Union objects to tax subsidy for Bakery Square because of hotel

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A dispute between the city of Pittsburgh's development agency and a union over a $113 million project comes down to a philosophical issue: Can a building be divorced from the land below it?

The Urban Redevelopment Authority believes that it can, pushing a subsidy plan for the Bakery Square project in Larimer that excludes a 120-room hotel to be built in the "air rights" above the rest of the development.

A representative of the union UNITE HERE, which includes hotel workers, said yesterday that the "air rights" are a legal ploy to avoid complying with a 1999 ordinance requiring that city-aided hotels enter into labor peace agreements.

"If the city is going to be involved in the development business, public officials and their appointees at the URA have a responsibility to ensure that the developments they fund comply with the laws of the city," said Sam Williamson, Western District Director for UNITE HERE. He's urging City Council to postpone a vote on the TIF that appears on today's agenda.

Bakery Square is developer Walnut Capital's plan to transform the former Nabisco bakery into a 285,000-square-foot retail-and-office complex, plus 38 homes, an 849-space garage and the hotel.

The URA wants to borrow $10 million, spending half on the garage, and the rest on infrastructure improvements, including some to nearby Penn Circle in East Liberty. It would pay off the debt using 60 percent of the property and parking taxes generated by everything except the hotel. Allegheny County and the Pittsburgh Public Schools have agreed to forego part of their taxes. A council vote, plus mayoral approval, are the last steps.

The question is whether the hotel is part of the parcels that would benefit from the URA aid, or floats above them.

"The hotel is actually starting on floor two," URA General Counsel Don Kortlandt said yesterday. It "will be a separate [tax] parcel" from the stores and ground directly beneath them. "It will be under separate ownership, separately financed."

That's a key point, thanks to the 1999 ordinance requiring that city-aided hoteliers try to come to terms with unions that want to negotiate on behalf of their employees. The unions, in turn, forgo the right to strike, and disputes must go to binding arbitration.

"I concluded that [the ordinance] does not apply to the hotel parcel," said Mr. Kortlandt.

Mr. Williamson said the ordinance, which the union backed, is meant to ensure that "if there is an organizing campaign, that it be handled in a dispute-free manner." Organizing pickets or a strike "would jeopardize the value of the property over time" and could affect the flow of taxes that pay off URA debt, he said.

The project that spawned the ordinance, Downtown's Renaissance Pittsburgh Hotel, was the subject of a lengthy organizing campaign that led to a July recognition vote. UNITE HERE is negotiating a contract with the hotel's ownership.

The ordinance is on "some shaky legal ground," said Eric Montarti, a policy analyst for the conservative Allegheny Institute for Public Policy. "We're singling out one industry here. ... The city is basically saying to a developer that they have to accept a union and accept binding arbitration, which [usually] only applies to police and firefighters."

Mr. Williamson said he is willing to work with Walnut Capital and hotel operator Concord Hospitality Inc. Walnut Capital President Todd Reidbord would not comment yesterday.

Mayor Luke Ravenstahl's administration has political ties to both sides. Top Walnut Capital executives gave the mayor's campaign $16,000 last year and this year, while UNITE HERE endorsed him.

Bakery Square has drawn criticism from some in Larimer, which would get a $35,000 job training program and $15,000 for community development in the deal.

"All of this money has been blowing around, but none of it blows over here," said Ora Lee Carroll, a neighborhood activist.

Rich Lord can be reached at rlord@post-gazette.com or 412-263-1542.


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