In response to "Don't Knock the URA" by state Sen. Jay Costa, May 23 Sunday Perspectives:

The Legislative Budget and Finance Committee recently released a study of the Urban Redevelopment Authority's use of the Pittsburgh Development Fund. The committe interviewed URA officials and beneficiaries of the fund and issued its finding that the development fund is a positive use of tax dollars. Based on this report, state Sen. Jay Costa, D-Forest Hills, claimed in his May 23 op-ed that critics of the URA "could not attack the facts" of the development fund's success. We would like to take the senator up on his challenge.

		Frank Gamrat and Eric Montarti are with the Allegheny Institute for Public Policy.

First, the city used a portion of its allocated Regional Asset District tax revenue -- originally designed to lower the burden on municipal taxpayers -- and created the Pittsburgh Development Fund. The city issued $61 million in bonds and has dedicated $6.2 million per year of RAD tax revenue over the past 10 years to service the debt. A decade into the life of the loan and $62 million in RAD payments later, the Legislative Budget and Finance Committee claims that paying off the bonds would still cost $60 million. Starting next year, 10 additional payments of $7.5 million per year in RAD revenues will be required to repay these bonds.

Secondly, since 1995, the Pittsburgh Development Fund has disbursed funds totaling $106.6 million for 49 projects. At the end of 2003, there were 31 outstanding loans with a book value at $55 million. Judging the fund on its biggest allocations, it does not fare well. We now know that its largest loan -- $18 million to Lazarus in 1995 for its Downtown store -- will not be repaid, as the store has closed and never achieved the performance measures necessary to trigger repayment. Many other loans have repayments tied to performance measures. How many more of these loans will have a fate similar to Lazarus?

Apparently very many -- URA officials and the study's authors acknowledge that the outstanding loans would bring in only $16 million on the open market. How can $55 million in outstanding loans have a market value of only $16 million? Only if it is a very poorly managed portfolio.

Finally, subsidizing retail projects like Lazarus, Lord & Taylor and the SouthSide Works merely shifts spending around the city and county while creating unfair competition for existing taxpaying retailers. Just imagine what subsidized retail at the SouthSide Works will do to the establishments on Carson Street, Downtown, Shadyside, Oakland and other communities. What type of net new jobs will be added, if any?

Projects like Lazarus and the Pittsburgh Technology Center are questionable on two grounds: First, they never lived up to the expectations of jobs promised -- Aristech (Sunoco) and Cellomics have furloughed large numbers of their workforce, while Union Switch & Signal simply consolidated employees from around the county. Secondly, much of the property tax revenue is being diverted to repay TIF bonds.

Sen. Costa claims that the URA and the Pittsburgh Development Fund have achieved certain economic objectives of the city. He ignores the fact that many groups and various other sources of public subsidies are often involved in these projects as well.

Thus, to attribute any and all "success" to the existence of the development fund would be incorrect. Then too, many of the jobs claimed came about by simply transferring jobs from other locations within the city and county. The result is no net benefit to the county. The Pittsburgh Development Fund is financed by RAD funds, which come from the extra 1 percent sales tax in Allegheny County.

The Pittsburgh Development Fund is a blatant misuse of taxpayer dollars. The city was supposed to use its share of the RAD funds to assist in tax relief, not fund questionable economic development projects. The large sums of public money spent by the URA through the Pittsburgh Development Fund will never be recovered through the small increases to the property tax revenues, since much of that revenue is going toward repayment of tax-increment financing bonds and there are few net new jobs being created by these projects. It is time to liquidate assets of the URA, pay off the Pittsburgh Development Fund bonds and return the Regional Asset District money to the city.