Real Estate Tax Abatement Program to Stabilize Downtown Pittsburgh

Published on March 11, 2024

The new program will seek to spur the conversion of office buildings to residential buildings and encourage their adaptive reuse.

Pittsburgh, PA (March 11, 2024)—Pittsburgh City Councilman Bobby Wilson (District 1) announces upcoming introduction of legislation at Tuesday’s Regular City Council Meeting to create a robust tax abatement program for Downtown Pittsburgh. The bill, co-sponsored by City Council President R. Daniel Lavelle, Councilperson Erika Strassburger, Councilman Bob Charland, and Councilman Khari Mosley, creates a real estate tax abatement program to spur the conversion of office buildings into residential buildings and encourage their adaptive reuse.

“Downtown Pittsburgh is in serious financial trouble, and we need to do everything we can to make sure that it is not going to fail. The demand for commercial office space has dropped significantly, due to the aftermath of the COVID-19 pandemic, and we are looking at nearly a 50% vacancy rate in Downtown Pittsburgh office buildings by 2028. Given the recent wave of reassessments, the City’s real estate tax revenues are projected to drop by nearly $18 million a year,” said Councilman Wilson. “The bill I’m introducing creates a new Local Economic Revitalization Tax Assistance (LERTA) program for Downtown, to incentivize the conversion of office towers into much needed apartments and condos. The bill’s Enhanced Tax Exemption option requires either affordable housing or job creation to accompany a conversion project, which will create additional tax revenue for the City of Pittsburgh while attracting more businesses Downtown. We cannot wait any longer to address this critical fiscal issue in the economic heart of our City.”

John Valentine, Executive Director of Downtown Neighbors Alliance, emphasized the urgency of converting vacant office buildings. “One of the major economic casualties of the pandemic has been office workers abandoning their offices and working remotely. The domino effect has been empty or near empty office buildings that have lost value, which is eroding the city's tax base. The proposed Downtown LERTA program will create a desirable opportunity for developers to convert empty office space into a thriving residential community. This is a key component of revitalizing Downtown in the wake of the pandemic.”

Downtown Pittsburgh presently accounts for about 23% of the City’s total real estate tax revenue, or $35 million out of a projected total of $152 million in 2025. Commercial real estate industry analysts estimate that the assessed value of Downtown Pittsburgh’s commercial-use property will fall by almost 50% in the next few years as property owners pursue assessment appeals, and dozens of Downtown buildings risk foreclosure.

Council President R. Daniel Lavelle, District 6, shared his insight as the veteran councilmember representing Downtown Pittsburgh, “I’ve witnessed the ebbs and flows of Downtown Pittsburgh in my tenure on City Council. It’s crucial that we take a look at all of the options available to rebuild Downtown. The Downtown LERTA program proposed by Councilman Wilson is a big step in the right direction. Many people forget that Downtown Pittsburgh is not only a business hub, but also a neighborhood, with nearly 22,000 Pittsburghers calling it home. We need to rethink what Downtown Pittsburgh can and should be, and incentivizing the reuse and conversion of these vacant office buildings will spur new growth in this area.”

McDevitt, City Council’s Budget Office Director. “Nearly a quarter of that is derived from properties in Downtown Pittsburgh. With each Downtown property getting its assessed value slashed by millions of dollars, that revenue source becomes less stable. The City would be wise to utilize the resources it has to incentivize investment in Downtown Pittsburgh, to try and stop the values of those properties from decreasing any further.”

Announcements of the reassessments of many Downtown skyscrapers began in January 2024, with the U.S. Steel Tower, Three Gateway Center, and the Tower at PNC Plaza winning huge reductions in their 2022 and 2023 property assessments. The U.S. Steel Tower’s assessment was slashed by $91.6 million, Three Gateway Center’s assessment was slashed by $27.2 million, and the Tower at PNC Plaza’s assessment was slashed by $74.8 million, for a total reduction in assessment of $193.6 million.

In February, two more Downtown Pittsburgh landmarks—PPG Place and the Union Trust Building—won substantial reductions in their 2022 and 2023 property assessments, with PPG Place’s assessment slashed by $36.9 million and the Union Trust Building’s assessment slashed by $13.9 million, for a total reduction in assessment of this pair of iconic Downtown landmarks of $50.8 million. And this month, five Golden Triangle properties—the Even Hotel on Forbes Avenue, PNC Firstside Center, Two PNC Plaza, 11 Stanwix Street, and 525 William Penn Place—won a total of $203 million in reductions to their 2022 and 2023 assessments. The 2023 assessment reductions on just these ten properties total $364.4 million and could cost the City of Pittsburgh $2.94 million in real estate tax revenue in a single year

Councilperson Erika Strassburger (District 8), who chairs Council’s Committee on Finance and Law, noted her support for Councilman Wilson’s bill, explaining, “The City's fiscal health is my foremost priority. The Downtown LERTA program Councilman Wilson will introduce this week is a vital—and necessary—action for stabilizing our Downtown real estate market and incentivizing the types of renovations that will create the thriving, sustainable, and vibrant Golden Triangle of the future. I am proud to support this legislation and look forward to working with my colleagues as well as external partners on further initiatives that, in combination, will save Downtown Pittsburgh from permanent decline.”

