Erie County Executive Mark Poloncarz has emerged as a leading critic of local economic development practices. Investigative Post Editor Jim Heaney interviewed Poloncarz on April 2 to discuss his concerns in-depth.
A 4 minute, 8 second video clip featuring the highlights of that interview is posted above. The full 21 minute, 37 second interview is posted deeper in the transcript, produced by Ivy Rivera, which has been edited lightly for clarity.
Heaney: We’re going to do a special focus today on economic development. I’ve been covering economic development in Buffalo for probably 15 years and it’s been a status quo environment. I’ve asked the county executive on it because you’ve really been a voice of reform that I really haven’t heard out of anybody in your position. There’s been some folks that have kind of talked a little bit about reform, but you really seem to have a head of steam up on this. So, rather than hopscotching around different issues, I wanted to zero in for the next 20 minutes on just economic development. So, offer me your critique. You feel that economic development in this town is not done well. What’s wrong with the way government handles economic development in Erie County, in particular, but in Western New York in general.
Poloncarz: Well, first off, I appreciate the comments saying that I’m the only one doing it. It is dysfunctional, the economic development model that we’ve seen in this community. And, one thing that I’ve been criticized for, by those who’ve been involved in the economic development field, is for rocking this dysfunctional boat, for saying that “It just doesn’t work.”
Heaney: How is it dysfunctional?
Poloncarz: Well, I think that we’re working off of a system that’s predicated for a prior economy. An economy after the steel mills closed and after the auto industry moved out, which is, ‘We need to do any project possible in this community because we need to create jobs.’ I agree. We always need to create jobs. But, we’re acting as if this is the 1980s in which no one did projects in this community and we’ll give away tax abatements, tax incentives to anybody who appears at our door, even though, there’s a billion dollars worth of economic development from the private sector going on in Erie County and Western New York right now.
My argument is: yes, we should be focused on economic development, but we have to look at the projects that are appropriate for this region – those that generate a real bang for the buck. If we’re going to be investing taxpayer dollars in those projects, they better be generating a real bang for the buck, with real jobs that pay substantial wages, not just part-time jobs at minimum wage salaries. And, also, do the right things to generate new business for our community.
As I’ve said, we’ve got Toronto – a 90 minute away drive – with over 3 million people living in that community. Canada is the United States’ largest trading partner. Its economic hub is in Toronto. They come down to our football games. They come down to our hockey games. They go to Ellicotville to ski. They go to the Galleria Mall and Boulevard Mall to shop. But, they’re not investing in our community. Why?
Because no one’s been selling Erie County and Western New York to the Torontonians as an investment for their businesses. They’ve just said, ‘Come down and enjoy our services.’ ‘Enjoy our football and our mall.’ But, we haven’t really reached out to them to say, ‘We want you to be economic partners.’ It’s important, if you think about it. It is the United States’ largest trading partner in Canada and their economic hub is only 90 minutes away. So, why are we treating it as if it’s 9,000 miles away?
I’ve been trying to sell our community up there. We’ve seen some successes already with the number of Canadian companies that are coming into the community and I don’t think it’s just because of me – Buffalo Niagara Enterprise has been actively involved in it in the recent past.
We focused for too long on the wrong kinds of economic development projects instead of taking advantage of our geo-political strategic location to our benefit.
Heaney: George Hasiotis, who has been involved in cross-border trade issues for some time, was on the show about three or four weeks ago. He was very critical of elected officials in general in New York State and locally about not doing that kind of outreach. Are you seeing, by way of what the state or the city or other locals, anybody else doing what you’re doing up in Ontario?
Poloncarz: No. (Only) Buffalo Niagara Enterprise is.
Heaney: But in terms of government?
Poloncarz: Government? I would say that no one is. The city doesn’t seem to play a role. New York State had a full-time individual, a consultant, that they hired to do work up there, and they eliminated that position.
I think it’s important because we just assume the Canadians are going to come down here because they are close to us and they know us. But, we’ve got to sell ourselves, like a business tries to sell itself. We have to go out there and actually try to produce the businesses that will, in the end, generate real jobs here in Erie County.
We should only be doing projects that generate new economic wealth for the community.
Heaney: We’ve had some projects approved, just in the last couple months. You voted against some of them, voted reluctantly in favor of some of them. The Sabres and Harbor Center – a project that received substantial tax breaks – I think Pegula and Company were going to go forward with that project, regardless. The medical building on Main Street, which, I think, was going forward – that was a “no” vote of yours. And, a project that’s up in Niagara County – Yahoo, a data center and call center. Yahoo, originally, received $2 million a job subsidy up there. Are these the kinds of deals that we ought not to be doing?
