The Post-Gazette reports that the plan to convert the iconic Gulf Tower in downtown Pittsburgh into apartments and a tony hotel “appears to be a step closer to reality.”
But likely with a multimillion-dollar infusion of public money.
Yee-haw? Hardly.
Per the P-G report:
“New Jersey-based Rugby [Realty] is proposing to transform the [44-story] building into 226 residential units — 27 affordable — on floors 11 to 38, and a 126-room luxury hotel on par with a Ritz Carlton or Four Seasons.
“It is working with New York City-based Left Lane Development on the project. Left Lane is seeking hospitality and multifamily opportunities in the fastest-growing U.S. secondary markets, according to its website. Left Lane recently opened an upscale hotel in Savannah, Ga.
“Rugby has been one of the major players behind recent efforts to provide more incentives to developers to repurpose struggling Golden Triangle office buildings for residential or other uses.
“The initiatives include a new 10-year Downtown tax abatement program approved by City Council to help with the rehab of such properties.
“Full abatements are available to developers who commit to designating at least 10 percent of the residential units created as affordable to households at 50 percent of the area median income or to those whose projects create a minimum of 50 full-time jobs.”
Rugby also is planning to take advantage of the abatement program in the conversion of Gulf Tower. And its application for a $10 million state Redevelopment Assistance Capital Program (RACP) grant is pending, “considered to be a key piece of the funding puzzle,” the P-G says.
But what business do taxpayers have underwriting “luxury” hotels?
One would imagine that such hotel rooms will command a premium rate, yes, especially if Pittsburgh now is considered a “fast-growing secondary market”?
Why should any developer be allowed to offload what solely should be its risk?
If Rugby stands to make a very pretty penny out of 100-plus very tony rooms, why should taxpayers become its venture capitalist? Such socializing of the risk in pursuit of purely private profit is not acceptable.
In fact, it’s putrid.
The “incentive” should not be the promise of public money to defray capital costs for which the developer alone should bear. It should be the profit potential for private developers risking their own money and credit.
That’s the way the system is supposed to work. If it can’t work without raiding the public kitty – turning out taxpayer pockets — that’s the marketplace speaking loud and clear that a respective project doesn’t pass economic muster.
Talk about Orwellian – making this project or that “affordable” by sticking up taxpayers.
The tax-paying public would be wise to remember the words of economics scholar Marc Knapp, taken from the conclusion of his seminal 2014 white paper “Promise vs. Performance: Why Public Subsidies of Private Development Are Not Likely to Produce Fair Returns to the Taxpaying Public”:
“When it comes to public subsidies of private development, the tax- paying public has not gotten, nor is it likely to get, the return on investment it was led to expect. …
“Rarely, if ever, will the tax-paying public receive an above-board accounting of costs incurred and value received when it comes to public subsidies of private development.
“Our system is designed in a way that makes this virtually inevitable. Too many inside interests benefit when projects are subsidized – the developers who shepherd the projects through, the organized labor that builds them and, most of all, the elected officials and bureaucrats who use these projects to further their careers.
“If the taxpayers that provide the subsidies were to get fair value for their money, it will be by happenstance and not by design,” Knapp concluded.
Keep that in mind as more and more developers get in line for their handouts, all in the name of “rescuing” the Golden Triangle and leading to the Nirvana of a promised new “renaissance” to top all past “renaissances.”
Pass the bucket. It’s way past time for a group retch.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
