Feb 9
2023
Niagara IDA ups its subsidies for fast food eateries
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The Niagara County Industrial Development Agency on Wednesday doubled down on two projects its leaders claim will convince tourists to spend their vacation dollars in Niagara Falls rather than across the border.
Those projects? Two fast food restaurants, a Moe’s Southwest Grill and an A&W.
The IDA had previously signaled it would offer tax subsidies to those projects — a total of $172,000 in property and sales tax breaks — and made those offers official at its monthly meeting Wednesday morning. That alone drew the ire of local politicians, namely state Sen. Sean Ryan, who’s pledged to reform IDAs across the state.
But IDA leaders decided the tax breaks weren’t enough. So, on top of the tax breaks, the IDA leaders on Wednesday approved two grants — worth a total of $261,750 — for the Moe’s and A&W. Coupled with the tax breaks, the IDA’s assistance comes to $433,000. That works out to $14,448 per job (30 full time equivalent positions). The restaurants will receive the grant money following construction, after the developer submits receipts to the IDA.
For the Moe’s, the grant and tax breaks equate to the IDA paying for 21 percent of the construction costs. For the A&W, the IDA’s assistance equates to paying for 27 percent of costs.
Ryan, a Buffalo-area Democrat and chairman of the Senate’s economic development committee, has called the tax subsidies “wrong” and “wasteful,” adding Wednesday that the additional grant money is “disappointing.”
But Mark Onesi, the IDA chairman, argued that the tax breaks and grants were necessary because fast food restaurants would otherwise never open in downtown Niagara Falls. The downtown area does include at least a dozen restaurants, however.
“(Businesses) are not coming here. It is a depressed area. We need jobs,” Onesi said. “I don’t think you understand that concept, that you give a little to get a little.”
“We need stuff like that to keep the tourists on our side of the bridge,” he added. “I’m tired of them going to Canada.”
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The tax subsidies and grants come despite the developer, Muhammed Shoaib, saying he didn’t need the assistance.
“This is a little help, but we are able to do it without it as well,” Shoaib told Investigative Post last month after the IDA granted preliminary approval to the subsidies for his two restaurants.
That admission would normally disqualify the projects from receiving subsidies. Under state law, IDA subsidies must pass the “but for” test, meaning a particular project is only viable “but for” the assistance.
But Onesi argued Wednesday that Shoaib comments to Investigative Post were a “miscommunication” and that his project was “misstated.” An Investigative Post reporter recorded the interview with Shoaib, and published his comments verbatim.
Listen to the developer tell Investigative Post he doesn’t need a subsidy.
“He just stated right here that it was a miscommunication and he does need the money,” Onesi said. “Why are you bothering with these small things when the Buffalo Bills are getting 850 million dollars?”
Investigative Post has published extensive reporting on the planned Bills stadium, and the public’s $850 million contribution.
Shoaib, on Wednesday, declined to comment for this story.
Politicians, business leaders take sides
Ahead of Wednesday’s meeting, the proposed subsidies and grants for the Moe’s and A&W sparked controversy.
Following Investigative Post’s initial reporting on proposed subsidies, Ryan — along with state Assemblyman Jonathan Rivera and Niagara Falls City Council Member Donta Myles — spoke against the IDA, arguing that subsidizing fast food restaurants wouldn’t create the jobs or investment needed to alleviate poverty and unemployment.
“We know you can’t support a family by working at an A&W root beer and that’s the reason why retail isn’t eligible for this type of funding,” Ryan said at a press conference Jan. 27 in Niagara Falls. “They don’t provide family-sustaining jobs.”
“It doesn’t take an expert to look at this as bad, wasteful spending, bad economic development,” he added.
Niagara Falls business leaders, in turn, wrote letters and emails to the IDA to voice their support for the project, with one saying Ryan “has no clue about Niagara County.” Leaders from the Niagara USA Chamber, Destination Niagara USA, the Aquarium of Niagara, as well as several hotel owners wrote or spoke at a public hearing Jan. 30 in favor of the subsidies.
In addition to criticizing Ryan, several agreed with the IDA that downtown Niagara Falls is in need of more restaurants and that tax subsidies and grants are the way to get them.
“People want to stay here longer, but we don’t give them enough reason to do that,” said Frank Strangio, whose family owns several Niagara Falls hotels. “So, in my opinion, incentives like this are tailor made for this type of project. This is exactly what we’re looking for.”
Listen to an exchange between the IDA chairman and Investigative Post.
At least four of the business leaders who voiced support, including Strangio, Destination Niagara USA and the Aquarium of Niagara have received grants or subsidies from the IDA in the past, agency records show.
Reforms coming?
Ryan, the newly appointed chairman of the Senate’s Committee on Commerce, Economic Development, and Small Business, has pledged to push forward legislation to reform IDAs, partially in response to projects like the Moe’s and A&W.
One bill would take away IDAs’ ability to grant tax breaks that take away revenue from local school districts.
A study released Wednesday by the nonprofit research and advocacy group Good Jobs First showed that New York public schools lost an estimated $1.8 billion from tax subsidies in 2021 alone.
The Niagara-Wheatfield School District lost $3 million in 2021, according to the report, meaning it had $847 less to spend per student.
A second bill would require IDAs to get a third-party assessment before issuing tax breaks for tourism-related projects. The assessment, Ryan said, would verify that tourists would actually visit an area because of the subsidized project.
“Guess what, no third-party verifier is going to say an A&W root beer is a regional and tourist destination,” he said.
Ryan has expressed optimism that both bills could pass later this year, marking the most significant reform to IDAs in a decade.
“We’ve seen plenty of evidence that IDAs like the one in Niagara County aren’t going to stop making bad deals with taxpayer money until we pass laws to stop them, and I’m working hard in Albany to do that,” Ryan said in a statement Wednesday. “It’s a shame that Niagara County taxpayers are going to foot the bill for two restaurants that would have been built even without subsidies.”
Onesi shrugged off Ryan’s criticism as “fanfare” and all but dared him to reform IDAs.
“He seems to not like this area. That’s my take,” Onesi said. “Why is he focusing on us when he’s from down there, why us? There’s a statute … it’s on the books. If he wants it changed, change it.”
