Mt. Lebanon developer may avoid repaying tax-aided loan
By Matthew Santoni
Published: Wednesday, September 12, 2012, 12:01 a.m.
Updated: Wednesday, September 12, 2012
Developers who hoped to build luxury condominiums in Mt. Lebanon are short nearly $2 million for repaying tax-backed loans and could stick Pennsylvania taxpayers with the bill, officials say.
Downtown-based Zamagias Properties planned the $42.8 million Washington Park project for the corner of Washington and Bower Hill roads and Mt. Lebanon municipal and school district officials agreed in 2007 to a tax increment financing plan, or TIF, that allowed Zamagias to borrow money to buy the land and plan for construction. Part of the money from property taxes on the condos would go into a fund to repay the loans.
When the suggested condo prices of $300,000 to $1.1 million prevented enough sales to begin construction during the recession, Zamagias withdrew the project in 2010. That meant no tax money going into the company's debt service fund to repay the $1.79 million it owes by next year.
Zamagias CEO Dave Martens declined to comment. Vice President and General Counsel Vincent Zappa did not return calls.
“The TIF and the development plans are no longer active,” Mt. Lebanon Manager Stephen Feller said. “There was a drawdown account, we're told, to pay for the property acquisition and other administrative costs.
“We're told it's likely it'll reach a point where there won't be adequate funds to make the payments.”
Yet the developer might not be on the hook for the debt.
Pennsylvania's Commonwealth Financing Authority guaranteed the loans, said Theresa Elliott, a spokeswoman for the state Department of Community & Economic Development. Unless Zamagias covers the $1.79 million shortfall in the debt service fund by Jan. 2, the authority would be responsible for paying principal and interest due on the loans.
Neither the municipality nor the school district lost any money on the project, Feller said. Both collect taxes on the value of the unimproved land; only tax money from any buildings would go into the debt service fund.
Zamagias controls the land, through several extensions Mt. Lebanon commissioners granted; the company bought the site from the defunct Mt. Lebanon Parking Authority. The board in January granted the most recent extension, lasting until December 2013.
After consolidating its properties along Washington Road and Kenmont Avenue, Zamagias cleared the site, which remains empty.
“It's disheartening walking out the door of the rectory and just seeing that empty space that has so much potential and promise,” said the Rev. Dave Bonnar, pastor at St. Bernard Parish, across the street. “It's just a beautiful piece of property waiting to be developed.”
St. Bernard once sought to buy the property for extra parking. Feller said that since the condo project fell through, Zamagias expressed interest in other projects for the site such as a retirement community, but never presented officials with plans.
Sabina Dietrick, a professor at the University of Pittsburgh's Center for Social and Urban Research, said it's uncommon for a luxury high-rise project to win approval for tax increment financing. That's typically reserved for projects involving polluted sites or mixed-use housing, she said.
“Somebody sold (Mt. Lebanon) a bill of goods and they got burned,” Dietrick said.
She and Bob Hurley, deputy director at the Allegheny County Department of Economic Development, said the Zamagias situation is unique.
“To our knowledge, there is not another TIF that has gone forward similar to Washington (Park), where they've gone forward with TIF financing and been unable to fulfill their obligations,” Hurley said.
Pittsburgh leaders approved a TIF to help Lazarus build parking for a Downtown department store at Fifth and Wood streets in 1995. The store closed in 2004 but new owners converted the building into condominiums and are paying back the TIF bonds for its parking garage.
Matthew Santoni is a staff writer for Trib Total Media. He can be reached at 412-380-5625 or email@example.com.
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