City Pins Hopes of Hill District Redevelopment on Lower Hill Tax Abatements

Feb 25, 2015

The Pittsburgh Penguins and development firm Clayco are just six months away from the proposed groundbreaking for a 28 acre mixed use development in the Lower Hill. City Council on Tuesday approved a unique approach to tax abatement, which has been vital to getting the Hill community on board with the plan.

It’s been more than half a century since eight thousand Pittsburgh residents were displaced from their homes in the lower hill district, when 95 acres of a thriving, mostly African American community were razed to make way for the Civic Arena.

Four-term Mayor David Lawrence was a strong proponent of the project, as current Mayor Bill Peduto remembered at a press conference in November.

“‘The redevelopment of the Lower Hill,’ (Lawrence) said at a speech at Harvard in 1956, ‘will be a giant bite from the core of the city, and the greatest of our Pittsburgh projects underway or yet envisioned.’ Six decades later, we know what a bitter failure those plans were,” Peduto said.

Peduto was speaking at the Consol Energy Center, which replaced the Civic Arena as the home of the Pittsburgh Penguins in 2010.

He was there to celebrate the announcement by U.S. Steel that it would be the anchor tenant for a new mixed-use development on the lower hill.

That development will include roughly 630,000 square feet of office space, about 250,000 square feet of retail and entertainment space, a new hotel, around 1,200 residential units, parking garages and green space.

U.S. Steel CEO Mario Longhi called the opportunity transformational.

“Right now, you might see a parking lot out there, but I see a vibrant thriving development that will serve as the cornerstone in the revitalization of this community and our company,” Longhi said.

Key to the revitalization of the surrounding Hill District is the new tax abatement arrangement; it’s a setup that’s never been tried in Pittsburgh before.

Instead of paying taxes to the city, county, and school district, property owners will pay the same amount split into two separate accounts: one for infrastructure needs in the Lower Hill and one for reinvestment in the Middle and Upper hill.

Councilman Daniel Lavelle said the idea is to avoid a scenario like the one that played out with The Waterfront development in Homestead.

“We had all this focus on the Waterfront, but when you look what’s happened above 8th Ave., you haven’t seen the Waterfront affect that change,” Lavelle said. “So this was really a concept to say, let’s take the revenue that’s going to be generated from this site and be very intentional about putting it back into … above Crawford Street and rebuild the rest of the community.”

One hitch is that tenants and property owners aren’t actually required to pay into the infrastructure fund. In fact, U.S. Steel will only pay into the reinvestment fund, which goes toward things like housing improvements and job training in the middle and upper hill.

“That’s the one that’s a requirement. There’s no negotiation on that,” said Robert Rubenstein, Acting Director of the Economic Development division of the Pittsburgh Urban Redevelopment Authority, which currently owns the land jointly with the Sports and Exhibition Authority.

“All developers, all purchasers of property on the Lower Hill District, will be required to pay 50 percent of their tax abatement value into the reinvestment fund that helps the greater Hill District,” Rubenstein said.

That fund is expected to generate $20 million over the ten year life of the abatement, and so is the infrastructure fund, barring the negotiation of any other deals like the one with U.S. Steel.

But here’s the other hitch: even if $20 million dollars ends up in the infrastructure fund, Rubenstein said it still won’t be enough to build all the streets and sewers and everything else that needs to be built.

The Hill Community Development Corporation gave their blessing for the plan back in September, but the real test of success will be whether the city can undo some of the harm that was done when 95 acres was taken away from the Hill District almost 60 years ago.