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Wednesday, October 02, 2002

By M. Ferguson Tinsley, Post-Gazette Staff Writer

A mall in Frazer may yet see the light of day.

For two decades, Johnstown builder Damian Zamias has threaded his way through a gauntlet of delays, public opposition and business setbacks to get a $250 million mall built in the township.

Despite filing for Chapter 11 bankruptcy protection in the spring, Zamias crossed another hurdle when he got backing for the project from The Mills Corp. of Arlington, Va.

In July, Mills gave Deer Lakes school board members a tour of Arundel Mills, its 1.3 million-square-foot mall complex near Baltimore. On Sept. 16, district board members voted 8-0 to take part in the tax increment financing plan that makes public money available for the project. As a result, if the project is done, the district is committed to using 80 percent of any increased tax revenue from the development to cover the cost of bonds issued to finance it.

The district's share of the debt service on the bonds would total $85.8 million over a 20-year period. During that time, the increased tax revenue must go only toward paying off the debt.

On Sept. 23, when Frazer supervisors unanimously approved the TIF, their decision put the mall closer to reality. The township would encumbered 75 percent, or $4.3 million, of future tax revenue from the project.

The third taxing body weighing its option to participate is Allegheny County. County Council is set to vote on the issue this month. If it approves, the county's obligation will be $17.9 million over the 20-year life of the TIF. That's 75 percent of the tax revenue the county could expect to see from the project.

Also, another $500,000 would be pulled annually from the tax revenue pot to pay for security around the mall.

Tax increment financing is less than a decade old in Pittsburgh.

According to the Allegheny Institute for Public Policy, a local think tank that analyzes politics and economic development, TIF first came to Pittsburgh in1994. It was a state-sanctioned way for communities to fund projects and yet avoid raising taxes or drawing from the general fund.

Since 1994, some ventures carried out with TIF money include the renovation of the Lazarus department store Downtown and the expansion of the Pittsburgh Technology Center on the South Side.

The way it works is that a TIF earmarks future tax revenues to secure proposed development projects. After developers and government planners draw boundaries defining the TIF district, they next identify three taxing bodies -- in Pennsylvania, that is usually the municipality, school district and county -- who must agree to the TIF plan.

Each taxing body uses a percentage of the increased tax revenue that results from the development to pay off the bonds sold for construction of it .Usually, the school district's percentage is the largest.

On Monday, another school board will ponder participating in a TIF. Avonworth School District is to hear a presentation by Developers Diversified Realty of Beechwood, Ohio seeking a TIF to build an open-air shopping center at Mount Nebo and Lowries Run roads in Ohio Township.

In Frazer, township supervisors agreed to the TIF in hopes of spurring more commerce, bringing more jobs and improving infrastructure. Promoters say the mall, which has a working name of Pittsburgh Mills, would do all those things. Others are skeptical.

Zamias and The Mills Corp. say the mall would spark $58 million in transportation and community improvements and create up to 9,665 construction jobs and 3,413 permanent jobs.

"We know that this is a good thing for the township," said Christine M. Heintzinger, chairwoman of the supervisors.

Maurice Strul, an assistant manager with the Allegheny County Economic Development Department, worked on the project and echoed Heintzinger's optimism.

"Without this development, the infrastructure would never be built unless someone could come up with $58 million," he said. Of the $58 million, $40 million is the public share pledged for transportation improvements, including a Route 28 access road and bridge, the updating of other roads, improving intersections and adding signs and lights in the area. The developer would put up the remaining $18 million.

"What ... government agency could do that?" Strul asked. "The township couldn't afford it. The county couldn't afford it. And the school district wouldn't do it because it's not responsible for those kinds of things."

Strul also wrote the conditions report that led to the designation of the south Frazer area as "blighted" and thus eligible for the TIF.

"It will open up that whole area around the TIF [district]," he said. "Access and egress is what people in business look for. It's not just benefiting the developers. It's going to benefit the county, district and the township. Did you know that [township residents] have no sewers?"

Sewer and water lines are included in the infrastructure improvement plan.

The south Frazer TIF district encompasses about 300 acres. At the southern end lies Springdale Township. Yutes Run Road borders the west. A private lane runs along the northern line. At the east, part of Butler-Logan Road abuts the district. The blighted areas within the TIF district include open junk yards, a dozen derelict buildings and houses, inaccessible pockets of homes and swaths of open meadows and fields.

Jake Haulk, director of Allegheny Institute, said using TIF money to turn green space into a center for commerce abuses the concept.

"The use of 'blight' there is a travesty unless its a brownfield," he said referring to the barren landscape left when a factory or steel mill shuts down.

"Blight, in most people's minds, is rat-infested tenements, abandoned urban buildings, a safety hazard," he continued. Haulk said blight comes after an area has been developed and then allowed to decline.

"If nothing has ever been done to it, how can it be blighted? In that case you could declare the entire western world blighted."

Further, Haulk said, when a TIF backs private developers who are looking to establish private retailers, those retailers don't bring in new dollars.

"With retail, all you're doing is taking money from part of the area and spending it in another place." He said Allegheny County is already saturated with malls. "Eventually, it's going to result in overbuilding of shopping centers and the taxpayer will end up having to pay off the bonds," he added.

Strul said that contingency will not occur with the Frazer TIF. If the tax revenue does not reach anticipated levels, the developers have agreed to assess tenants and themselves to make up the deficit.

If the mall is built, it is expected to yield $126.9 million in new taxes by 2006. The current tax base is $1.3 million. Over the life of the TIF, the three taxing bodies would pay $108.1 million to service the bonds. In turn, they would expect to receive $28.9 million in new tax dollars in addition to the improved infrastructure.

Groundbreaking for Pittsburgh Mills is expected to take place no later than 2003. The latest opening date is spring of 2005.