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Slots to pay down debt for city, county

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Friday, Aug. 29, 2008

Pay off the credit cards or buy a plasma TV•

State lawmakers faced that kind of question when deciding how to dole out $629 million in slots money for Pittsburgh and Allegheny County. This year, the city and county are getting $48.7 million from a casino-backed economic development fund.

Like a debt-ridden homeowner who has hit the lottery, the politicians split the difference -- paying off some debts at spots such as the airport and convention center while buying some new stuff, too.

For her money, Julie Bradley, 27, of Gastonville in Washington County said it makes the most sense to pay off the old bills first.

"If you can't afford it, don't buy it," she said. "That's the problem with credit cards: People buy now and never pay later. They should use slots to pay off the back finances and rearrange government so it doesn't happen again."

On the other hand, the city and county have needs now, said Sam Santillo, 53, of Bloomfield. That money could go to pave roads and clean up the riverfront.

"We're seeing no improvement in the city at all," Santillo said. "That money could be put to a better use."

The slots law takes 5 percent of the money from casinos around the state, puts it into a development fund and then gives priority to eight projects in Allegheny County and to a Philadelphia convention center. The fund has brought in $106 million so far.

The plan gives Pittsburgh and Allegheny County at least $404 million over 12 years, plus $225 million over 30 years for the Uptown arena. Philadelphia would get $880 million over 30 years for building its convention center.

Local governments and their authorities need to pay off what they owe, said state Rep. Mark Mustio, R-Moon.

This year, Allegheny County took in $29.2 million for debts that have accumulated during the past two decades at Pittsburgh International Airport, the city's Urban Redevelopment Authority, the David L. Lawrence Convention Center and the county.

The URA is getting $5.1 million toward a development fund on which it still owes more than $50 million. Allegheny County is receiving $2.5 million for a similar fund.

For the airport, the county received $19.9 million to offset the $42.5 million it paid to help build the terminal in the early 1990s.

The city-county Sports & Exhibition Authority received $1.7 million for convention center debts, and another $1.7 million for its annual shortfall.

The convention center loses money, said Executive Director Mary Conturo, but the visitors it attracts spend money on hotels, restaurants and entertainment.

The authority borrowed $20 million in 2004 to cover the cost of running the convention center and to pay for improvements, Conturo said. A payment is coming due at $2.4 million, leaving the authority $600,000 short, she said. It had expected to receive $4 million a year, with half for the debt and half for running the center.

"Paying off the debt will help with the operating cost of the convention center," Conturo said.

Debt payments by the city of Pittsburgh, which still owed $764.1 million at the end of last year, helped create its financial crisis and remain a draw on its resources, said Frank Gamrat, senior research associate at the Allegheny Institute for Public Policy, a Castle Shannon-based think tank.

"It's absolutely wise to start paying debt off," he said. "That's one of the biggest problems facing the city of Pittsburgh. They just have to get control over it. Using gaming money is the wise thing to do."

But plans for the slots money don't stop with the outstanding accounts. Lawmakers agreed to spend $17.8 million on purchases as well.

The biggest ticket item, $7.5 million a year for 30 years to help build the arena, was not included in the original slots bill but added last year.

The arena "will have both an immediate and long-lasting impact on the entire region, making it a worthy recipient of the funding," said Chuck Ardo, spokesman for Gov. Ed Rendell. "There is always competition for a limited number of dollars, but it would be difficult to argue that any other project was more deserving."

There's $3.7 million for a convention center hotel and $6.6 million for a new infrastructure fund.

The sports authority plans to seek proposals for the 500-room facility that would connect to the convention center, Conturo said.

No hotel should be built if it can't be completed without spending public money, the Allegheny Institute's Gamrat said.

To dole out the infrastructure money, the county created the nonprofit Economic Development, Community Infrastructure and Tourism Fund with a five-person, volunteer board of directors. The group will take applications and then decide how to spend the money.

Dennis Davin, director of county economic development, said the funds could go to projects that create jobs, reuse industrial sites or help distressed municipalities.

Either way, state Rep. Mike Turzai, R-Bradford Woods, questioned whether spending slots money on items new or old adds up to sound financial planning.

"I think the whole scheme is wrong," he said. The money "should be going to property tax relief."

Divvying up the pot

Pennsylvania is spending $48.7 million in slots money on Allegheny County development projects this year. That money will be used for:

• Retirement of city Urban Redevelopment Authority debt -- $5.1 million

• Retirement of David L. Lawrence Convention Center debt -- $1.7 million

• Offsetting convention center operating deficit -- $1.7 million

• Construction of a multiuse arena -- $7.5 million

• Debt service and economic development for Pittsburgh International Airport -- $19.9 million

• Infrastructure fund -- $6.6 million

• Financing of a convention center hotel -- $3.7 million

• Retirement of county economic development fund debt -- $2.5 million

SOURCE: Pennsylvania Office of Budget

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