City’s woes delay revitalization plan
A revised Fifth-Forbes revitalization plan won’t be presented to Mayor Tom Murphy until late November.
The presentation by developer Kravco Co. was scheduled for early August, but has been delayed by the Lord & Taylor department store’s July 31 announcement that it intends to pull out of Pittsburgh and by the city’s financial problems.
Now, Kravco and its partners will look to finance Downtown residential development without much, if any, cash from the city, according to Midge McCauley, vice president of King of Prussia-based Kravco. The new plan will call for private financing of 500 apartments in the beleaguered corridor.
Kravco hopes to attract private investment through state and federal income tax credits and property tax abatements. The rental apartments would be in converted office space and in new construction, according to Kravco.
McCauley said the upper floors of many Downtown buildings have been overlooked for housing because Pittsburgh’s relatively cheap housing market made conversion projects too expensive in comparison.
“Nobody paid attention to the upper floors because rental rates weren’t high enough to pay for the cost of construction,” McCauley said. “That’s why this program is going to require large subsidies, and we know (local) foundations are very interested in this Living Downtown Initiative.”
The initiative is part of a proposal by state Rep. Dan Frankel, D-Squirrel Hill, to offer state tax credits to institutions and businesses that invest in redeveloping buildings in blighted areas.
It is modeled on a federal program that encourages refurbishment of rundown historic buildings by offering 20 percent tax credits. A $10 million conversion of vacant office space into lofts, for instance, would earn a corporation a $2 million tax write-off.
Kravco is still working to define the size of the subsidy that would be needed to develop 500 apartments in the Fifth-Forbes corridor, but estimates that each unit would cost about $150,000 to build. To keep rents competitive — $800 to $1,800 a month — with those in other parts of Downtown, from 30 to 45 percent of that cost would have to be offset by tax credits or other subsidies, according Kravco.
There is great potential for housing development through programs such as a property tax abatement district that City Council will consider next week, according to Eve Picker, a developer and the president of No Walls Productions Inc., which is working with Kravco on the Fifth-Forbes project. Within such a district, she said, developers are given property tax breaks for the first few years, but pay the full tax by the end of 10 years.
The abatements help developers show banks healthy balance sheets by the projects’ third year. Developments become financially self-sufficient more quickly, Picker said.
“If you can reduce the property taxes in those early years, you can show greater cash flow and in turn borrow more money — more conventional money,” she said.
The emphasis on housing is in contrast to the original and subsequently abandoned Fifth-Forbes project proposed by Urban Retail Properties Co. That plan relied almost entirely on retail projects to spur economic development. City planners have since emphasized housing in the area to fulfill city officials’ vision of a 24-hour Downtown.
Another of Kravco’s goals is finding a replacement for the Lord & Taylor department store. The May Department Stores Co., Lord & Taylor’s parent, announced in July that it will close the Forbes Avenue location, along with 31 other stores nationwide. No closing date has been announced.
The Pittsburgh Urban Redevelopment Authority approved a $12 million loan to the May Co. in 2000 to buy and renovate the historic Mellon Bank headquarters. URA director Mulugetta Birru said May will have to repay the so-called cash flow loan if it closes the store before 2005 — unless the company can find a high-quality tenant to take its place.
“They are cooperating with us on finding a new tenant. But if they do not find one, they are committed to stay until the five-year term expires (in 2005),” Birru said.
City Council rejected a proposal in a 4-4 vote Wednesday to require council approval before the URA grants any more cash flow loans, which require repayment only when a recipient store meets a certain sales or profit threshold.