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Judge rules against Amherst IDA on Lord Amherst tax breaks

The Amherst Industrial Development Agency is appealing a state judge’s ruling that it should have given Iskalo Development an extra $1.1 million in tax breaks for its revamped Lord Amherst project.

The decision by State Supreme Court Justice John Michalski represents at least a temporary setback to the Amherst IDA, and to those on the agency’s board and in the community who say it gives away too much to developers.

It’s also potentially a shot across the bow to critics in general of IDAs and economic development incentives – including Erie County Executive Mark Poloncarz, Amherst Town Supervisor Barry Weinstein and Assemblyman Sean Ryan, D-Buffalo, as well as taxpayer and labor advocates – who want to slow the frequency and size of such tax break.

The critics complain that the agencies exist more to help developers, and fail to consider community concerns or opposition to projects. But developers and other supporters say the agencies have finite constraints that they must abide by within state law, and must be consistent in approving applications that comply with the rules.

The Amherst IDA approved a $1.07 million package of tax breaks in December 2012 for Iskalo’s original $9.9 million plan to renovate the Lord Amherst into a mid-range hotel and restaurant. That’s the second phase of a larger hospitality campus that includes the new Hyatt Place Hotel behind it.

But after workers began asbestos abatement and demolition on Lord Amherst, they discovered “rampant mold infestation” that required replacing all the interior walls, according to court documents. That forced Iskalo to abandon the mid-range project in favor of a 92-room upscale boutique hotel and restaurant, and pushed the price up to $19.9 million. So Iskalo returned to the IDA in March to seek $1.1 million in additional breaks.

In between the two rounds of tax breaks, state lawmakers had modified the code to bar financing for “retail projects” unless the applicant proves it qualifies as a “tourist destination.”

Iskalo argued that the hotel qualified as a tourism destination and was located in an enhancement zone that the town has targeted for redevelopment. The developer cited data that three-fourths of the Hyatt guests were from outside the state, submitted a detailed endorsement from former Amherst IDA Executive Director James Allen, and provided records that other IDAs have found hotels to be tourism destinations. Agency staff supported the application but the board rejected the claim in a 4-3 vote.

Iskalo executives argued the IDA “acted arbitrarily and capriciously.” Michalski agreed, citing no evidence or explanation to support the IDA vote.

Iskalo also charged that one IDA director – Michelle Marconi – should have recused herself because of her vocal criticism of Iskalo and opposition to the Hyatt and Lord Amherst projects – adjacent to her neighborhood.

The IDA said it would appeal the decision in the Appellate Division of state Supreme Court, although it may not be heard for a few months. Carlton N. Brock, Jr., the IDA’s chairman, said the agency was “surprised by the court’s decision,” but he believes the agency’s action was “an appropriate and proper exercise of the board’s discretion.”

The appeal will delay Iskalo. “The legal costs and time involved are unfortunate expenses that have only made a difficult project that much more challenging,” said Executive Vice President David Chiazza.

email: jepstein@buffnews.com

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