Allegheny County and Pittsburgh school district create tax-break district to spur Downtown redevelopment

Allegheny County and Pittsburgh Public Schools officials are hoping to spur new development in the city’s Downtown to address the loss of tens of thousands of office workers the neighborhood has seen since the covid pandemic by offering 10 years worth of tax breaks to encourage growth.

County Council passed a bill Tuesday to create a tax-exempt district across nearly all of Downtown that would provide county tax breaks for new, large commercial developments and redevelopments or housing developments that include percentages of affordable units.

The school district approved the same tax-exempt district last November. Pittsburgh has had on the books a tax-exemption plan for the entire city, including Downtown, since 2020. With the county joining the school district and the city, the exemption now applies to all three local taxing bodies in Downtown.

The tax-exempt district was structured by the city’s Urban Redevelopment Authority, which called the “strategy a robust economic stimulus package.”

New commercial construction and reconstruction of current buildings that add at least 50 new full-time jobs will receive 10 years of exemption from county, city and school district property taxes. The same goes for housing projects that include 10% of units affordable to tenants at 50% area median income or 60% of units affordable to tenants at 80% of area median income.

Tax exemptions for each individual project are capped at $250,000 annually per taxing body. Applicants have a three-year window to apply for county and school district tax exemptions.

The hope is to boost the neighborhood’s growth in residents as a way to combat the lagging return of office workers and to bring workers back Downtown with incentivized office development, said Allegheny County Executive Sara Innamorato.

She said the district will help convert struggling office buildings into new residential properties with affordable housing, and that strategy is vital for Downtown’s future.

Pittsburgh Mayor Ed Gainey said a combined effort is necessary to attract investment in Downtown.

The new district joins other efforts led by the city of Pittsburgh to encourage Downtown growth, including grants to convert older office buildings into housing.

The central business district has only recovered 53% of its workers compared to pre-pandemic levels, according to the Downtown Pittsburgh Partnership. At the same time, Downtown has seen residential occupancy rates remain steady at around 90% and the partnership said the neighborhood has added 1,300 residents since the start of the pandemic.

Several large buildings Downtown have recently seen multi-million drops in property values after successful reassessment.

Ira Weiss, the solicitor for Pittsburgh Public Schools district, said the drop in property values will likely decrease school district revenue significantly. He said any loss of revenue from the tax-break district is a fraction of what the school district is losing from downgrades in property assessments.

“What we are losing in (the tax-break district) pales in comparison to what we are losing in this assessment debacle,” Weiss said.

He said the school district approves of a proactive approach in an attempt to preserve the tax base in Downtown and to counter the downward spiral of dropping property values.

“It won’t alone correct this but it certainly will help,” said Weiss.

The tax-exempt district essentially covers all of Downtown, from Point State Park to Interstate 579 and the Liberty Bridge.

Tax-exempt districts, or Local Economic Revitalization Tax Assistance districts, have been common practice in Allegheny County to help spur development. The city of Pittsburgh and the county already have several tax-exempt districts on the books.

County Council voted 14-1 to support the district. Councilwoman at-large Bethany Hallam, D-Marshall-Shadeland, was the lone dissenting vote.

Hallam called the tax-exempt district a “blanket band-aid for all of Downtown.” She asserted that it won’t fix Downtown’s problems.

Hallam said the district could also exacerbate problems of tax-revenue declines that have been spurred by reassessments of large Downtown office towers. She said it’s not the time to exempt taxes on development. Instead, the county should conduct a countywide property assessment to ensure property taxes are paid equitably, she said.

“We need to do a reassessment, I know no one wants to talk about it, but it is the elephant in the room,” said Hallam.

She also suggested the county transition to a land-value tax system as a better way to encourage development without providing subsidies.

Other council members acknowledged the tax-exempt district was not a perfect solution to Downtown’s problems, but ultimately decided it was necessary.

Councilman at-large Sam DeMarco, R-North Fayette, said there are many concerns about disinvestment in Downtown. He cited a recently reported foreclosure of the K&L Gates Building and other large buildings that saw huge reductions in assessed value, including the Tower at PNC Plaza and The U.S. Steel Tower.

“Is this bill the be all and end all? Absolutely not,” DeMarco said. “But this is needed.”

Council President Pat Catena, D-Carnegie, is also in favor of a countywide reassessment, but said immediate action must be taken to help avoid a disinvestment spiral.

“It’s conceivable that the total Downtown assessment value will drop by 50% in the next few years, and that could initiate a vicious decline,” he said. “The (tax-exempt district)can counter individual instances of decline and disinvestment.”

Correction: An earlier version of this story incorrectly left the impression that the City of Pittsburgh recently created a tax-exempt district for Downtown. The exemption has existed since 2020.