Tax-Increment Financing Successful, City Data Indicate

By Pfister, Bonnie | Tribune-Review/Pittsburgh Tribune-Review, May 18, 2008 | Go to article overview

Tax-Increment Financing Successful, City Data Indicate


Pfister, Bonnie, Tribune-Review/Pittsburgh Tribune-Review


An often criticized financing tool used by local governments to spur private development appears to be working well in Pittsburgh, according to data provided by the city's redevelopment agency.

As some communities across the country begin to more closely scrutinize the use of tax-increment financing, and seek better definitions for projects to be eligible for such bonds, the Tribune- Review analyzed figures provided by the Urban Redevelopment Authority for these so-called TIFs in the city dating to 1993.

Since that year, Pittsburgh has completed 14 tax-increment financing projects that created 12,225 jobs, which exceeded projections, and last year generated $12.8 million in property tax- increment revenues, nearly 10 percent more than anticipated, according to the URA figures. Some of the jobs, however, were shifted from other business locations within the region.

An additional five TIFs are under development.

Individually, half of the projects exceeded tax revenue projections, and nine topped job projections.

Successful TIFs have transformed land dirtied by Pittsburgh's former heavy industry into open-office settings that nurture high- tech and bioscience jobs. Others have fallen short, particularly those tied to Downtown retail development and ex-Mayor Tom Murphy's doomed Fifth & Forbes master plan.

Still, said URA economic development director Robert Rubinstein, "We think every one of our TIF projects meets the intended purpose of not only state legislation, but the TIF concept in general."

TIFs allow local governments to borrow money for infrastructure improvements as a way to spur private development on a "blighted" property. Once a project is completed, the property is reassessed. A portion of this new property tax -- the "increment" -- is used to pay down the public debt while the rest goes to local taxing bodies. In Pittsburgh, between 60 and 90 percent of the increment pays off the TIF bond. The rest goes to the city, county, school district and, in some case, the Parking Authority.

If the increment falls short of the bond payment, the developer must pay the difference.

Development experts like TIFs because the loans are repaid with tax money they say otherwise would not exist. But some municipalities are restricting the use of TIFs, and several experts on land use, as well as the Cleveland-based Council of Development Finance Agencies, a professional association, are calling for greater detail in laying out what TIFs should achieve -- and whether they do so.

Skeptics worry that TIF decisions tend to be driven by developers, not community or elected leaders, and that the term "blight" is open to interpretation.

"In Knoxville, in Madison (Wis.), in Milwaukee, in several places in Texas, you're seeing more focus on accountability of what the developers are saying," said Toby Rittner, executive director of the Council of Development Finance Agencies. "Cities are starting to take a closer look at the incentive, and making sure they get returns on them."

Pittsburgh Councilman Bill Peduto said he is drafting legislation that would define "blight," and to direct tax-increment financing to be part of work force development plans for specific industries.

The city's first TIF, the Pittsburgh Technology Center in South Oakland, often is cited as its most successful.

On the site of a former Jones & Laughlin Steel Corp. plant, the URA issued a $4 million TIF bond in 1993 to pay for a parking garage for Union Switch and Signal, which moved its engineering and technology group there from the North Hills. Eventually Union Switch's headquarters moved to the center as well. …

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