Poloncarz: Well, I’ve been arguing against many of these deals saying “it’s not appropriate, where’s the bang for the buck?” So, to speak for us locally? Where are the new jobs being created? Or, for that matter, what’s the end result that the community will see? If we give a tax break now, what are we going to see in return for real property taxes or sales taxes that are generated off of the project?
I voted “no” on the Conventus project, the Ciminelli project, which was, and still is, medical offices … even if it’s a higher level of medical offices than generally going to see a doctor. For two reasons: number one – the Erie County Industrial Development Agency’s own policy says, “We don’t do medical offices.” I sat down with Ciminelli and the tenants that they’re bringing in and, basically, showed that it was a medical office. But, even beyond that, I believe they were going to do this project, regardless, of whether the tax breaks were being provided. And, I didn’t think it was appropriate for the government to be subsidizing that project.
I ended up voting reluctantly “yes” for the Sabres’ Harbor Center project. I have to admit that the Sabres did do a very good job of selling what the long-term development for the community would be as a result of that project moving forward, not only on job creation but also on sales taxes that would be generated for the community as a result of the activities that would be going on in the Harbor Center.
Heaney: You’ve been a “no” vote on the ECIDA board on some of these and you’ve got, including yourself, five votes on that board. And I couldn’t help when I read about the Main Street medical building that you were the only “no” vote, which, really begs the question … A lot of county executives would be asking for resignations of appointees who voted against you on those kinds of projects. What’s going on there?
Poloncarz: Well, I think it’s safe to say that whenever I appointed someone to a board I want them to think freely. I don’t want you to think that you have to do everything I say on every particular vote.
I do believe that in a couple of those votes, including the Conventus building, 10 votes were registered “yes”, which is required to pass it. And a number of individuals who voted “no” previously, knowing that they would probably kill the project, once they realized that the project was going to get the tax breaks, wanted to vote “yes”, probably to look good. And, I don’t mind being the sole “no” vote. But, in the end, if this continues, it’s certainly something that I’m aware of and I …
Heaney: I mean, if you’re trying to drive reform, and your own appointees aren’t on board when it counts, doesn’t that really undermine what you’re trying to do here?
Poloncarz: It doesn’t help.
Heaney: It doesn’t help. OK. Town IDAs – they’ve really been on your list. The governor and state Legislature passed some reforms in the budget that was just approved recently. To what degree do those reforms solve the problem? Is it a half a loaf? Is it better or worse than a half a loaf?
Poloncarz: It doesn’t solve the problem completely, but it certainly goes a long way to fixing it.
There are multi-multi-millionaires who feel they are entitled to do a project without paying one red cent of tax, that they are entitled to the tax breaks.
Heaney: What’s the big improvement? And, two things: Where was there improvement? And, what still needs to get fixed?
Poloncarz: Well, number one, it was improvement because the retail projects that we have seen recently – the Mini Coopers, the Lexus dealers, the Premier Liquor, the pizzerias, the Paula’s Donuts – those would not qualify anymore under the legislation that was passed as part of the state budget, except in very rare circumstances. And I’m fairly confident that a number of the IDAs still want to go forth with those projects and try to do them. But, I think it’s fair to say that, in all likelihood, they will be stopped – if the rules are followed. If they’re not followed, it probably opens up to lawsuits from citizens and others to say that ‘If you’re not following the state’s rules, you can’t do this.’
We should only be doing projects that generate new economic wealth for the community. Retail projects don’t generate new economic wealth because if one pizzeria doesn’t get the benefit, people can still go out and buy pizza from somewhere else. Same thing with a liquor store. Same thing with an auto dealer. What we want are new jobs created in the community as a result of the incentives that are being provided. Towns – and this is part of the dysfunction that we talked about and I’ve talked about -towns were so desperate to do any project, they gave tax breaks away to every project. Now they’re not so desperate to do the projects anymore, but they’re still giving tax breaks away to every project, including, those that should not receive them because no economic new wealth is generated. I believe this piece of legislation is good because it should stop that.
Heaney: Where’s the hole?
Poloncarz: The hole is that you still see projects and communities that, like medical offices, are coming before boards and are being approved. Housing developments, so to speak, we’re not supposed to be doing housing developments but you see town IDAs doing – and offering incentives for – housing projects. Those don’t generate new jobs. OK, they generate some jobs during the construction phase. But, after the construction phase, maybe there’s one service man that gets retained, even if it’s a 300-unit apartment complex.
We’re giving away our tax dollars to do projects that, in all likelihood, would have been done anyway. We should be using incentives as a carrot to try to incentivize a developer to do something they would not otherwise do. We should not be giving it as a cherry on the top of a cake saying, ‘Here’s your incentive, even though you were going to do it anyway.’ That’s wrong.
Heaney: There is an entitlement mentality out there in the development community?
