Saturday, November 30, 2013

The Condominium/Coke Paradox


You could tell the entire history of Pittsburgh through property assessments.

Today PG has this: U.S. Steel's lower taxes causing budget headaches, which talks about the ramifications of U.S.Steel's Clairton Works getting a property assessment lowered from $10 million to $2 million.  Note that is not their tax bill for the site, but the value of the site itself. The tax being due being whatever the millage is for the taxing bodies there.

Is the entire Clairton Works worth 2 million?  As the PG story notes, the company has invested "millions of dollars" on the site.  Literally true I guess, though a bit of an understatement.  Not just millions, but very recently invested hundreds of millions; make it half a billion dollars. Semantics.

Now recall that big commercial property is not valued at a market price since in reality there is no market for that site any longer. A century of coke-making has made the site virtually unusable for anything else.  Commerical property is valued on a highest and best use basis. So more what could that real estate be optimally used for.  Of course, that is a very metaphysical question for a site that has been making coke for a century. Here is the question in the end.  Is the entire Clairton Works worth just $2 million, an amount that would make it worth less than a single condo Downtown in a few buildings?  Ponder that paradox.  Can you imagine what the disparity in  $$ per square foot works out to be?

But we have been through this before.  In 1950 Allegheny County actually raised the assessment on local U.S. Steel properties.  The firm appealed those values saying that of course they were too high.  They said, insightfully, that there was no alternative use for the sites they use. In the legal machinations U.S. Steel apparachiki went public with what was a quietly spoken truth not talked about openly.......

Becauseof the shift in population and gradual decline of its natural resources advantages, Pittsburgh is losing its crown as steel king of the world.
1950 folks.  Just two years later the region would reach its all-time peak in manufacturing employment and then begin Pittsburgh's long march.

Also the corporation argued in 1950 that it plants were located "on property not desirable for business or residential uses...."  Indeed as true then and now you can make that argument, prime riverfront they are, but again why is that?

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