TIF-Backed Mall Kills Nearby Businesses

Published December 1, 2006

In Pennsylvania’s Allegheny County, two businesses have succumbed to the new Pittsburgh Mills development in suburban Pittsburgh, which received a tax increment finance deal and other public dollars totaling $58 million.

Pittsburgh Mills opened for business in 2005. On August 27 of this year two restaurants, Abate and Dingbats, closed after 23 years of operation. They were located in the Waterworks, a shopping center a few miles from the Mills.

“It was a decision revolving around the loss of business resulting from chain restaurants opting to move into the area and pulling the existing population base from local entrepreneurs like us,” said Victor Son, chief financial officer of Food Service Management Associates, which owned the two restaurants, in a September 10 article in the Pittsburgh Tribune-Review. “In the state the city is in, with people moving out, all they’re doing is dividing up the pie among everyone that’s left, so we get a smaller share by definition.”

Subsidies Hurt

Son said new competition from restaurants that opened at the taxpayer-subsidized Pittsburgh Mills mall along Route 28 in Frazer Township was a big factor in the closings.

Business at the restaurants had dropped 25 to 30 percent since the mall opened in 2005. The Route 28 corridor runs from the city of Pittsburgh to north/northeast Allegheny County.

The experience of the two restaurants is similar to the 2001 case of Keystone Plumbing, which saw a 30 percent drop in its business after a new tax increment finance-supported Home Depot opened nearby in the East Liberty neighborhood of Pittsburgh.

County Loses Revenue

Local business closures represent a net tax loss to local governments because the established businesses were not receiving tax subsidies and were thus paying their full share of the local tax bill.

Pittsburgh Mills also has had an impact on another nearby tax-subsidized development, Deer Creek Crossing, which has lost tenants to the Mills.

Despite the subsidies, Pittsburgh Mills is suffering problems itself. A planned go-cart track at the development never materialized, and its upscale bowling alley has already announced it will close.

Eric Montarti ([email protected]) is policy analyst and Jake Haulk ([email protected]) is president of the Pittsburgh-based Allegheny Institute for Public Policy.