A debate on how to spur the emerging Downtown housing market is set to start today in Pittsburgh City Council.
On one side is Councilman William Peduto, who wants to replace the project-by-project tax breaks with a blanket abatement for most new construction. He's won some backing from Downtown advocates and developers.
On the other side may be the tax man, worried about losing too much revenue from the city's priciest neighborhood.
Mr. Peduto's resolution calls on Mayor Bob O'Connor to bring together a dozen groups with a stake in Downtown construction, from resident and business groups to labor organizations. They would consider his plan to waive property taxes on new Downtown housing for 10 years, and on new offices and hotels there for five years.
That would replace the long-standing approach of granting some projects tax increment financing, called TIF. In a TIF, a city agency borrows money to aid a development, and then pays off the debt using most of the new taxes created by the development over a set time.
TIF is "a subjective process of providing incentives," Mr. Peduto said. "We have an opportunity to create a financing mechanism that would be fair and equal."
The abatement would only work if the Pittsburgh Public Schools and Allegheny County participated, he said.
That may be a hard sell. Ira Weiss, an attorney handling tax matters for the city school district, said he wasn't sure schools can legally participate in abatements for specific neighborhoods or types of businesses.
"I think a project-by-project approach may be better because it gives the taxing bodies an opportunity to scrutinize the projects," he said.
Mr. Peduto said TIFs skew the real estate market, benefitting recipients like PNC Financial Services Group, which wants $18 million in local aid for its proposed $169.5 million tower on Fifth Avenue. He opposes that TIF, which is expected to come up for an initial council vote next Wednesday.
Ongoing or proposed Downtown housing developments would add around 1,000 new condominiums and apartments. Mr. Peduto called that "only a spark. ... If we fan the flames, through a tax abatement that is equal to everyone, we can turn that into a bonfire."
He said his office has found "well over 20" cities that have used downtown abatements, including Philadelphia and Columbus, Ohio.
In 2002, Columbus placed a 100 percent abatement on new, affordable housing in and around its downtown, and a 75 percent break on other housing there.
The aim was to spur 10,000 new residences in 10 years. The Columbus Downtown Development Corp. claims it already has led to 3,754 new housing units either built, under construction or proposed.
Pittsburgh already offers three-year property tax abatements to new housing, and developers can apply for another, limited tax break that phases out over 10 years.
"I don't think that's a big enough incentive," said John Valentine, executive director of the Downtown Neighborhood Association.
An abatement has to be big enough to offset the cost of building and parking Downtown, he said. The city would get wage, sales and deed transfer taxes from new residents, he said.
He backs Mr. Peduto's approach, saying he has heard from developers that bypassed Pittsburgh for cities with downtown abatements.
Also enthusiastic is Lucas Piatt of Canonsburg-based Millcraft Industries Inc., which is building 47 condos and townhouses in the former Downtown Lazarus-Macy's building.
Millcraft wants to build 805 more apartments and condominiums near Market Square, and has said that effort's "extreme success is contingent upon" a tax abatement.
Mr. O'Connor's administration hasn't yet embraced the idea.
"We'll review it based on the short and long-term economic and citywide development impact it has," said mayoral spokesman Dick Skrinjar.
Mr. Peduto's resolution also calls for tax credits for redevelopment of historic property, for construction of environmentally friendly buildings and for funding public art.
After the 10-year abatement expired, Mr. Peduto said, he would plow part of the new revenue into citywide property tax relief to create "a benefit for every city resident, not just those living Downtown."
Rich Lord can be reached at email@example.com or 412-263-1542.