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sean mcdaniel

Sam,

I found the answer to the $12 million shortfall...on the same page as that story...Rendell just approved $12 million in funds for the city!

Problem solved.

Mark Rauterkus

This is an easy one for us (bloggers and fed-up citizens) to push to connect the dots. We have to do so, time and time again.

I ranted recently about how this promise of corporate welfare to Millcraft from Rendell is a slap in the face to the Bob O'Connor's legacy. Bob had given the pledge that the downtown re-do would occur without handouts and be more in stages / phases.

By all means, if we can turn up the heat, this becomes a mayor's race issue of the tallest kind.

Watch out however. They'll start to change the names. No more TIFs, but a Pittsburgh model, a new model, a tax abatement program. Call it what they will -- it all stinks.

This is a big shell game with Lazarus as one piece.

Jonathan Potts

I'm pretty sure that Bob O'Connor gave the plan his blessing, and I never heard him take a stand against state funding. He did promise no local subsidies. I'm relying on memory here.

Mark Rauterkus

This, $11 Million, is a NEW wrinkle to the plan. Bob gave his blessing to a Millcraft plan, before, without the funding mentions from the state.

Jonathan Potts

Well, if Mayor O'Connor was against state funding, he didn't speak up. On May 18, the Post-Gazette reported that O'Connor picked Millcraft's redevelopment plan. In the same article, Lucas Piatt said "I'm not ruling out [asking for help from] the state." (http://www.post-gazette.com/pg/06138/691140-53.stm). On May 24, the PG reported that Millcraft planned to ask Rendell for subsidies. On June 6, the PG reported that Rendell was wavering on giving the $18 million that Millcraft requested, and I suspect that number may have been public before then.

Don't get me wrong, I'm against the plan. But let's not rewrite history.

Sam M

I don't recall anyone objecting to the plan. Except maybe the folks at the Allegheny Institute.

The only thing that might be changing now is the idea that all the money is going to come from the state:

"To help make the Murphy project work, Mr. Dettore said the URA also may have to commit funding."

I gather that the $11 million being discussed here is part of the $18 million the Piatts originally asked for from Harrisburg.

What it means for the URA to "commit funding," I don't know. But I expect shenanigans. It already looks like the URA is going to charge the Piatts about $7 million less than they paid for the buildings.

And I suspect that rather than ever writing the Piatt's a check, the URA would just reduce the price of the buildings.

For instance, just charge them $1 million. Then you can have a photo of the Piatts presenting the city with a big check.

And everyone would forget that the city dumped $13 million into them and let them sit dormant for about a decade.

Presto. Market forces.

Balls.

Jonathan Potts

Let's not overlook an important fact--the appraiser works for both the URA and the Piatts. Not exactly independent, is he/she? Perhaps this is a typical arrangement when commercial property changes hands. But it smells funny.

Sam M

Jonathan,

I'm right with you. I thought about bringing up that point in the original post. But I also wondered whether or not that is standard operating procedure.

Shouldn't the city be interested in an independent assessment? I suppose it could claim that it is trying to cut costs. But come on. Seriously.

And I wonder: Who did the assessment that said the buildings were worth $13 million in the first place? Those people were wrong by an entire order of magnitude. Shouldn't someone's ass be on the line?

I doubt it will be. Because in the end, I think the city is dying to be a player in this deal. To take some kind of credit for it. The people in charge have some kind of messiah complex. And giving the properties away is a good way to get things rolling. Who cares if we paid too much? There is no "we" in politics. "They" paid too much. They being the Murphy administration. Nothing to do about it now except stand in front of an empty lot with a golden shovel and take credit for saving us all.

I am guessing that, pretty soon, this is going to shake out in such a way that it will be obvious that "market forces" have nothing to do with how much the city is going to charge the Piatts for the building.

But that doesn't matter. Because the URA will claim that "fair market value" and other such nonsense has guided this process all along.

And not a single person will even attempt to explain why the fair market value of these properties has gone from $13 million to $6 million to whatever it will eventually be.

Voila! Renaissance III.

nemo31

"$11 millions not bad for a start". I'll settle for $11,000. I feel that I have earned that much keeping my residence in the Commonwealth of PA. I even have a name for the program the $11,000 will come from. The Keystone Residence Retainage Initiative or KEYRETI for short.
Tax abatement schemes have been fascinating to watch develop over the years. A few years ago I was watching a replay of a Erie city council meeting. The subject was granting 10 year tax abatements city wide. One Democratic councilman made a long drawn out speach how tax abatement was going spur investment, which would then have all these multiplier effects, which would then trickle down and create jobs, which would then create new revenue for the city coffers yada, yada, yada. While observing this rant. I was struck that I had heard this type of thinking before. Someone had coined it "Voodoo Economics". Erie's city council are all Democrats. They voted for the abatements, based on the theory, it would jump start development. Then I finally realized after over 20 years of searching. I had finally found some of those Reagen Democrats.
Oh! How did it work out? Erie is running another defficet and is trying to stay out of Act 47. Plus they are moving forward with the latest saving grace. Any guesses? Mixed use downtown development. Condos, lofts, lattes shops, artist spaces etc....Keep those subsidies rolling in.

