MORE DOWNTOWN PROPERTIES GET CUTS
Five buildings have received $120 million in assessment reductions for 2023 tax year
The fallout from Allegheny County property assessment appeals is delivering more body blows to the Downtown tax base.
Another five Golden Triangle properties, including the PNC Firstside Center and Two PNC Plaza, have received $120 million in assessment cuts for the 2023 tax year, adding to the mounting losses potentially facing the city, the Pittsburgh schools and the county.
That’s on top of $244.4 million in reductions awarded for 2023 to five other Downtown landmarks — U.S. Steel Tower, PPG Place, the Tower at PNC Plaza, Three Gateway Center, and the Union Trust Building.
In all, the assessments on those 10 buildings have been slashed by a whopping $364.4 million. The cuts could cost the city, the school district and the county nearly $8.4 million in combined tax refunds for 2023 alone.
If that’s not bad enough, the assessment reductions total another $317.9 million for the 2022 tax year — with the potential hit to the three taxing bodies equaling $7.3 million.
And in a sobering sign to Mayor Ed Gainey and other local politicians that the scope of the properties receiving cuts is widening, the assessment on the Even Hotel on Forbes Avenue has been chopped by roughly 92%
For the 2022 tax year, the 160room hotel’s taxable value plummeted from $13.4 million to a mere $991,600. For 2023, it plunged to $1 million.
Of the office properties, the assessment on PNC Firstside Center, owned by the Buncher Family Foundation, fell by almost 50% from $85 million to $43.5 million for 2023, a reduction of $41.5 million. For 2022, the $79.7 million assessment dropped by $37.4
million to $42.2 million.
The 2023 taxable value on the half empty 525 William Penn Place office building has been reduced by more than half from $58.8 million to $28.3 million, a difference of nearly $30.5 million. For the 2022 tax year, it was cut by $29.3 million to $29.5 million.
At Two PNC Plaza, owned by PNC Bank, the 2023 assessment tumbled by about $19.1 million to $33.8 million from $53 million. It dropped by $16.6 million to $36.3 million for 2022.
In addition, at 11 Stanwix Street, the former Westinghouse building, the 2023 taxable value fell from $60.3 million to $43.8 million, a difference of $16.5 million.
The latest round of cuts was approved by the county’s board of property assessment appeals and review last week.
In another sign of how serious the situation is becoming, the certified taxable value of real estate citywide has plunged $151.6 million to $21.7 billion in just the past six weeks alone.
Pittsburgh Schools Solicitor Ira Weiss has described the Downtown cuts as a “feeding frenzy.” The district has vowed to fight many of the reductions through court appeals.
The cutbacks are being driven by high office vacancies caused by the COVID-19 pandemic and hybrid work policies that have reduced the need for space as well as a steep drop from 87.5% to 63.5% in the common level ratio, used in assessment appeal hearings to compute taxable value.
Buildings are assessed chiefly on the revenue they generate. As vacancies increase, revenues drop, making the structures less valuable.
Experts said the massive reductions in Downtown, which represents about 25% of Pittsburgh’s overall tax base, could trigger tax increases or cuts in services citywide.
“The end result is to reduce services or increase taxes or a combination of both,” said Jerry Shuster, professor of political communications at the University of Pittsburgh. “I wouldn’t want to be any elected official under those circumstances. No matter what choice they make, it’s going to be the wrong choice for the average taxpayer.”
Joe Mistick, a Duquesne University law professor who was chief of staff to former Mayor Sophie Masloff, called the assessment situation an “all hands on deck moment” that requires immediate attention.
He ripped Mr. Gainey and his administration for not seeming to understand the gravity of the problem.
“It’s astonishing that no one has sounded the alarm. The mayor is not leading us, bringing people to the table, getting the best minds to solve this,” he said. “It doesn’t seem like these guys care.”
In the past, mayors like Richard Caliguri and Ms. Masloff rallied corporate and political leaders and other experts to improve Downtown, he said. But he doesn’t see that happening with Mr. Gainey on this issue.
“The most disturbing aspect of it is they don’t appear to be concerned. Some people have been sounding these warnings for a couple of years now. It was very foreseeable and I don’t think anything has been done to address it,” he said.
One way to start, Mr. Mistick contended, would be to convene the best and brightest minds Pittsburgh has to offer to study the issue and then formulate a consensus plan to move forward.
At the same time, the mayor should be lobbying the state Legislature to provide some type of tax reform to help the city navigate the crisis.
Without steps to address them, the assessment reductions are “going to have a devastating impact on the state of the city,” Mr. Mistick stressed, noting that the Downtown tax base subsidizes a lot of essential services citywide.
Like Mr. Shuster, Mr. Mistick said that the staggering commercial cuts — and the resulting tax refunds and revenue losses — will have to be made up somehow.
“There’s only one place you can look to make up the revenue and that’s on the backs of homeowners,” he said. “When you do that, it’s over.”
Olga George, Mr. Gainey’s spokeswoman, did not respond to an email Sunday seeking comment.
The city’s Urban Redevelopment Authority, controlled by Mr. Gainey, has tried to address office vacancies by offering a tax abatement program to aid in the conversion of buildings to residential and by creating a $6 million loan fund for the same purpose. It also is seeking $30 million in state assistance.
But some developers have said that the programs don’t go far enough, particularly since both require the creation of affordable housing that is expensive to provide and to subsidize.
Jim Roddy, who served as the first county executive and who presided over a countywide reassessment, said the answer to the woes facing Downtown is another reassessment. The last one was more than a decade ago.
However, he argued that the reevaluation process, fraught with political implications, should be taken out of the hands of counties and given to the state. That’s the way it is done in many other states, he said.
He also believes that such reassessments should be done every three or four years and that counties should reimburse the state for the cost.
With the state in control, “you would eliminate all of the politics and all of the problems,” he said.
And with regular reassessments, “over a period of time, it just becomes routine,” he added.
County Executive Sara Innamorato has said at times in the past that there needs to be a countywide reassessment. But she has not taken any steps in that direction since taking office in January.
Dominick Gambino, a tax consultant who was county assessment manager under Mr. Roddey, said the current situation “is starving the budgets” of municipalities and school districts countywide, not just the city.
“The more commercial reductions there are, the more the burden switches to residential properties,” he said.
And with the common level ratio dropping to 54.5% this year, Mike Suley, an assessment board member and another former county assessment director, foresees big commercial cuts continuing in the future. Adding to the woes, some Downtown office buildings are facing sales, foreclosure, or loan defaults because of high vacancies.
“Public officials have to look at this and say it will not get better. They have to make some decisions before it gets worse, put out the fire,” Mr. Suley said.