Dec 23
2025
Subsidies, nonprofits reduce Buffalo taxes by $20M
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The Delaware North building, recipient of major tax breaks. Photo by J. Dale Shoemaker.
The City of Buffalo last fiscal year missed out on $20 million in revenue due to a variety of property tax exemptions and abatements, according to a recently released audit.
That’s the biggest loss the city has recorded since it began tabulating the figure in 2017, city financial audits show.
For a city facing a current-year deficit that could be as high as $54 million, the uncollected property tax is “obviously a concern,” said Benjamin Swanekamp, who will be Ryan’s deputy mayor overseeing tax and finance matters.
The uncollected funds came from three categories: businesses awarded tax abatements by the Erie County Industrial Development Agency; businesses that qualified for state-level abatement programs like 485-a; and government agencies, nonprofits and churches that aren’t legally required to pay property taxes.
The city’s audit, released last month, breaks the losses into two categories:
- $11.2 million abated due to IDA deals.
- $9.2 million abated or unassessed due to state programs, government buildings, nonprofits and churches.
Among the IDA-backed properties not paying full tax are 250 Delaware — home to Delaware North, the Westin hotel and ICE — the Park 75 apartments on Delaware Avenue, the Northland Workforce Training complex on the East Side and Asbury Hall at Babeville downtown.
John Kaehny, executive director of the watchdog organization Reinvent Albany, said Ryan — a longtime champion of IDA reform who will now have a seat on the Erie County IDA — ought to halt new property tax breaks. Under IDA policy, businesses awarded property tax abatements make smaller “payments in lieu of taxes,” called PILOTs. They typically last up to 10 years, with property owners starting out paying 10 to 20 percent of its tax bill and progressively paying more as time goes on until they’re paying in full.
“The PILOTs are a bad idea for a whole bunch of reasons, not just because they have been shown again and again … to not be consequential in business location decisions, but also because they’re unfair,” Kaehny said. “They create cynicism about the fairness of their property tax system.”
Kaehny noted that while other cities and counties in New York suffer more from property tax breaks than Buffalo does, the abatements are “politically humongous.” Should Ryan seek to reassess real estate values or increase property taxes, he said, longtime homeowners may balk at paying more while wealthy developers and corporations can apply to pay less. Such a system is “totally unfair” to homeowners, he said.
“As part of Buffalo becoming a physically sustainable place, they do need to freeze, and, wherever possible, not renew these PILOT agreements,” Kaehny said.
In an interview with Investigative Post, Swanekamp said there’s probably little that Ryan could do to revoke many of the tax breaks, especially those “as of right” abatements awarded to developers under state programs. Under the 485-a program, for example, a developer who converts an industrial or commercial building to mixed-use that includes residential and meets certain requirements automatically qualifies for a property tax reduction.
IDA benefits come with a provision the agency could revoke them, but that typically only happens if a business has not met its hiring targets or stops making PILOT payments.
Swanekamp did say that Ryan would scrutinize new property tax abatement applications.
“Mayor-elect Ryan is going to have very high standards for ensuring that there is genuine economic benefit to the City of Buffalo from projects he’s voting on,” he said.
In the immediate term, Swanekamp said the Ryan administration is more focused on winning additional funding from Albany as recompense for the many state-owned buildings that pay no property taxes. The state government has a similar arrangement with the City of Albany, he noted, and Buffalo has “the second-highest percentage of non-taxable real estate that is owned by the state.”
One option, he said, is a payment in lieu of taxes. Another is a “curb fee” based on how much of the property’s footprint abuts a city road or sidewalk. Members of the transition team have already met with state leaders about such a proposal, he said.
“If they see us taking proactive action to get costs under control, but also to bring revenue to where it should be,” Swanekamp said, “I think they’d be willing to look at some options like that.”
The nonprofit problem
In a September interview, developer Rocco Termini, a member of Ryan’s transition team, suggested that large, property-owning nonprofits ought to pay a PILOT to the city, save for religious buildings. Such a fee would level the playing field, he said, and cover the cost of city services to the nonprofits, like fire protection.
Swanekamp said the incoming Ryan administration is not yet considering such a PILOT payment program for nonprofit organizations. While Swanekamp noted that the percentage of taxable property in the city has dropped sharply over the years — down to 56 percent — it’s “too soon” to discuss such a proposal, he said.
Other cities have attempted to wrest funding from their large nonprofits with mixed success.
Boston is a success story. Beginning in 2012, the city instituted a PILOT program for its large educational, medical and cultural nonprofits that own property valued above $15 million.
According to a city breakdown of the program, Boston assesses the property, offers the institutions — like Harvard University — a “community benefits credit” and then requests cash payment for the remainder.
In fiscal year 2024, for example, Harvard’s property was assessed at $1.5 billion and the city requested a $14 million PILOT as a result. Boston granted the Ivy League university a $7 million credit and then asked for the rest in cash. Harvard ultimately paid the city $4 million.
Pittsburgh, a city similar to Buffalo, has had much less success.
In 2013, the city sued the University of Pittsburgh Medical Center to strip the multi-billion dollar hospital system of its nonprofit status so it could tax its hospitals and offices.
That effort came partially on the advice of Brad Korinski, who served as longtime solicitor to former Allegheny County Controller Chelsa Wagner. He argued that a 2012 Pennsylvania State Supreme Court ruling affirmed that only “purely public charities” could avoid taxes due to their nonprofit status, thereby opening the door for Pittsburgh to pursue funds from its large hospitals and universities.
The lawsuit ended in 2014, when Mayor Bill Peduto took office. At the time, Peduto said the city would pursue with UPMC “other opportunities to really become a good neighbor.”
“The effort failed in Pittsburgh for lack of political will,” Korinski said. “The effort didn’t fail because of a lack of mechanism or a lack of a legal vehicle.”
Peduto later won commitments from UPMC, Highmark Health, the University of Pittsburgh and Carnegie Mellon University to fund a city-controlled nonprofit organization called OnePGH with $115 million over five years. Peduto’s successor, however, opted to have the city leave that organization and pursue PILOT payments from nonprofits instead. That effort has proven to be only marginally successful, so far yielding $94,000 per year in revenue.
Donate to support our nonprofit newsroomIn Buffalo, the largest colleges are state owned. And Swanekamp said Buffalo’s nonprofit hospitals are less profitable than Pittsburgh’s and are not the prime target for municipal fundraising.
“I’m not sure now is the time to be taking a hard crack at the healthcare systems in our region,” he said.
Should Buffalo pursue revenue from its property-owning nonprofits, Swanekamp indicated the city would take the Peduto approach and try to work “collaboratively” with the entities.
“Without Buffalo succeeding financially, the region cannot succeed financially,” he said. “And so it would be a more positive conversation of trying to be collaborative with those institutions and emphasizing the benefits.”
Other ideas for raising money
Kaehny floated another idea for raising revenue: restructuring the New York Power Authority’s economic development programs into payments to cities.
Currently, NYPA sets aside a portion of the electricity generated by the Niagara Power Project in Lewiston for two economic development programs. In one, electricity is sold to job-creating businesses at below market rates. In another, NYPA sells that power that hasn’t been allocated on the open market and awards cash grants to qualified companies.
Kaehny argued that NYPA should sell all of its power on the open market and send proceeds to the municipalities within the 30-mile radius it uses now for its economic development programs.
“They could generate tens of millions of dollars in cash for Buffalo, and that cash is worth a hell of a lot more to Buffalo than hydropower allocations [are] to a smattering to various businesses,” he said.
Swanekamp called the proposal “an interesting concept.”