Poloncarz: Oh, there is a tremendous entitlement mentality out there. You hear about entitlements that people complain about for those who receive Medicaid, food stamps, and those types of program – welfare. Well, there are multi-multi-millionaires who feel they are entitled to do a project without paying one red cent of tax, that they are entitled to the tax breaks. And, I think that’s wrong and I’ve told them that it’s wrong. It’s one of the reasons we have a depressed economy anyway, with regards to governments, because they can’t generate enough tax revenue from projects that they should generate and the rest of us have to pay it.
If I take a mortgage out on my house, I have to pay mortgage taxes associated with that. The developer doesn’t.
Heaney: Alright, let me ask you about that. Because, obviously, you and many other elected officials in this community are constantly under the gun about property taxes. To what degree does this region suffer from high property taxes due to these types of deals? Is this a small drain on the public treasury? Is this a medium, a big drain?
Poloncarz: It’s a larger drain than it should be. We should not have to be giving up, in these PILOT agreements, taxes for a 10-year period, or a portion of it for a 10-year period. When you or I pay taxes on our house, we pay it. When a developer starts a project, they often don’t pay taxes for a certain number of years on the property …
Heaney: No, they almost never do. Right?
Poloncarz: They will usually ask for sales tax breaks and they’ll ask for mortgage tax breaks. If I take a mortgage out on my house, I have to pay mortgage taxes associated with that. The developer doesn’t. And what happens when they don’t do that? Then there’s less money for the governments to be providing the services that the public’s demanding, so, what are we asked to do? We’re asked to do more with less or ask the general public to make up the difference, which is unfair.
Heaney: What share of deals that are done locally – by the IDAs, be it county or town, or other economic development agencies – are deals that ought to be getting done? Is it more-than half? Less-than half?
Poloncarz: At least on the Erie County Industrial Development Agency, I’d say 80 percent of the deals should be done anyways.
Heaney: How about the towns?
Poloncarz: The towns? It’s probably drops down to 50 percent. You have to remember that the IDAs do not receive tax revenue. They only generate revenue when they do deals. And, usually, they charge a fee of about one percent of the cost of the deal.
Heaney: That’s a built in conflict of interest, isn’t it?
Poloncarz: Yes, because they’re going to do deals just to pay themselves. And, I find it ironic, like with Amherst IDA – Jim Allen’s the head of Amherst IDA – he gets paid more than any other elected official in, not only Erie County but in all of Western New York, to do deals that, basically, take away tax revenue for the rest of the community. And, it’s just wrong. And they continue to do them because that’s how they generate their salaries.
Heaney: Let’s talk a little bit about your agenda moving forward. It’s more than just IDA reform, obviously. In your State of the County address recently you touched on a couple of things that caught my attention. One is a proposal to start to target subsidies. The other is trying to do something to take advantage economically of our proximity to the lake. Let’s start with the “blue economy.” What is the “blue economy” and how can county government help make that happen?
Poloncarz: The “blue economy” is using our location on Lake Erie to our advantage. We know that many parts of the country right now are water starved. Not just for population use for drinking water, but for businesses that need water for the production of goods. Like, for example, we have a tremendous dairy aspect here, a tremendous food preparations – Stuben Foods – that rely on clean, adequate water supply. We need to protect our water supply and right now Lake Erie’s at risk, especially with regards to algae blooms in the western end of the lake. We need to protect our water supply. We need to ensure that we go around and let other people know that we have a high quality, safe, adequate number of water for the future, for decades, not just for two or three years like some parts of the country are seeing.
We can do that in Erie County by incentivizing businesses to come here through targeted subsidies. Or, for that matter, by ensuring that we’re protecting our water through the Department of Environmental and Planning and its environmental planning and its environmental compliance division to ensure that people are not contaminating our water supplies by putting what would be considered harmful chemicals into the water. And that still happens. People still try to take advantage of it. Yes, New York State has its Department of Environmental Conservation, which goes after those individuals, but we have our environmental compliance division to also ensure that that goes forward.
You could fit a stadium there, but is it the best use of Outer Harbor land? Probably not.
Heaney: The Environment and Planning Department, if memory serves me correct, was not treated kindly by the previous administration. What have you done to rebuild its capacity?
Poloncarz: It was destroyed by the previous administration. We’re in the process now of doing a complete analysis as part of the development of our economic development plan. We’re calling it “Initiatives for a Smart Economy” and I’ll be releasing it in approximately a month. But, what we’re doing is looking at the environmental compliance division and figuring out how we can strengthen it going forward using the resources that we have. So, what we’re doing right now is – we’ve shifted some individuals from the Environmental Planning Division that primarily work on planning, but have an environmental science background, to assist the environmental compliance division for the work it must do. But, unfortunately, we still don’t have enough people as a result of the layoffs that occurred under the Collin’s administration. So we’re going to be presenting a plan very shortly to show how we think that can be strengthened in aspect of everything that we’re doing. Part of my initiatives for “smarter economy” are looking at our smart-growth principles. Are we following proper smart-growth principles as it applies to green fields and brown fields?
