A Pittsburgh homeowner called the other day to say she is most definitely not in favor of the proposal to raise property taxes to fund city parks. One of her reasons is Lerta.
Lerta? Who’s Lerta?
LERTA is an it, not a who. It happens to rhyme with Serta, the mattress maker, and is even more comforting to the people who use it. It’s a tax break for real estate developers. Its existence is no surprise, but I’d bet not even “Jeopardy!” champion James Holzhauer could tell you it means Local Economic Revitalization Tax Assistance.
LERTA is a big part of the reason there’s been so much development Downtown, in the Strip District and across the Allegheny River at Heinz Lofts. Those neighborhoods and Uptown are where the city has targeted residential LERTA programs in recent years.
It’s quite a deal, too. The program for apartment buildings and hotels offers a 10-year tax credit of up to $150,000 in city property taxes and up to $250,000 in school taxes. The one for condos is a 10-year credit of up to $2,700.
This break is based on the improvements made to the properties but, understand, this is what gets written off taxes, not the property assessment. Unless the hotel or apartment-building owner has put together something that owes more than $400,000 in combined taxes, he won’t owe a dime to the city or schools for a decade.
This break is hardly unique to Pittsburgh. LERTA arrived through state legislation in the 1970s. The breaks spread faster than leisure suits and have lasted a lot longer. They’re in South Fayette, North Fayette and a lot of suburbs not named Fayette. Though the original LERTA legislation targeted the tax break toward “deteriorated areas,” LERTA has been used in areas as prosperous as the North Allegheny School District.
This is all foreign turf to most homeowners. LERTA makes me feel like the character Fenwick in the movie “Diner.” He’s in a car going through Maryland horse country, riding past properties that all but ooze money, when he asks his buddy, “Do you ever get the feeling that there's something going on that we don't know about?”
The homeowner who called me, in the same house more than 20 years, her family dutifully paying their fair share, said it’s hard to even consider approving a property tax increase for parks when new arrivals are benefiting from tax breaks in trendier digs than hers. Some might call that an apples-and-oranges comparison, but it just doesn’t seem fair to her.
It also seems altogether unnecessary. Those who already have this break can keep it, but there seems little reason to keep targeting tax breaks toward parts of the city that already have boomed.
Thankfully, city council is considering legislation that will shift the LERTA tax elsewhere. No longer would the break be targeted toward buildings in and around Downtown that have spawned high-end rentals and condos, but would instead go to “the production and preservation of rental housing that is affordable to low and very-low incomes throughout the city.”
Mark Masterson, executive director of the Northside Community Development Fund and on the advisory board of the Housing Opportunity Fund, has been developing tough real estate for decades. Property values in several North Side neighborhoods have soared in that time, but there are still a lot of places there and throughout the city that have seen little if any investment.
“The city’s changing and the LERTA program needs to change,” Mr. Masterson said, backing the legislation proposed by Councilman Dan Lavelle of the Hill District.
The city says owners of 37 apartment/hotel buildings currently save $1.5 million a year in city property taxes under the LERTA program, and 185 condo owners are saving $423,000. Applications are still being accepted until there is legislative change by council.
Let’s hope there is a change. A couple of years ago, City Controller Michael Lamb projected that the cumulative revenue coming into the city from expiring tax-abatement programs, between now and 2026 as the 10-year windows shut, should be $9.5 million. Maybe that can free up some money for city parks.
Brian O’Neill: boneill@post-gazette.com or 412-263-1947 or Twitter @brotheroneill
First Published: July 14, 2019, 9:00 a.m.
