City offering greater incentives for development

Pittsburgh is revamping its tax abatement programs in a bid to encourage the creation of more affordable housing and to coax developers to take risks in neighborhoods that have been bypassed in the rush to build Downtown and in other hot markets.

Mayor Bill Peduto also is seeking to streamline the number of programs available to developers while working to improve coordination with Allegheny County and the Pittsburgh Public Schools to maximize potential investment.

The new rules would not affect any current developments receiving tax abatements.

Nor would they have any impact on the Local Economic Revitalization Tax Assistance Act (LERTA) district set up at the former Civic Arena site with the goal of using part of the tax revenue generated by the development to fund millions of dollars in improvements in other parts of the Hill District.

Under legislation submitted to city council, the seven existing tax abatement programs would remain in effect until the end of the year. Four of the programs currently are set to expire at the end of June.

At the start of 2018, the seven programs would be reduced to three under a separate bill submitted to council.

Kevin Acklin, chief of staff for Mr. Peduto, said the existing programs have become such a “labyrinth” that some developers don’t even want to get involved with them.

That, he said, puts the city at a “competitive disadvantage,” particularly with out of town developers who are unfamiliar with the way the abatements work.

With the new programs will

come a “social equity” component — incentives for developers to invest in affordable housing, jobs, sustainability, or in underserved neighborhoods.

“We would like to define and incentivize projects that address some of the certain set of social equity goods that we’re hoping to advance as a condition to that public money,” Mr. Acklin said.

For example, under Act 42, which applies to residential new construction or improvements, the base program would involve a property assessment reduction of up to $175,000 a year for three years. Unlike the current program, the value is the same for new construction and improvements.

An “enhanced” version would offer assessment reductions of up to $250,000 for 10 years for those who build new homes or make improvements in neighborhoods eligible for community development block grant funding.

Under the current system, the reductions are available in 28 targeted neighborhoods, including Downtown.

In addition, developers of multiple for-sale units would qualify for the same reductions if they dedicate at least 15 percent of units to households with earnings at or below 80 percent of the area median income.

With LERTA, four programs offering varying levels of abatements would be reduced to one under the proposed legislation.

Under the new guidelines, the base tax credit would be up to $125,000 a year for 10 years, with the amount reduced by 10 percent every two years.

The enhanced version would offer tax credits of up to $250,000 a year for 10 years to those who develop in neighborhoods eligible for CDBG funding or who commit at least 15 percent of the multifamily units they build to households at or below 60 percent of the area median income.

Projects also would be eligible if they create at least 50 jobs or achieve high levels of sustainability like passive housing, net zero energy usage, or a LEED silver rating or higher.

A visitability residential tax credit program would remain unchanged.

Mr. Acklin said the restructuring of the programs is in line with recommendations of the city task force on affordable housing and Mr. Peduto’s executive order on the same subject. The order called for improvements in real estate tax incentives, abatements, and assessments “to advance the public interest.”

For the first time, the city would charge a fee, yet to be determined, for Act 42 or LERTA applications.

The city also plans to work with the county and the Pittsburgh Public Schools to better coordinate the administration of their respective programs — and perhaps to see if there are ways to make them uniform.

Ira Weiss, school district solicitor, said he is all for such discussions.

“I’m perfectly willing on behalf of the district to work with the city to come up with a coordinated plan. I think it would be a great benefit,” he said.

Todd Reidbord, Walnut Capital president, said that for developers, it would be ideal if all three taxing bodies adopted one standard.

“I’m fine with whatever standards they come up with as long as there’s buyin from all three taxing bodies. That’s the most difficult thing now — three different processes from the taxing bodies,” he said.

“I’m fine with whatever standards they come up with as long as there’s buy-in from all three taxing bodies.” — Todd Reidbord, Walnut Capital president

Mark Belko: mbelko@post-gazette.com or 412-263-1262.