Update on May 7, 2024: Pittsburgh City Council unanimously approved the creation of new tax breaks for downtown developers Tuesday. Members approved a measure that would reduce new taxes on construction based on how many jobs or low-income housing units would be created by the project.
Councilor Bobby Wilson, who sponsored the legislation, said he hopes the tax cuts will serve as a tool to spur development amid rising vacancy rates in the city’s Golden Triangle.
After the law is signed by Mayor Ed Gainey, the city will establish an application process for developers who plan to take advantage of the new tax cuts. It’s unclear when that application will become available.
City Council had reworked the legislation earlier this month to create additional tiers. During a committee meeting Wednesday, Councilor Bobby Wilson replaced the text in his legislation with new language aimed at getting all members on board.
“A lot of great policy changes … are in this amendment,” Wilson said. “I think the main point here was to try and make it so that there [are] multiple avenues for people that want to invest downtown.”
Wilson first introduced a bill to expand the city’s tax assistance program within the Golden Triangle a month ago. The effort is aimed at reversing the area's plummeting occupancy rate, as businesses downsize office space due to hybrid work policies and other factors. Wilson said the legislation could kick-start development in the heart of the city by giving developers a break on new construction.
On Wednesday, Wilson said the city might be unable to fund popular services without a healthy central business district.
“It’s important because when we come to the table for other things that are going to make our communities great … that comes down to whether or not we have the funds to do it," he said.
But the bill's future seemed uncertain last week, after members raised concerns ranging from whether it would do enough to create affordable housing to whether it could require construction work go to union contractors. Members held the bill to allow more time to make changes.
During Wednesday’s meeting, Wilson said the new legislation was informed by many of those concerns.
The most notable change sets forth a new tiered system of tax incentives in which the amount of assistance provided is based on how affordable new residential units are. The bill uses income thresholds defined by the federal Department of Housing and Urban Development to determine how much of a break a development would qualify for.
For example, if new construction sets aside at least 10% of units to be affordable to people earning below 50% of the area’s median income, developers would pay zero new taxes on that project. Those who set aside the same number of units priced lower than 80% of the area’s median income, meanwhile, would receive 80% off their new taxes.
The tax breaks apply to new construction or improvements made to old buildings, such as converting an office building into apartments or condos. It also allows breaks for commercial developers who create a certain number of permanent full-time jobs, with tiers similar to the residential unit requirements.
Buildings renovated for commercial use that don’t create a certain number of jobs would still qualify for a lower level of tax assistance.
The new bill disqualifies new parking structures from assistance, a change proposed by Councilor Deb Gross, who argued the legislation should seek to avoid creating a tidal wave of new parking garages and hotels instead of residential units.
Gross said Wednesday that she was happy with the changes, which also struck language that would have qualified hotels as residences. But she said the new bill doesn’t go far enough to guard against hotel projects.
“In the initial version of the bill, I said we could hypothetically have not a single apartment built because people could have built just offices and hotels,” she said. “That’s still technically true here.”
She suggested that the city consider how to end tax assistance for hotel projects should there be too many going up.
Other members more broadly praised the changes introduced Wednesday. Among them was Bob Charland, who this week introduced another bill aimed at shoring up city finances.
“Our North Star here needs to be ‘What are we going to do about downtown and how are we going to attract development into downtown?’” Charland said.
He added that although requirements aimed at producing more jobs and affordable housing are important, the city’s priority should be staying competitive with other cities in order to solidify the downtown tax base.
“Every other downtown in the United States is trying to do the same thing, [but] we want to make sure the developers want to invest in our downtown," he said.
Another major change to the bill requires the creation of a three-member monitoring committee responsible for tracking the impact of the incentives. Two members would be appointed by the mayor and a third would be appointed by the council president. The committee would meet monthly to "ensure the objectives of the program are being met," the amendment reads.
Council members did vote to schedule a public hearing on the downtown tax assistance program before bringing the matter to a preliminary vote. That hearing has yet to be scheduled. But after members voted unanimously to amend the bill, it appears Wilson’s effort has a clearer path forward.
