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Pittsburgh could expand Downtown tax cuts in effort to galvanize development

Downtown Pittsburgh buildings are pictured against a blue sky
Kiley Koscinski
90.5 WESA
Pittsburgh could increase tax breaks for Downtown developers as the neighborhood seeks revitalization.

In an effort to resurrect real estate in the heart of the city, Pittsburgh officials could soon give downtown developers bigger tax breaks. City Councilor Bobby Wilson, whose district includes parts of downtown, unveiled a bill Monday that would dramatically expand the city’s tax assistance program in the area.

“Downtown is in serious financial trouble,” Wilson said at a press conference Monday at the Greer Cabaret Theater along Penn Avenue. “After the COVID-19 pandemic, the demand for commercial office space has dropped significantly.”

That drop has taken property tax revenue with it. Wilson said a 30% vacancy rate downtown is expected to grow to nearly 50% in the next four years — but he said his bill could prevent that.

Wilson's legislation only pertains to downtown development, and would not reduce the taxes currently being paid on a site. But it would reduce taxes on any additional value created by future work that involves "converting or improving" the property.

An existing tax assistance program takes a similar approach but caps the tax break at $250,000. Wilson's bill would lift that cap entirely, and all downtown developers will see taxes on their new projects slashed in half. The bill also offers steeper tax discounts for projects that meet criteria for creating permanent jobs or affordable housing.

Residential projects in which 10% of units are made affordable to low-income families would pay zero new taxes. The same is true of projects that create 50 new full-time jobs.

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Projects that create between 41 and 49 new full-time jobs would get a 95% abatement; those resulting in 31 to 40 new full-time jobs would get a 90% abatement; and those that generate 30 full-time jobs would get an 85% abatement.

As with the city's current tax-abatement program, the discount would last up to 10 years. And it could help to slow the decline in property tax revenue from the area, since developers and owners would be required to pay taxes on the current value of the building if they wanted a tax break on the improvements to it.

Wilson acknowledged that his bill would mean the city would forgo some future tax revenue it might otherwise earn. But he said the trade-off was worth it to freeze current revenues where they are in the meantime.

“We have to stop the bleed of further loss in tax revenue,” he said.

Wilson argued that lowering taxes on new construction is one way the city can entice developers to buy in on an effort to revitalize the Golden Triangle, and help those who are already working on projects get over the finish line.

“There are investors and developers out there that are looking to make projects work. And quite frankly, it's just not happening right now,” he told WESA. “To do those conversions, it's going to be very costly. There are high-interest loans right now. There are high construction costs.”

Downtown business owners, community groups, non-profits and city leaders joined Wilson to support his bill at the Greer Cabaret Theater Monday.

Wilson appears to have enough support on City Council to pass the bill. Council members Erika Strassburger, Khari Mosley and Bob Charland stood alongside Wilson in support of the bill. City Council President Dan Lavelle told WESA last week that he was in favor of the expanded tax assistance as part of a larger effort to revitalize downtown.

Also present was Pittsburgh City Controller Rachael Heisler, who last week implored city leaders to act to reverse plunging downtown tax revenue. She applauded Wilson’s proposal as a starting point and said that her office would “provide rigorous oversight of any program that's implemented to preserve downtown.”

But while Wilson’s bill has support on council and from the controller, it’s not clear if the mayor is on board.

Mayor Ed Gainey, who has been vocal about a need to invest in downtown as the city recovers from the pandemic, was notably absent from Monday’s press conference. When asked about whether the mayor had expressed his support of the proposal, Wilson only said that and Gainey have spoken about it.

“We’re in close talks with the administration and the [Urban Redevelopment Authority],” Wilson said. “I can’t tell you anyone that wants to see downtown fail… that’s why we’re all continually talking about what needs to happen.”

In a statement, Gainey's office did not explicitly endorse the proposal.

"While no one tool is the answer, the administration is supportive of bringing additional resources to bear to further the stabilization and growth of Downtown Pittsburgh," the statement reads.

The office pointed to the mayor's previous efforts with the Allegheny Conference to "develop a holistic action plan" for the neighborhood and credited the city's existing abatement program for enticing Allegheny County and Pittsburgh Public Schools to adopt similar measures last month.

City Councilor Bobby Wilson stands at a podium on stage at the Greer Cabaret Theater.
Kiley Koscinski
90.5 WESA
City Councilor Bobby Wilson was joined by fellow council members as well as downtown business and labor leaders and community groups Monday.

Meanwhile, Wilson’s proposal has earned the support of half a dozen city and regional groups, downtown non-profits and labor unions. The Allegheny Conference on Community Development, the Pittsburgh Downtown Partnership and the Downtown Neighbors Alliance were among the groups at Monday’s gathering.

Stefani Pashman, CEO of the Allegheny Conference on Community Development, noted that Pittsburgh has the nation’s fifth-highest concentration of office space in its downtown sector, but as companies downsize their physical space due to hybrid work policies and other factors, vacancy rates will continue to grow. She argued that diversifying development downtown is the way forward.

“As the world evolves, so must downtown,” Pashman said. “We know thriving downtowns are more than just business districts. They are vibrant neighborhoods with the amenities to support families …. [and] vibrant day and nighttime activities.”

The Allegheny-Fayette Central Labor Council, SEIU 32BJ and the Pittsburgh Regional Building and Construction Trades also spoke in support of the proposal. Some remarked on the unique circumstances that brought labor leaders and business interests together.

“To say that our union is standing alongside the Chamber of Commerce and other business leaders in supporting expanded development subsidies … should tell you something about the depth of this crisis,” said Sam Williamson, SEIU 32BJ WPA District Director. “Workers are depending on all of us to act together at every level of our government to invest in Downtown Pittsburgh.”

Downtown’s plunging real estate value

Wilson’s bill comes after months of headlines about Pittsburgh’s crashing downtown real estate. Successful reassessment bids have triggered major reductions to the tax revenue produced by some of the city’s most iconic skyscrapers.

In January, the U.S. Steel Tower, Three Gateway Center and the Tower at PNC Plaza together saw substantial assessment reductions totaling nearly $194 million. A month later, two more noteworthy buildings — PPG Place and the Union Trust Building — won reassessments that resulted in a nearly $51 million combined reduction in value.

So far this month, another five downtown properties — the Even Hotel on Forbes Avenue, PNC Firstside Center, Two PNC Plaza, 11 Stanwix Street and 525 William Penn Place — won reductions totaling $203 million.

As property owners continue to pursue assessment appeals, and some buildings risk foreclosure, commercial real estate industry analysts estimate that the assessed value of Downtown Pittsburgh will fall by almost 50% in the next few years.

Given those trends, Heisler said the city must prioritize filling buildings and preserving the current downtown tax base, which accounts for a quarter of the city’s overall tax base.

“If a building is only a quarter full, it's worth a lot less than it was five years ago when it was 80% occupied,” she told WESA. “Every municipality in the country is basically throwing stuff at a wall right now to see what will fix the issues.”

Updated: March 11, 2024 at 2:52 PM EDT
This story has been updated to include comments from Mayor Ed Gainey's office.
Kiley Koscinski covers city government, policy and how Pittsburghers engage with city services. She also works as a fill-in host for All Things Considered. Kiley has previously served as a producer on The Confluence and Morning Edition.