Councilman Wilson’s bill creates a new Local Economic Revitalization Tax Assistance Program (LERTA) for just Downtown Pittsburgh. The City of Pittsburgh has created similar tax abatement programs in the past to bolster development in vital neighborhoods. Eligible projects will receive an abatement for ten years and can seek either a standard or enhanced exemption on their real estate tax bill. An applicant seeking the Standard Tax Exemption would receive an abatement not exceeding 50% of the City’s real estate tax on the portion of the property’s assessed valuation attributable to its conversion. An applicant seeking the Enhanced Tax Exemption would receive an abatement not exceeding 100% of the City’s real estate tax on the portion of the property’s assessed valuation attributable to its conversion. In order to receive the Enhanced Exemption, the applicant would have to create either affordable housing or jobs.

“This expanded LERTA program comes at a critical time for Downtown,” added Jeremy Waldrup, President & CEO of the Pittsburgh Downtown Partnership. “Thankfully, as outlined, it expands upon the City’s existing LERTA program, providing a catalyst specifically for the redevelopment of Downtown buildings and leading to new residential opportunities in the Golden Triangle.”

Stefani Pashman, CEO of the Allegheny Conference on Community Development, noted the thicket of challenges facing Downtown Pittsburgh. “Creative tools are required to revitalize Downtown and support the conversion of commercial property to fit the needs of what’s next. Downtown faces a complex and unique set of challenges that, if not addressed, will undoubtedly have significant impacts on our region’s outlook. Now is the time to act. We must work together to identify opportunities to create the Downtown of our future—a place that, as the heart of our region, has a strong beat, shines as a relevant live-work-play destination, and contributes to achieving our goal of delivering a next-generation economy for all.”

Darrin Kelly, President of the Allegheny-Fayette Central Labor Council (AFL-CIO) applauded the bill’s incentives for job creation. “I commend Pittsburgh City Council, especially Councilman Bobby Wilson, for taking a proactive approaching regarding the financial situation in Downtown Pittsburgh. With an eye on the future, this bill tackles today's crisis by providing working families with stable, long-term union job opportunities. Pittsburgh is and has always been open for business.”

"This legislation recognizes that this is an all-hands-on-deck moment for Pittsburgh,” said Sam Williamson, 32BJ SEIU WPA District Director. “With increased commercial building vacancies and threats of foreclosures, we commend Councilman Wilson for responding to this crisis with a forward-thinking proposal that will help revive our Central Business District. The policy not only safeguards thousands of good union jobs, but also fosters economic recovery for our local businesses. This tax abatement program is an investment in our Downtown, the people of Pittsburgh, and the prosperity of our region.”

“This initiative to convert underutilized office buildings into vibrant residential spaces is a win-win for Pittsburgh,” added Greg Bernarding, Business Manager of Pittsburgh Regional Building and Construction Trades. “Not only will it create a more dynamic Downtown, but it will also provide a significant boost to our skilled trades workforce. With tax abatements supporting the conversion of at least nine downtown towers in the next year to eighteen months, this project represents a major investment in our city’s future. We’re talking $550 million directly injected into Downtown Pittsburgh, along with an estimated $275 million in additional economic activity. Most importantly, this project will create numerous new jobs for electricians, plumbers, carpenters, and other highly skilled union tradespeople. This is a tremendous opportunity to revitalize our Downtown and provide good-paying union jobs for our men and women of the Pittsburgh Building and Construction Trades.”

This new LERTA program will be administered by the City of Pittsburgh’s Finance Director, in partnership with the Director of the City’s Department of Permits, Licenses, and Inspections. The City Controller will audit this program on a yearly basis to account for the value of all granted exemptions, document the total number of housing units created by recipient projects, and project incoming real estate tax revenue upon expiration of these exemptions. “The Controller’s office will provide vigorous oversight of this LERTA program. The City of Pittsburgh must do everything we can to preserve both the tax base and jobs downtown,” said City Controller Rachael Heisler.

Councilman Khari Mosley (District 9) reiterated the pressing need to for the proposed Downtown LERTA ordinance. “We are facing a crisis of epic proportions that requires immediate action. While this tax abatement program is only one of several critical steps we need to take, it will allow us the opportunity to prevent the value of our Downtown real estate from hitting rock bottom, make necessary conversions of empty commercial space into affordable housing, and maximize the amount of property tax revenue the city can collect in this extremely difficult time.” City Councilperson Bob Charland (District 3) added, “I don’t represent Downtown Pittsburgh, but Downtown is everyone’s district. I want to thank Councilman Wilson for his leadership in not only stabilizing Downtown Pittsburgh, but also encouraging investment in our city’s Central Business District at this critical moment.”

For press inquiries, please contact Councilman Wilson’s Community Relations Manager, Julianne Hluska, at (412) 676-5758 or julianne.hluska@pittsburghpa.gov.