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Action by the County Legislature that could stymie development of a proposed mega-mall in downtown Niagara Falls may be the final push for the city to withdraw from the county sales tax distribution, Mayor Michael C. O'Laughlin said.

The Legislature last week adopted a resolution by Legislator H. William Feder, R-Niagara Falls, making the county's role in tax distribution "contingent upon assurances that no church property will be taken without the consent of the membership of the churches involved and without first having conscientiously and thoroughly analyzed the consequence of such action."

Two churches, St. Sarkis Armenian Church and St. Hagop's Armenian Apostolic Church and Community Center, are in the 300 block of Ninth Street -- the exact area that developers have have selected for the main entrance to a proposed $115 million factory outlet mall.

The mayor said the matter of churches urgently needs to be resolved.

Pre-empting, or withdrawing from the county system and collecting revenues only from city sales tax -- rather than a portion of county tax -- would be risky.

Exact figures are not available, but O'Laughlin estimates that the city would lose $1.5 million to $2 million the first year. Under the county formula, the city received about $10 million in sales tax revenues in 1989, and O'Laughlin said collections are running slightly higher in 1990.

But he predicts the loss would be only short-term. In the long run, he said, "The city would more than recoup -- if the mall were built.

"If the mall were not built, how do you reverse pre-emption? That's the high risk of it."

He called Feder's resolution "untimely." The city has been negotiating with the county, trying to convince it to commit a portion of the projected sales tax revenues from the mall to help the city fund about $31 million needed to buy about 327 properties, move residents and businesses, demolish structures and prepare the proposed 100-acre mall site for construction.

"He knew we were negotiating. It definitely interfered with negotiations. . . . When you take a unilateral position, that closes that item out of negotiations," O'Laughlin said.

He said the city will continue negotiating with members of the two Armenian congregations and with Benderson Niagara Associates, the developer of the proposed 1.4 million-square-foot mall.

But he said, passage of Feder's resolution "closed negotiations with the county."

The congregations oppose the city's plan to acquire the churches, which they say have significant sentimental, emotional, historical and religious value to the Armenian community.

O'Laughlin said the city has offered the churches several options, such as relocating to former churches of other denominations, moving to other locations and building new churches in other areas -- all at the city's expense.

Members say they are willing to co-exist with the mall and have suggested it be redesigned and its main entrance relocated.

O'Laughlin said that is easier said than done.

"One of the problems is that the mall runs from Ninth Street to 13th Street, so it's a big mall; therefore, it's hard to move," he said. "But the chief problem is the churches are right in the middle of the entrance."

O'Laughlin said relocating the entrance has been considered, but all other possible locations have obstructions or prohibitive drawbacks.

O'Laughlin said the only logical choice for the main entrance is Quay Street, which is wide enough and close to the Rainbow Bridge and Robert Moses Parkway exits. The city also expects the state to extend Quay Street from Niagara Street to Walnut Avenue.

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