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A Profitable Non-Profit: Parlaying Obsolete Industrial Land Into Economic Stimuli

By Donald F. Smith, Jr.

The Pittsburgh region has gained international attention recently for having reinvented itself from an old, industrial steel mill town to a center of technology, life sciences and robotics innovation.

That tremendous shift might not be possible, or at least would have been slowed, had it not been for the region's ability to provide physical facilities to house the companies that are driving this new economy.

The story in Pittsburgh starts out like the story of many other areas that were historically dependent on heavy industry. Huge properties designed and built for a single purpose that once housed thousands of employees working for a single company were abandoned, sat idle and deteriorated. And the communities around them that had grown dependent on them for jobs and tax revenue deteriorated as well.

The challenge: Bringing those obsolete properties back to life and doing so in a way that is not only financially viable, but that serves the interests of the community as a whole. That, in a nutshell, is the mission of the Regional Industrial Development Corporation of Southwestern Pennsylvania (RIDC), a unique entity that combines the community service orientation of a non-profit entity with the entrepreneurial approach of a private sector business.

As owners of 2,800 acres of land, 50 buildings and 11 industrial parks, RIDC has had a major impact on our region's economic growth. More important, perhaps, the approach may serve as a useful model for other regions around the country that, like Pittsburgh, have lost industry and find themselves trying to deal with the large, empty properties those companies left behind.

RIDC is not a governmental entity, but a private non-profit. The organization is self-sustaining, with revenues from the development projects supporting operations–enabling it to function in much the same way as other private developers. But thanks to the non-profit status, the group is mission-driven as well as market-driven.

The portfolio overall must be profitable, but can afford to look at projects with a community's needs in mind. Decisions are often made that may not be the most profitable in the short-term, but ones that are believed to be beneficial to the community and will provide RIDC with the return it needs over the longer term.

An example of how that unusual model played out successfully is a former Westinghouse facility in Turtle Creek, a borough just east of the city of Pittsburgh. Originally purchased by George Westinghouse from local farmers, the campus was constructed in 1894 and, at its peak, housed 20,000 workers. Its more than 2 million square feet of space included 12 buildings, two parking areas, a bulk liquids storage area, a transformer substation and two large petroleum storage tanks.

Ultimate Goal: Economic Growth

Environmental reviews highlighted issues including groundwater contamination, the presence of asbestos and lead paint, and a variety of contaminants including total metals, PCBs, VOCs and semi volatile organic compounds.

Despite a number of costly and complex challenges, both environmental and involving the renovation and repositioning of the property, RIDC acquired the site with the ultimate goal of providing economic growth to the region by redeveloping a world class, new economy, industrial facility. Rehabilitation of the property, now named Keystone Commons, was focused on specific buildings and the conversion of the overall complex into a multiuse urban industrial center.

Today, the site already houses 35 companies that employ approximately 1,100 people, including Brush Aftermarket, Innovative Controls and Taktl.

Only a non-profit, mission-driven entity would have undertaken a project of this scope, knowing that total completion and full occupancy of the property would take years to accomplish–and that success was not a foregone conclusion. In fact, RIDC continues to renovate and market buildings at Keystone Commons today.

That's why this model works. To be successful in this arena, development entities are bound and determined to take on projects that others would find daunting and economically unfeasible. Entities need to be able to consider not only return on investment, but whether a property has the potential to have a catalytic impact on the community over time.

They need to apply a vision for capturing opportunity for the region, as RIDC has done in making space available for innovators in the field of robotics. They need to be able to take on projects that have a higher than usual risk/reward ratio, content in the knowledge that it will be part of a portfolio that is balanced with more mature, more profitable ventures.

Also important is a recognition that getting properties back on the tax rolls is a crucial element of service to those communities, which is why even though RIDC is a nonprofit, it pays property taxes, providing all the benefits that a for-profit developer would, while focusing relentlessly on spurring economic growth and creating jobs.

This model has served the Pittsburgh region well and is one that is replicable and could provide similar benefits in some of the many regions across the country that are struggling to reinvent themselves after similar economic disruption.

Donald F. Smith, Jr., Ph.D is President, RIDC of Southwestern Pennsylvania


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