Friday, June 01, 2007

abatements again....

City Council has given preliminary approval for a selective tax abatement for certain city neighborhoods. I actually support the idea for a tax abatement on residential investment in the city, but also feel pretty strongly that it has to be city wide (or wider actually). It looks like that will not happen, but there are some pretty important points to think about even if it goes forward in its current form.

First off, why is there severe disinvestment in certain neighborhoods? I actually think the city did a decent job at identifying the neighborhoods in the most need for investment. This is distinct from the issue of whether Downtown needs an abatement... something that gets Sam really mad. But hold that aside for the moment. Let's talk about the other neighborhoods. Does somebody really think that city property taxes are the cause the severe disinvestment in places like Larimer. I don' t mean to pick on one neighborhood, but seriously. If you think an abatement is a solution for acute neighborhood specific problems then you have to believe there is someone out there saying: yes I want to build or improve my property, but find the increased city property tax I would incur is prohibitive. That argument may make sense in areas where property is worth a lot.. but that just isn't the case in the city neighborhoods where this will be focused. In Larimer, what is the median assessed value of residential property? I bet its well under $20K per property... Could it be as low as $10K per housing unit? At that level it's hard to make the case that it is the city property tax that is holding back investment. The problems in certain areas are far more complex than that. Thinking it will help the most depressed areas of the city is the wrong tool for the wrong neighborhoods fixing the wrong problem.

Then you get the question of how will you evaluate the impact of the abatement? As we go forward it will be nearly impossible to distinguish the impact of the tax abatement in these neighborhoods because they also happen to be the neighborhoods where the tax liens were concentrated. (not exactly a coincidence in that by the way) If we do see any improvement in these neighborhoods, will it not be because the liens were repatriated from MBIA? But that is a technicality that I am sure will be lost in any future debate.

There is this argument that abating new investment in some of the other neighborhoods would cost the city more than it would in these selected neighborhoods. Well, sure. Since they essentially claim it will cost nothing to abate investment in these selected neighborhoods (because there is so little investment anticipated) that borders on a tautology. One stated goal is that lost property taxes will be offset by gains in wage and other taxes. If the costs of abating other neighborhoods are higher then are not the gains that much higher as well. I would argue that the only real potential gains in the long run can come from keeping in the city the people who are moving to the suburbs. Otherwise you are just shifting people around within in the city.

I really try not to pick on individual politicians, but as part of this debate there is a quote by DS in the PG story on this the other day. He says:

"Doing it citywide would draw investment to areas where we already have significant investment,"

Really? Where exactly in the city is there significant private sector, non-institutional, non-exempt, non TIF'ed residential investment going on. The exceptions one can find can't obviate the fact that residential building investment is at all time lows despite what you read about some high profile projects Downtown. For a city the size of Pittsburgh, just to offset normal depreciation and demolitions, you need a lot more new housing units going in than we have, by far. When you factor in the fact that we have one of the oldest housing stocks in the nation (also by far), the rate of investment just to keep things from collapsing further is far beyond where we are at now.


Blogger EdHeath said...

You know, I gather Lawrenceville has had some property movement in the last few years, though I don’t know how much of that has been in new housing built. Ditto for the Strip. But you are right, I doubt anyone is looking at a lot of these neighborhoods and wanting to build expensive new housing just to escape $2700 in property taxes. By the way, reading the PG story I don't see where improvements figure in, not saying they don't, just that I can't find it. There’s a riff on “Field of Dreams” somewhere in there … How many vacant properties are there in the city?

Sunday, June 03, 2007 9:06:00 AM  
Blogger Skip said...

I can't find that information either, Ed, and I think it's because this only applies to new housing. That is why Peduto's abatement plan focused on large, big money developments to targeted areas in the city. My concern , speaking to Chris' point in the article, is that the 'vitality index' might be good to identify communities that need investment but not necessarily good to spur investment. The end goal is to generate for the city a larger pool of payers of property taxes. The 'vitality index' does not necessarily accomplish this.
Each neighborhood has different needs and a city-wide tax-abatement may not be a good blanket solution at this time. Bloomfield-Garfield Corp., for example, has secured investments in building new and affordable housing units prior to a city-wide tax-abatement, taking advantage of other available tax/financing programs that were suitable to development in Garfield. These types of investments are best handled by neighborhood CDCs whereas big projects with a high likelihood of accomplishing the goal of an increased tax base could have been spurred by a tax-abatement plan proposed by Peduto. Chris, do you have evidence/know of publications that suggest that the wider the abatement area is the higher likelihood of investment? I would be curious if this applies to cities across the board or to those who satisfy certain conditions? And, if so, would Pittsburgh fit that group of cities?

Monday, June 04, 2007 10:09:00 PM  
Blogger C. Briem said...

A couple important points. It just isn't the case that there has been significant private investment in the BGC area. Even if you forget the high rise demolition, the number of housing units in Garfield is collapsing and the new units that have gone in or are being planned are essentially been URA or subsidized projects which makes it a very different issue not relevant to abatements.

Not to repeat myself, but I think people misconstrue what I am saying a bit. I worry people will think an abatement consitutes action for the most depressed neighborhoods which would be a mistake. but almost any version of limited/targeted abatement just can't address population attraction in any meaningful way for the city. So I do think its essential to have a universal abatement or none at all. You just wind up moving people around in the end.

It's the wrong question to ask if there is evidence of city wide abatements working to attract residents, there is no evidence of such a limited abatement could work. Philly saw little overall population impact until their abatement was city-wide. Especially when you consider just how small out Downtown and environs are, if you could achieve the population density of Manhattan you would not arrest the population decline that is happening across 89 neighborhoods. If the logic for an abatement Downtown works then it works for many other city neighborhoods.

On improvements. Philly's abatement included rehabilitation and significant improvements. If any of these proposals do not cover significant improvements as well as new construction than there is no analogy to Philly which they use as a premise.

but I have not see the exact verbiage.. at least when proposed the 10 year plan by the administration included residential rehablitation which could broadly cover all meaningful improvements.

Monday, June 04, 2007 11:19:00 PM  
Blogger Skip said...

Thanks for clarifying. For the record, I wasn't suggesting you said abatement=action and that BGC secured private investors. I'm well aware BGC took advantage of URA programs. In any case, thanks for posting, perhaps reposting, info from Philly re: citywide abatement. I don't think that the newly approved Pgh tax-abatement includes rehabilitation, just new construction.

Tuesday, June 05, 2007 7:16:00 PM  
Blogger C. Briem said...

the earlier news stories mentioned rehabilitation.. but I believe you. just musing on that though.... if true does it mean the incentive put in place is to demolish and not preserve older structures?

This could get kind of interesting depending on how Judge Wettick rules on base year assessments.

Tuesday, June 05, 2007 7:25:00 PM  
Blogger C. Briem said...

I probably should get a copy of the bill to avoid this confusion.. but what I see says bill 2007-1285 is described as "Exemption for Residential Construction, so as to create a new ten-year exemption
covering residential improvements and construction in areas defined as the Uptown District, the Downtown District and Targeted Growth Zones for exemption applications filed on or after July 1, 2007 and through June 30, 2012. " Emphasis added.

That also clears up some confusion over on Sam's board about whether Downtown was included in an of itself, and not because of how it would have scored on the vitality index.

Tuesday, June 05, 2007 7:45:00 PM  

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