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Amherst looks at merging of IDAs Lucrative tax breaks for developers being examined

For years, Amherst officials have steadfastly resisted attempts to drop the town's often-aggressive economic development efforts.

But that resolve may be weakening, after Monday night's vote by the Town Board directing the town's attorney to explore a merger between the Amherst Industrial Development Agency and the Erie County IDA.
ir,4.1i,6p5 "It basically says they feel that economic development in the Town of Amherst would be better served through the ECIDA," said James J. Allen, the Amherst IDA's executive director. "Given the political climate, I'm not shocked."

Amherst's vote, while just a preliminary step, is the latest move in an intensifying debate that is putting the Buffalo Niagara region's economic development policies under growing scrutiny. It also reflects the change in the Town Board's political makeup, following the defeat of former Supervisor Susan J. Grelick and Councilwoman Jane Woodward, who backed the town's aggressive development approach.

At the heart of the issue: Are the lucrative tax breaks accomplishing their goal of encouraging businesses to invest in -- and expand -- their operations here? Or are they costly handouts, financed by already-strapped taxpayers, that too often only help local companies hop from one community to another?

County Executive Joel A. Giambra, who has renewed his push to merge the county's six IDAs into a single entity, has criticized the agencies for granting tax breaks for the construction of buildings that do not have tenants lined up. He claims the new construction creates unneeded space with taxpayer-subsidized rents that rarely brings in new businesses to the region and creates far too few jobs.

"I'm very encouraged," Giambra said Tuesday. Amherst lawmakers are "starting to recognize that the way we've been doing development in this community does not work," he said.

In a 5-2 vote Monday night, the board directed Town Attorney E. Thomas Jones to study the legal issues involved in such a merger and to report back as soon as possible.

"It may not be within the town's purview to do this," Jones said, adding that state officials and others may need to take action for a merger to occur.

"I think it's something we have to look at," said Amherst Council Member Shelly C. Schratz a co-sponsor of the merger measure. "We are the only county in the state that has more than one IDA."

The resolution, drafted by Amherst Council Member Daniel J. Ward, a frequent critic of both town and county development agencies, likened the network of local development agencies to a "boondoggle," and criticized local IDAs for competing needlessly with each other.

In the past, Ward's motion would have been easily defeated by supporters of the town's IDA led by Grelick and Woodward. But both lost their re-election bids in November, and their replacements -- Supervisor Satish B. Mohan and Council Member Deborah Bucki -- provided the necessary votes for Monday's action.

>Shrinking work forces

"There's a little bit of push back to tighten the ability of communities to give incentives to companies," said Charles Webb, the Erie County IDA's executive director.

From 2002 to 2004, the Erie County IDA provided incentives to 65 projects that had a total investment of more than $1 billion in the region. Those incentives saved those companies nearly $3.3 million a year in county and local property taxes, while bringing in more than $800,000 in additional revenue through payment-in-lieu-of-taxes (PILOT) agreements, according to statistics from the Erie County IDA.

The projects were projected to create slightly more than 2,000 jobs, but had actually reduced employment by 363 positions after two years, mainly due to shrinking work forces at General Motors Corp., American Brass and Moog Inc.

Those PILOT payments, which run for 10 to 15 years, are the lowest in the first years of the agreement and increase steadily in later years. Companies receiving those tax breaks typically pay about 73 percent of the full taxes on those projects.

In Amherst, the IDA aided 68 projects valued at $585 million from 2000 to 2004, according to data the agency released Tuesday. Those projects retained 6,251 jobs and created 5,004 positions. The projects received $23.2 million in tax breaks and generated $27.1 million in PILOT payments.

>Return on investment

Randall Clark, an Amherst IDA board member and the chairman of the Buffalo Niagara Enterprise economic development marketing group, said the region has made progress in recent years simplifying its system to recruit and support business and making it respond faster.

"That's what confounds me. We've finally got this machine to work and now we want to dismantle it," he said.

Clark said incentives are an essential tool to compete for projects at a time when companies are more mobile than ever and given the difficulties of convincing people from other parts of the country to consider the Buffalo Niagara region as a potential site.

"It isn't a giveaway, and without those incentives, you're not going to have businesses here," he said. "If you dismantle this process, then you don't need a marketing organization like the Enterprise if when they get there there's no deliverable (incentives)."

Auditors from the state Comptroller's office, which have been reviewing the operations of the Amherst and Erie County IDAs, are expected to criticize the Amherst IDA's use of $30 million in incentives for an HSBC Bank data center that created 25 new jobs, Allen said.

But that overlooks that HSBC Bank could have built the center in New Jersey, which would have jeopardized 1,100 jobs at the bank's information technology division in downtown Buffalo, Allen said.

"There is no question that, without that kind of support, that bank would not be here," said Clark, who also sits on HSBC's regional board of directors.

>Project will add jobs

Amherst IDA officials also noted that the $18.5 million global payments data center that Citicorp plans to build in theCrossPoint Business Park was selected after the bank looked at 30 sites, including just two others in Amherst. That project, even with tax breaks totaling $4.8 million, will lead to nearly $3.5 million in additional tax revenue over the next 15 years, compared with what the vacant parcel currently generates. The project is expected to add 100 jobs to the company's 430-person work force in Amherst.

"Who can tell me that is not a smart investment?" said Edward F. Stachura, the Amherst IDA's chairman. "At first blush, everybody thinks we're giving something away. We're investing in the future . . . Our return on investment is very, very good."

Schratz, however, believes merging the county's IDAs deserves a close look. "I'm never going to say we can't do it until we've explored all the options," she said. "From a regional standpoint, there are a lot of expenses in having all of them."

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