Jonathan Potts

Sam,
One point I would make about the value of the buildings--specifically, the G.C. Murphy Building. I agree with your overall assessment that there are shenagins afoot regarding the value of the buildings. However, I've heard--secondhand--that the Murphy building has rapidly deteriorated under the stewardship of the URA. It's important to remember that the URA has turned away developers interested in that building because they were not large enough to also take on the authority's other holdings. So it is conceivable that these buildings have dropped in value--perhaps significantly--while the URA has owned them.

That, of course, is not vindication for the agency.

Sam M

Jonathan,

I agree that that is an interesting thing to consider. And that it does not vindicate the URA. But I might also add that the Murphy building is only one of many that the URA owns. And I can't imagine that all or even most of the depreciation has come on that alone.

Moreover, the neglect would only deal with the structure. Not the land on which it sits. And doesn't it seem that, apart from its basic "soundness" as a structure, the cosmetics don't matter much? That is, it is going to be almost completely refurbished.

It seems to me that most of the complaints about the building deal with the fact that it is actually five different structures and that the pillars are unevenly placed. But those things have not changed.

But that's only part of the problem. I wonder when the buildings suddenly fell to $6 million in value. Check out this from the Post-Gazette in June:

"According to the Allegheny County property assessment Web site, the agency spent $13.8 million acquiring the buildings. Together, the properties are assessed at $9.5 million."

But now it's $6 million? Says who? And from the same article:

"Mayor Bob O'Connor said getting back the $13.8 million the city paid for the URA properties is a 'reasonable goal,' but added other factors were at work, such as environmental and remediation issues in some of the buildings."

So somehow getting the full $13.8 million back has gone from a "reasonable goal," apart from a few remediation issues, to completely out of the question. Because between then and now the buildings have gone from somewhere between $9 million and $14 million in value to something closer to $6 million. And falling. In four months.

The Murphy building would have to have one hell of a hole in its roof to account for that kind of depreciation.

Here's the link to that PG article:

http://www.post-gazette.com/pg/06155/695591-53.stm

It's titled "City may lose money in selling Downtown Buildings."

That appears to have changed to "City will lose at least half its investment in selling Downtown buildings, and URA discussing other ways to 'commit funding'"

Balls.

Sam M

The article listed above was published on June 4.

The Post-Gazette repeated the $9.5 million assessment figure two days later.

http://www.post-gazette.com/pg/06157/696008-53.stm

I am trying to find the first mention of the $6 million assessment, but other than the article from the other day, I can't find it. Was that the first mention of the new Piatt/City funded assessment? Who did the assessment? How was the funding for it broken down? If the city already did it's own assessment and came up with $9.5 million, why did they agree to another one? SOP? isn;t this big news? Why isn;t anyone asking questions?

And shouldn't these building have actually INCREASED in value? The city purchased many of them at the beginning of an incredible nationalreal estate boom. I know that boom has not hit Pittsburgh as much as other places. But we keep hearing about all the "excitement" and "buzz" about downtown. Doesn't that mean that developers should be clamoring to get into the area? And that, given the laws of supply and demand, the prices should be going up? if it is not, doesn;t that mean all the talk about excitement and buzz is a bunch of gibberish? And that efforts to generate that exceitement and buzz through development subsidies are already failing?

OK. So someone screwed up and let the buildings depreciate. Who? Moreover, seeing that Mayor O'Connor must have know about said depreciation and still thought the city could reasonably think about recouping the full $13.8 million purchase price, what has changed so drastically in the past few months?

Someone ought to answer these questions, no?

That is, how has the value of the buildings plummeted from $13.8 million to $9.5 million to $6 million and falling in just four months?

Now that you've let this group of theives into the city the bullshit, deceit, lies will continue on and on.. And as usually is the case joe public will sit back, shake his head and ask why...This group is poorly run and relies solely on doing business with other peoples money. In fact its their unwritten motto. Forget talking market forces think more along the lines of greasing palms.. Big hairy political palms. I am thankful that in the end their lives will truly be finished as they spent them decieving people who have less than they and using all they come in contact with for their own personal gain.......If you could get inside and knew how many of our esteemed public officials were on the invisible payroll you may be shocked. Then again maybe not. Screw the piatt group.

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