US Steel keeping its headquarters in Pittsburgh — for a price

By Rachel Martin | Watchdog.org

PITTSBURGH — Pittsburgh icon U.S. Steel announced Monday it will build its new headquarters in Pittsburgh, at the site of the former Civic Arena, now a sprawling parking lot.

The deal didn’t spring from mere loyalty. A fuzzy picture of financial incentives helped sweeten the deal.

After the Monday press conference, Kevin Acklin, Mayor Bill Peduto’s chief of staff, said he thought federal and local tax breaks would probably total at least $6 million, but he was uncertain of the numbers.

U.S. Steel CEO Mario Longhi said Monday other states had “clearly demonstrated a lot of interest in having us move out of here.” He declined to say which.

“It doesn’t matter at this point,” Longhi said.

U.S. Steel has made an agreement with the Pittsburgh Penguins, who own development rights to the land, to build a five-story 268,000-square-foot building. The company’s lease in the iconic Steel Building — technically, for now, the U.S. Steel Tower — expires in 2017.

The building will also house a steel museum and retail space. Penguins CEO David Morehouse said U.S. Steel, a Fortune 200 company founded in 1901, insisted on that detail.

Frank Gamrat, senior policy analyst for the Allegheny Institute for Public Policy, a Pittsburgh-based nonpartisan think tank that focuses on government spending and economic development, characterized the tax breaks as “another case of corporate welfare.”

Robert Strauss, an economics and public policy professor at Carnegie Mellon University and longtime economic policy analyst, said such public-private partnerships can be useful, but the details are crucial.

It’s important to analyze whether such programs simply encourage relocation rather than growing business, Strauss said.

Gamrat also noted the new facility isn’t claiming to generate any new jobs. U.S. Steel is simply moving these jobs from current locations to a new one.

Pennsylvania will invest $15 million in total for the development, underwriting infrastructure like water and sewage.

The project is part of a larger development project on the 28-acre site. The city announced in September a proposed 20-year tax-increment financing district.

Strauss noted caution must be taken with that sort of financing. It’s limited by state law, he said, and no more than 10 percent of a municipality’s tax base “can be given away.”

It’s also important to bear in mind that, as companies pay less in property tax, residents often have to take up the slack, he said.

Construction is expected to begin by fall 2015. The building is slated to be complete in 2017, when the company’s lease expires.

The building will be owned an affiliate of the Penguins and Clayco, the team’s developer, based in St. Louis. The deal includes an 18-year lease by U.S. Steel.

A spokeswoman for U.S. Steel didn’t respond to a request for comment.