The Shapiro administration and “local partners” have signed a letter of intent with Loews Hotels to build a 500-room hotel at the David L. Lawrence Convention Center.
And taxpayers’ wallets will be millions of dollars lighter for this pol-touted “progress.”
Per the government statement announcing the deal:
“The Loews Hotels project will spur $418 million in total investment, including $135 million in company investment, and create 1,200 union construction jobs and 400 permanent union jobs.
“The [c]ommonwealth has agreed to provide $30 million in funding to support the project … . Allegheny County will also provide the largest local share of financing for the deal via available financial tools designed to bring a hotel to the convention center,” the official statement noted.
Do remember that “investment” in government-speak means taxpayer dollars.
So, let’s do some good-old fashioned ciphering:
Loews, which posted net income (that’s profit) last year of $1.66 billion, will put up $135 million for this new hotel. That’s just over one-third of the total cost (that is, if the $418 million figure represent “total cost” that’s sure to balloon) at 32.30 percent.
We are left to assume that taxpayers will be on the hook for 67.7 percent of the new Loews’ price tag. That’s $283 million.
We know that “the state” is providing $30 million in taxpayer money, apparently through the Redevelopment Assistance Capital Program (RACP). But about the only thing being “redeveloped” here is state government upping its ante to raid taxpayer coffers to serve up on a silver platter a hefty new entrée of corporate wealthfare.
OK, so back to the ciphering. Let’s take that $283 million and subtract that $30 million. That leaves $253 million.
“Surely local money is not going to be close to [that balance],” pondered Jake Haulk, president-emeritus of the Allegheny Institute. “They’ll never earn a positive return on that,” he observed, a sentiment the think tank’s executive director, Frank Gamrat, reiterated in a Tribune-Review interview.
Haulk further ponders if Loews and the state are looking for private investors with which to partner.
But apparently not, if we are to take at face value the hardly cryptic words of county and City of Pittsburgh officials. Not only will the county hotel tax be tapped, the city will, as the Trib puts it, “divert future increases in parking tax revenues to make up the balance.”
It’s unclear if that indicates a parking tax hike might be in the offing.
As a point of order, all this comes from a county that jacked up property taxes last year and from a city whose structural budget deficits are legion. The latter more simply is known as sucking for air. But we digress.
As this scrivener noted in February, our long-held bottom line in this 30-year-plus saga to secure a “full-service” convention center hotel – and never mind that there’s already a large, 700-plus-room hotel adjacent to the convention center – is that if there’s such a robust demand for this convention center hotel, it should be a profitable enterprise. And the developer and/or hotelier, in anticipation of profits, should alone bear any risks.
And talk about undermining the many privately built hotel rooms that have been built Downtown over the past three decades.
As we’ve said thousands of times over the past 30 years, taxpayers are not venture capitalists. Taxpayers should not fund corporate wealthfare, not for any developer and not for any hotel chain.
But the scam continues.
As we’ve previously noted, Steven Malanga, writing in The Manhattan Institute’s City Journal in 2004, framed perfectly the racket that publicly subsidized convention center hotels long have been:
“Though hotel companies won’t finance these properties themselves, because they know they are unlikely to repay their investment, they are more than willing to move in and operate them after government has built them.
“The result is a version of the rat and cat farm: we use tax money to build a convention center that supposedly will stimulate the hotel industry and then use tax dollars to build a hotel that supposedly will stimulate the convention industry.”
The usual suspects backing this and all other taxpayer-funded “civic” projects over the last 30 years keep insisting these signs of “progress” prove that Pittsburgh is on the proverbial “move.”
But, “What utter hubris and pie-in-the sky mindlessness,” says Haulk, a Ph.D. economist. “How have all the other huge subsidized projects – think sports stadium, think the North Shore Connector, among others –stopped the population loss in the city or boosted the county?”
They have not, of course. As Haulk notes, the city has seen its population decline steadily in the 1997-to-2026 period.
Oh, by the way, the Shapiro administration and its merry band of government almsgivers common highwaymen tout that the new hotel project “will create 1,200 union construction jobs and 400 permanent union jobs.”
Those permanent jobs, though “jobs” they are, will be relatively low-paying service-sector positions. But research shows unionized convention center hotels can have daily room rates nearly 30 percent higher than their non-union, non-convention center competitors.
As for those 1,200 union construction jobs? That union label can increase construction costs anywhere from 10 to 21 percent, various scholarly studies have shown in general.
But it’s OK to screw taxpayers, those paying the lion’s share of the tab, right?
Still, state Sen. Wayne Fontana, the Brookline Democrat who chairs the Pittsburgh-Allegheny County Sports & Exhibition Authority that owns the David L. says, “The economic impact and growth of the city should be great,” thanks to the coming new convention center hotel. “Everyone is going to want to use it.”
We all would be remiss to not remember such famous last words from the landlord of the rat and cat farm.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
