled to repaying the bonds instead of fully to the taxing bodies’ accounts.
We read of a failed development in North Versailles for townhomes and how the Mall at Robinson may not be throwing off enough money or produced enough corollary development (more retail?) to pay off debt; that the long-talked-about apartment village in Castle Shannon will go before Castle Shannon Borough and the Keystone Oaks School Board this month with one school official noting that the revenue split (75% for the bonds, 25% for the district) won’t bring a lot of dollars to the District, but they will get a lot of earned income tax dollars from people who will occupy the apartments (unless, of course, those prospective residents are already ling in the District and will simply move to the new location); the empty lot in uptown Mt. Lebanon, where the first swing and miss at development with a TIF came about a decade ago and is now in the hands of a second developer; a multi-use development in Sewickley; and, not to be left out, the Market Square development in Downtown Pittsburgh. We wrote an editorial in June about the resurgence of TIF in the area.
With these new developments, and a lot of ones already done over the years, are taxpayers getting significant benefits through the elimination of blight, the creation of new job opportunities, and increased tax value? If those questions are to be answered, don’t look to the Commonwealth: as we pointed out this year, the state hasn’t produced an evaluation on TIF even though it was a requirement in the 1990 law that permitted its use.
Nearly six years ago the borough manager of Castle Shannon stated "it appears the developer [of a proposed transit village at the Shannon trolley lot] has finalized both site development and financing structure". Three years after that the former Governor of Pennsylvania released $4 million in redevelopment funds to the project. And this week Allegheny County Council expects to act on a resolution to join the borough and Keystone Oaks School District in a tax increment financing plan that would allow incremental tax revenues to be diverted from the development to pay for up-front financing help.
The project does have staying power. Consider that the adjacent municipality of Mt Lebanon flirted with TIF plans for both the Galleria Mall at for a site on Washington Road that would have been a mixed use development.
According to the resolution’s language the site is expected to include "construction and lease of residential apartments, commercial space, and community parking of the [trolley station]". The resolution is non-binding and only authorizes an appointee of the County to work in conjunction with representatives of the other two taxing bodies on the TIF plan.
The benefits are enumerated as such: stimulation of private investment, increases in property values, creation of employment opportunities, and improvement of surrounding properties. Of course, for the County and the other taxing bodies they are hoping that these benefits are in addition to what is already there and don’t result from activity shifting around or to the detriment of existing activity.
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.