Heaney: Are we?
Poloncarz: No, I don’t believe we are. And, I think we can do a better job of that by focusing our governmental efforts to say, ‘We’re not doing a good enough job and we should be doing a better job.’
Heaney: How does this dovetail with Cuomo’s “Billion to Buffalo” initiative, because they’ve got smart-growth. They don’t have a blue water economy. Where is the connection or lack of connection?
Poloncarz: Well, our plan, our “Initiatives for a Smart Economy” are going to look at what the Regional Economic Development Council is doing. We’re there taking a lead. We will help them.
A good example: They’re going to be assisting workforce development. Erie County has been working with Erie Community College to take the lead on workforce development. We’re going to continue to take the lead on workforce development with assistance from the Regional Economic Development Council. The Regional Economic Development Council is taking the lead on “hub” economies, like the Buffalo Niagara Medical Campus and things like that. We will not take the lead on that. But, where appropriate, Erie County will assist in those.
Heaney: So, you’re going to find a few niches?
Poloncarz: Yes. Farmland protection is a good example. There really isn’t a whole lot in the Regional Economic Development Council about farmland protection, even though a good portion of the local economy is based on our farm production, not only in Erie County, but all of Western New York. We are uniquely situated to take advantage of Erie County’s strengths. When I say Erie County, I’m talking about Erie County government’s strengths to assist farmers in going forward with farmland protection issues. It’s one of the reasons why we announced the Farmland Protection Plan. We plan on moving forward to enforce the rules on that so our farmers can thrive in this economy and, hopefully, strengthen themselves. Because, if you go 10 to 15 miles outside of the city of Buffalo, it’s rural. That’s what I love about Erie County – it’s urban, suburban and rural. We have to actively ensure that all of these portions of our economy are being focused on for the future.
Heaney: Alright. Let’s conclude things with the football stadium. George Hasiotis, who’s promoting a multi-purpose facility on the Outer Harbor, was on several weeks ago. He views this as a major economic development project. He said that he’s seen some movement on the part of you, and some others, in terms of, maybe not his particular proposal but, at least, where it’s located. So, I guess my question to you is: Now that that proposal’s been out there a while and you’ve got the lease negotiations behind you, where do you stand on where a stadium should go, and what do you think about the Outer Harbor?
Poloncarz: Mr. Hasiotis, I don’t think, if he was paying attention to what I’ve been saying over the last year, he would realize that we talked about, in the long run, a new stadium will need to be built. The question is where?
The Outer Harbor, we looked internally when we were starting our negotiations with the Bills in case it went to that direction of a new stadium. We realized that, infrastructure-wise, it’s the worst location you possibly could put it because if you’re going to put a stadium that’s going to hold anywhere from 70,000 to 80,000 people in one sitting, you have to have the ability to get people in and out of that location. And, of course, there’s only one entry and exit point going north and south on the waterfront, and that’s Route 5. So, you’d have to, not just build a stadium, but you would have to invest hundreds upon hundreds of millions of dollars on infrastructure, blowing through neighborhoods …
Heaney: So, the Outer Harbor for you is out?
Poloncarz: It’s out. You could fit a stadium there, but is it the best use of Outer Harbor land? Probably not. But, more importantly, can you get the amount of people that you need to go into a football game and out of a football game safely? No, you can’t.
Heaney: Downtown? Where do you think it ought to land? Should it be an urban core location?
Poloncarz: First off, we have a stadium in Orchard Park for the next 10 years. As part of the stadium deal, we’re renovating it. That’s going to take two-and-a-half years. Then the county, the Bills and New York State are going to come together with the new stadium group to analyze where the stadium should be. I have a personal preference. I believe it should be in downtown Buffalo. But saying that is easier than actually plopping a stadium that fits 70,000 people in downtown Buffalo because you have to have the land space to do it. We’re becoming land locked in the immediate downtown core, you can go a little further out, but what you want to do is put a football stadium in a place where it’s also going to generate economic benefit all year round. I certainly don’t want to build a football stadium in downtown Buffalo that’s going to be used eight days out of the year. That’s no good.
Heaney: Let me conclude with one final question. If you were to give economic development efforts in this community a grade, what would it be, overall? Not just with the IDAs, but with what the governor’s doing, what they city is doing, the county, the IDAs. When you put it all together, how would you grade the efforts of government in this area?
Poloncarz: I would say, up until the last two years, it was probably like a D. And, I think, in the last two years we’re probably in the B category, primarily because New York State, through the governor’s office, is investing hundreds of millions of dollars in doing the right things by allowing locals to have a say in how that is going to be spent. That’s completely different from the past when Albany told us how they were going to spend the money, which was, of course, on projects that didn’t generate the benefit that they should have.