Town Posts Developer's Report on TIF

A feasibility study for the proposed Washington Park TIF has been posted to the Mt. Lebanon website. The full text of the report can be accessed via this URL:

http://tinyurl.com/2obvaa.

The report cost $20,000 to produce; half of that was paid by Zamagias Properties -- the developer. The balance was split between the Municipality and the School District.

The report contains many interesting statements. Among them is this:

As outlined in the Project Overview on page 3, the Project is primarily residential in nature. This is unusual for a Pennsylvania TIF financing. Most projects with associated TIF financings are primarily commercial, retail or industrial in nature. The preponderance of residential property in this Project creates some risks and produces some benefits versus other more traditional TIF financings.

Risks
· Once build-out is complete, there will be dozens of property owners in the TIF District instead of either a single owner or a handful of owners, as would be the case in an industrial park, a mall, or a corporate facility. This could potentially create problems should legal issues arise in the future (assessment issues,
tax payment issues, zoning concerns). The Taxing Bodies will have to negotiate with many owners instead of a single owner, which could increase the Taxing Bodies’ staff time and legal / financial resources devoted to such issues if they arise.
· Due to the residential nature of the Project, there will be no legal agreements between the property owners and the Taxing Bodies prohibiting the property owners from appealing their assessed values below the levels set forth in the TIF plan. This prohibition, common in single-owner financings, works to reduce uncertainty surrounding possible future assessment appeals. No such prohibition is contemplated for this Project, which creates the opportunity for possible assessment appeal issues to affect the TIF cash flows in the future. This risk would be mitigated on the Phase I debt by the Commonwealth Guaranty.

Benefits
· Residential properties will by their nature generate ancillary incremental tax revenues (real estate transfer taxes, earned income taxes) that commercial, retail and industrial projects do not generate. These ancillary revenues are captured by the Taxing Bodies at a rate of 100% (none are pledged to the Project financing).
· Reliance on a single tenant / owner / taxpayer is reduced. By having 72 individual residential units (as well as several retail parcels), the concentration on the performance of a single tenant or owner (such as was the case in the Downtown Lazarus Department Store TIF financing) is therefore reduced.

Note that this section fails to articulate its central assumption: the proposition that 72 half-million dollar condominiums can and will be absorbed into the Mt. Lebanon/South Hills real estate market. Criticizing the lack of any evidence to support that assumption was a key point in Jo Posti's recent commentary.

The report is also quite clear in *not* stating that the project will be profitable only if it is supported by a TIF. In other words, the consultant could have asked (or could have been asked): Without a TIF, would Washington Park make a reasonable profit for the developer? The report chooses not to answer that essential question.

Update: The Almanac's story on Monday's meeting raises similar questions about the report.