IDA deals trigger backlash

Reporting, analysis and commentary
by Jim Heaney, editor of Investigative Post

The Erie County Industrial Development Agency has put a moratorium on granting tax breaks to hotels.

The Lancaster IDA is having second thoughts about proposed tax breaks for a pizzeria.

Labor unions are challenging the hiring practices at a Niagara Falls company that received property  in tax breaks in 2010.

After years of “full steam ahead,” local IDAs are starting to have second thoughts about business as usual. That’s not to say they’ve necessarily changed their ways – questionable projects continue to get the green light more often than not – but there’s been an unmistakenable swing in momentum.

“IDAs are definitely on the hot seat,” said Erie County Executive Mark Poloncarz, who has emerged as a major critic since taking office in January.

Critics have long questioned the necessity of six IDAs in Erie County and three more in Niagara County. Watchdog organizations and the state comptroller have issued a string of critical reports on the performance of IDAs statewide. State legislation was introduced several years ago that would reform how they operate.

It didn’t matter. IDAs have gone about their business. But some of the deals they’ve done of late have triggered a backlash.

The Amherst IDA approved nearly $500,000 in tax breaks to help Premier Liquor relocate from Kenmore and $536,000 in incentives to assist Northtown Lexus relocate on Sheridan Drive.

Carl Paladino, a vocal opponent of tax breaks for others, has gained IDA approvals for everything from a dollar store on the city’s West Side to a hotel in Williamsville to, just this week, restoration of a the dilapidated Graystone hotel he owns in downtown into apartments. Those three deals involved $1.4 million in tax savings, even though they created relatively few jobs.

Then there was Amherst Town Supervisor Barry Weinstein’s explanation in February as to why he supported $61,000 in sale tax abatements to help restore a fire-damaged building. Weinstein, an Amherst IDA board member, reasoned that his town would be out only $700 in lost revenue. The balance would come out of the coffers of other local governments and school districts.

The deals have promoted a firestorm of criticism. Even David Robinson, the well-respected, even-handed business writer for The Buffalo News got into the act, penning a strongly worded column last month that concluded too many IDA deals fail to promote real economic growth.

Along with criticism has come the ascent of Poloncarz and Sean Ryan, who succeeded Sam Hoyt last September in the 144th Assembly district.

Poloncarz, never a fan of IDAs when he was county comptroller and now in a position to act as county executive, wasted little time after being sworn in as county executive the first of the year.

  • In January, he voted against tax breaks to convert the former Corn Exchange building on South Elmwood Avenue into offices and apartments.
  • The next month, he pushed the ECIDA to table a package of tax breaks to the Millennium Hotel in Cheektowaga, subsequently relenting a month later after securing the votes to impose a moratorium until the fall on other hotel deals.
  • Earlier this month, he voted against the package of tax breaks for Paladino’s Graystone project.

“We should be doing real job development, not renovations or rebuilds from businesses seeking inducements,” Poloncarz said.

Ryan has introduced legislation that would limit the tax breaks town IDAs can offer. They could still offer property tax abatements for town taxes, but school boards would have to approve abatements for the property taxes dedicated to districts. Likewise, countywide IDAs would have to approve abatements involving county property, sales and mortgages taxes.

Town IDAs have cried foul, saying the bill, if passed, would effectively put them out of business.

Yet another player has been added to the mix, the Occupy Buffalo movement, whose members have started showing up for assorted IDA meetings. Suffice to say, they haven’t been quiet bystanders.

Jim Allen, executive director of the Amherst IDA, maintains county leaders have brought some of the problems on themselves by failing to establish the boundaries of economic development zones within towns.  He said a number of town IDAs have been asking since the days Joel Giambra was county executive.

“They’ve never done it,” he said.

Absent any direction from the county, individual IDAs have drawn the lines on their own zones. Tax breaks offered to businesses in those zones, sometimes restaurants and other retail operations locating in vacant buildings, have been the source of much of the controversy.

Allen noted the growing number of vacant properties in the city and first-rung suburbs and said assistance to redevelopment them can be justified under certain circumstances.

Acceptable, he said, are properties that have a “chronic” vacancy problem.

“We think that makes a lot of sense from an economic development viewpoint,” he said.

Unacceptable, he said, are buildings that sit empty because of “market” vacancies.

Allen suggested that the county and town IDAs reach an agreement on what type of projects would be eligible for assistance. He also suggested a consensus on the boundaries of development zones to deal with problems such as chronic vacancies.

Poloncarz supports Ryan’s legislation and said IDAs need to change their focus.

“We should be doing real job development, not renovations or rebuilds for businesses seeking inducements,” he said.