posted by Mike Madison at 10:18 AM /
Once again, there is a deal in place to develop luxury condos at the intersection of Washington Road and Bower Hill Road, and once again, the deal is contingent on approval of Tax Increment Financing. Meaning: If this goes through, we'll have more high-end housing in Mt. Lebanon -- which doesn't get added to the real estate tax rolls.
Does anyone on the Commission and the School Board (both of which, I think, have a say in TIF deals) have the guts to put a stop to the TIF foolishness?
Link: http://www.post-gazette.com/pg/05349/622343.stm
Does anyone on the Commission and the School Board (both of which, I think, have a say in TIF deals) have the guts to put a stop to the TIF foolishness?
Link: http://www.post-gazette.com/pg/05349/622343.stm
4 Comments:
This TIF deal may result in the single largest, unwarranted transfer of public funds to private interests in the history of Mt. Lebanon. The Municipality is committed to fleecing Mt. Lebanon taxpayers and delivering an inordinate and unprecedented return on equity to Zamagias Properties (278%).
In 2002, when the Municipality was advocating a TIF for the Galleria, the Mt. Lebanon Magazine quoted a Commissioner as saying: “I don't think we’d do this, if we thought they would turn the same profit either way.”
Nothing has changed in 3 years. Zamagias can make money on this project without a TIF, but with a TIF they can make more money– something like $3,500,000 more, compliments of Mt. Lebanon taxpayers.
It is certainly a valid observation that 40% of something is better than 100% of nothing. And the question “Will the project go ahead without the TIF?” goes right to the heart of the matter.
Mt. Lebanon, however, never really tried for 100% of anything. Out of the gate, the Municipality led with the potential of a TIF.
In the RFP to selected developers, Mt. Lebanon indicated “Tax increment financing was approved by the Commission and School Board for a previously considered project on this parcel. Any proposed use of TIF financing would require new approvals from the appropriate taxing bodies. Otherwise, financial incentives are not available for this project.”
There were two formal proposals for the site and both expressed interest in a TIF (no successful developer would outright turn its back on free money).
Yet only one characterized a TIF as “mandatory” – Zamagias Properties. The second developer clearly specified – lack of a TIF “did not void its proposal”.
Unbelievably, no quantitative analysis was performed by the Municipality to consider the net incremental effect on Property, Earned Income or Real Estate Transfer taxes of either project. Let alone the impact of choosing one over the other.
While the EDC described its task as choosing between “two excellent projects by two extraordinarily well-qualified and financially capable teams,” the proposals in no way had “equivalent financing requirements” as the Municipality concluded in its review.
What was presented and accepted by Mt. Lebanon was a total project return of $5.5MM on an anticipated $1.5MM - $2.0MM equity investment by Zamagias. $3.5MM of the developer’s return being the TIF proceeds.
The Feb. 2006 issue of the Mt. Lebanon Commercial Districts Update (vol. IV, No.1) has an "article" about the "Washington Park Set to Move Forward". It states that the commission, on 12/12/05 approved the sales agreement to Zamagias Properties. It goes on to say that "the impact on the Washington Road central business district should not be underestimated. Full time residents of a downtown shopping area typically spend about $14,000 a year there. Assuming an average 1.5 residents for each unit, Washington Park residents can be expected to add up to $1,25 million annually to downtown sales figures."
The above statement was made without any source, and quite honestly the figures sound a little fishy to me. This would mean that each of those 1.5 residents would spend nearly $40 per day, 7 days a week in the central business district. Possible, but not probable. Even if this turned out to happen, what portion of that $1.25 million in additional sales would flow back to Mt. Lebanon as revenues, and how many years (decades?) would it take to make up for the $3.5 million TIF that Zamagias Properties wants taxpayers to contribute to their project?
Developing this corner is good development. However, overestimating its value to the business district is a continuation of the Municipality’s inability to fairly present the development to the community. This is a huge disservice to both residents and business owners.
The Municipality projects the development’s impact to Uptown businesses is an additional $1,250,000 annual spend ($14,000 per resident x 1.5 residents per unit x 60 units = $1.25 MM or $21K per household).
In considering the reasonableness of this suggestion I asked myself: With my fondness for several uptown businesses, restaurants and orthodontists - does my family spend $21K per year Uptown? No.
If I moved Uptown would my family spend $21K per year? No.
Do I believe families currently living Uptown or within a few blocks of the Central Business District spend anywhere near $21K per year Uptown? No.
Conclusion: The projected $1.25MM spend is nonsense. When preparing to hand over a $3.5 MM subsidy to Zamagias Properties, the least the Municipality could do is make the underpinning for their bequest plausible. Further, disseminating such nonsense at public expense adds insult to the injury.
The newsletter is available online at www.mtlebanon.org > Commercial Districts > Newsletters > February 2006.
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