The Story Behind Pittsburgh's Revitalization, Part IX

[Part I is here] [Part II is here] [Part III is here] [Part IV is here] [Part V is here] [Part VI is here] [Part VII is here] [Part VIII is here] [Part IX is here] [Part X is here]

I am into the home stretch with this ten-part series on Pittsburgh's current revitalization, its causes and cures. Today's installment briefly takes up a couple of technical points, which means I'll skip over Chris Briem's blast at Friday's downer of a Wall Street Journal column about Pittsburgh's past masquerading as Pittsburgh's future. I'll save a comment on that piece for Part X.

Instead, the more fortuitous timing is the Post-Gazette's item about the tour of Pittsburgh that County Exec Dan Onorato gave to the National Association of Counties. The focus of the tour and explanation for Pittsburgh's rise from the ashes was Hazelwood and the close-in Mon Valley: The Waterfront Mall. The Southside Works. The light office space in Hazelwood. Former industrial space -- former homes of major US Steel, LTV, and Jones & Laughlin steel works -- eventually cleared, and still later reborn as corporate office space, housing, and shopping.

(A question for Pittsburghers: I thought that J&L was bought by LTV in the late 1960s, so that the PG is misleading when it talks about LTV as the South Side works and J&L as the Hazelwood works. But maybe my history is wrong? Or maybe the J&L/LTV distinction survived in terminology despite the ownership change?)

The point that I want to address is the role of land use and redevelopment policy in Pittsburgh's revival. The tour that pointed to the Waterfront, the South Side Works, and Hazelwood makes the implicit argument that official economic development policy and economic development organizations have played key roles.

The view here is that the argument has a point. Earlier in this series, I expressed skepticism of the argument that Pittsburgh's government has somehow orchestrated the revitalization of Pittsburgh. There is no doubt that official land use and redevelopment policy has had a mixed record in Pittsburgh over the last decade and more. Successive plans to renovate parts of Downtown Pittsburgh, particularly the Fifth & Forbes corridor, and failed investments in new department stores Downtown, make that point pretty clearly. There is also the matter of one Bernardo Katz, and the less said about him, the better. Current efforts are far from uniformly successful. Pittsburgh's city government has been ham-handed in punishing skeptics of its development plans, especially when those skeptics occupy public offices that have a role in reviewing those plans. The lead economic development agency in Pittsburgh, the Urban Redevelopment Authority, was distracted by a weird corruption scandal that nearly ate the whole of government.

But the URA is out there, bureuacracy and all, plugging away. In a city whose unofficial motto might be "Don't just do something, stand there" -- that's the theme of the WSJ article -- the URA has been moving around, buying property and helping to package it for development. The Waterfront development in Homestead isn't a URA project (that mall owes its existence instead to the state-level TIF ("Tax Incrementing Financing") program). But the office developments along the Monongahela River? URA. South Side Works? URA. Housing and commercial development elsewhere in the city? URA. Not all of it is URA-assisted, by any means, and complain about tax subsidies and political favoritism (and we should, and we have), but without URA efforts Pittsburghers wouldn't see a lot of the amenities that they now look to as evidence of the city's current bright status.

There is a line of criticism that argues that local government shouldn't be involved in real estate development, as the URA has been. The private market is a better guide to private investment, it is said, and who knows how great Pittsburgh might be today if the URA weren't around. Sometimes that's true, sometimes that's not true. I'm usually not impressed by "what-if" stories. Private development capital hasn't exactly been beating down the door in Pittsburgh until relatively recently, and even in recent years the pattern of private investment has been hit-or-miss (even in the suburbs) and often it's been driven by TIF incentives). Even a policy of "let the market decide" is still a deliberate policy choice.

I mentioned tax policy. There are at least three tax notes worth mentioning in connection with Pittsburgh's revitalization:

One is the overall real estate tax assessment system in Allegheny County, which is a mess and which remains in limbo in the wake of the Pennsylvania Supreme Court's decision that the system is unconstitutional under state law. When that system restabilizes, its effect on property markets here will be interesting to watch. If you own property in Pittsburgh, its effects will be much more than interesting.

Two is what's called the land tax, or land value tax, or a split-rate property tax system, a system that is often associated with Henry George: real property is taxed a two rates, one (lower) rate for improvements; a second (higher) rate for the land itself. For decades, Pittsburgh taxed undeveloped land at a much higher rate than it taxed developed land. The goal of a land tax is to discourage land speculation and holding under-developed property, and to encourage development of raw land (d'oh!). There is some evidence that the split-rate system encouraged construction in Pittsburgh, especially commercial construction, during the 1980s and early 1990s. The split-rate system was abandoned after the county-wide reassessment in 2001. There are those who advocate a return to some form of land tax in Pittsburgh. I'll leave the debate on the merits to the tax experts, though a land tax alone wouldn't cure all ills. It is curious that the major recent flowering of development in Pittsburgh has come after the return to the single-rate system. In an earlier post in this series, I pointed out that new development in some areas comes with zero development in others. To me, that suggests that the virtues and vices of a land tax system have less to do with tax rates themselves than with how the system is administered. A tax system needs to be consistent from place to place (and parcel to parcel), and it also needs to be set at the right level to begin with. Neither may be true in Pittsburgh today.

Three is Pittsburgh's tax lien system. The city has had a large number of vacant and abandoned properties in the neighborhoods, and liens on those properties have stood in the way of selling them and getting development moving. A couple of years ago, the city started to buy back the liens, in effect getting taxes out of the way of improving the neighborhoods with private capital. The huge number of affected properties means that this project has a long way to run, but the fact that it got started at all is a positive sign.

There is more. Pittsburgh's neighborhood-oriented Community Development Corporations have flourished over the last decade; Pittsburgh's high deed transfer tax punishes those who buy and sell homes, discouraging turnover. But this post has hit the main points. Leaving development solely to the private market means that the process is subject to abuse; the market is deeply flawed. Guiding it through government hands means that the process is subject to abuse; government is deeply flawed. It's impossible to say that all of these activities and policies are manifestations of a master strategy for Pittsburgh. Instead, I think that it's better to say that lots of individual and local efforts, project by project and neighborhood by neighborhood, have accumulated over time to the point where Pittsburgh is able to stand back and point with justifiable pride to a quilt of relative prosperity. No matter which way one might like to turn in justifying the "best" way of structuring the process -- should government agencies and policies stay, or should they go? -- "planning" and "planners" have been important parts of it.