A few months ago I wrote about how government likes to all up in your business. They just cannot help themselves. One of the examples was how the City of Pittsburgh through its Urban Redevelopment Authority used eminent domain to seize a local theatre in Pittsburgh. The Garden theatre had suffered from the decline of city theatres and the proliferation of suburban multi-screen venues. They somehow survived by catering to the XXX movie crowd. I obviously don’t know the details of their finances, but they stayed in business for decades screening those flicks. That is until the City of Pittsburgh decided that the area would be better suited to a retail development.
“In February 2007, the URA ended a decade-long legal battle when it paid $1.1 million to buy the theater with hopes of attracting businesses to the corner of West North Avenue and Federal Street, a spot that many view as the gateway to the Central North Side.”
A recent article in our local paper caught my eye as the Urban Redevelopment Authority has recently agreed to sell the property for a whopping $250,000.00. Pittsburgh resident’s tax dollars spent $1.1 million for a return of $0.25 million for a Return on Investment (“ROI”) of a negative $850,000. In my original research, the City also incurred legal cost of $500,000 when the owner fought the eminent domain case. I love some of the quotes from city leaders as they try to grease this through,
“In general, it takes a significant write-down of some kind to make these things work,”
“reflects a value associated with the financial challenges of the development task,”
“The rent that you can get from those buildings is not sufficient to allow you to get financing in the private market to fix them up. There has to be public sources to make it work,”
“When you take into account the jobs created, taxes and the elimination of blight, there’s a net benefit,”
Perhaps there will be a benefit in time, but that is really not how investing works. Time is money and if the “net benefit” takes many years the investment might not be worth it. Government officials don’t have to worry about that since it’s not their money and they are more concerned about their vision and planning. I would guess that their determination of “net benefit” is not a monetary evaluation as it considers things like “elimination of blight” while ignoring the fact that a viable business was closed for many many years. Many years without paying property taxes. Many years without employing anyone. Many years without collecting sales tax.
You can read the original post at this link.