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One of the few things the Democratic White House and Republican Congress agree on is the need to commit federal dollars and ingenuity to bring cities like Buffalo and Niagara Falls into the current economic boom.

Just before the Christmas recess, President Clinton and House Speaker Dennis Hastert jointly promised to pass laws next year, called New Markets Initiatives, that would encourage private investment in stalled urban and rural communities like Buffalo and Albion.

Mayor Anthony M. Masiello calls one part of this program, advanced by Rep. John J. LaFalce, D-Town of Tonawanda, "a natural fit with Buffalo's Byte Belt initiative."

Masiello's program seeks to exploit the city's state-of-the-art fiber optics telecommunications network and the availability of plenty of first-class commercial office space by bringing information technology and support jobs to downtown Buffalo.

LaFalce's bill, which has been endorsed by Clinton, would create upward of $540 million next year in low interest loans for just this type of development. Backing up the loans would be $6 billion in tax credits over five years.

Scott Olsen, a LaFalce aide, said the types of facilities that might qualify include retail centers, factories or even an industrial park.

The Clinton administration said the program can in the next five years generate more than $4 billion in investments.

There is a hitch. This proposed federal program is totally different from any urban renewal effort advanced by Washington. There is no share of federal largess that a city like Buffalo is guaranteed to receive, like an entitlement, as was the case in all prior renewal laws.

Buffalo and other cities that list 20 percent of their populations as below the poverty line can participate in this loan and tax credit program. There is, however, no assurance that Buffalo would ever see a dime of it.

In all earlier programs, Washington and City Hall made the decisions on who got money.

"This is not a government-based program," Olsen said. "It is business-based."

New Markets is not an outlay like community development block grants that helped finance Olympic Towers in downtown Buffalo. It is not a subsidy for private investment like the urban development action grant that helped pay for the Hyatt Regency Buffalo.

Under the New Market Initiatives, all these funding decisions would be made by new private investment combines, called American Private Investment Companies.

These would be licensed and monitored by the Department of Housing and Urban Development, but not run by HUD.

"Getting its own APIC is the best way for Buffalo to ensure that it participates in this program," said Xavier Briggs, a HUD official. "It is not too early for a city like Buffalo to be working on creating its own APIC."

AIt will be a private corporation. It will screen projects in which to invest. Those which offer the most likelihood of returning a profit to it, and to its own investors, will get the low interest, government-guaranteed loans and the tax credits.

If the deal looks dicey, it will turn to opportunities in other communities. It will have no obligation to invest in the place where it has its headquarters.

"Their money will not be business loans but actual equity investments," said Buz Roberts, vice president of Local Initiatives Support Corp., a 21-year-old spinoff of the Ford Foundation. "Buffalo will have to have good investment opportunities in order to participate."

The attraction to investors is that the low interest loans, the federal loan guarantees and the tax credit offer a greater probability of turning a profit, Roberts said.

Investors can include corporations, banks, insurance companies, pension funds, state and local governments, foundations and others. The key to the success, he said, is a return on the investments. "The investment community will be watching to see if we maintain a successful track record," he said.

Roberts' organization, which has its headquarters in New York City, two years ago opened an office in Buffalo, headed by Michael Clarke, former executive director of the Buffalo Municipal Housing Authority.

A self-styled "community development intermediary" that operates outside the political patronage system in putting renewal deals together, the Buffalo local initiatives corporation has already helped refurbish Riverside Park and will invest $3 million in a seniors project.

Roberts believes that the Buffalo corporation is well-suited to create and lead a local investment corporation.

Before that happens, Congress must finish its work on New Markets. The process by which Congress created the Initiative is backward.

In its haste to adjourn and make the Clinton-Hastert handshake valid, Congress passed an appropriation for the program before it approved the authorizing law, which describes exactly how the New Markets Initiatives programs will work. That compromise will have to be passed in 2000.

"We're going to work something out," predicted Rep. Thomas Reynolds, R-Clarence, a member of the powerful House Rules Committee.

"The caution I would offer," Reynolds said, "is that government operating out of Washington cannot create growth and private job opportunities. It's going to be up to Buffalo and other localities to grow back the wealth that we lost in the last part of this century."

A good example of this in Buffalo, he said, is the way the city is using modest federal grants to improve the Inner Harbor area. Reynolds declined to pass judgment on the worth of the proposed new convention center, then added "I'm not for having the federal government pay for it."

Republicans have not objected to the specifics of the LaFalce and Clinton programs. But they haven't endorsed all the details, either.

Reynolds said the differences are matters of emphasis.

Reynolds said the GOP wants to expand the enterprise zone idea advanced 20 years ago by then Rep. Jack F. Kemp, R-Hamburg. Congress created 105 Empowerment Zones six years ago, granting modest grants and tax breaks.

Reynolds said Rep. J.C. Watts, R-Okla., would provide full capital gains tax relief for businesses that operate in zones for five years or more. The bill, cosponsored by Democrats in the House and Senate, would provide brownfields relief, wage credits and tax allowances for plant and equipment bought for facilities operating in Empowerment Zones.

Government guaranteed loans would be available to APICs on the basis of $2 of debt for every $1 of private investment. APICs must raise at least $25 million in private investments and would each carry between nine and 12 deals ranging in value between $5 million to $50 million each. The tax credit would be up to 6 percent per year.

LaFalce said the APIC concept is based on two successful government-backed business programs, the Overseas Private Investment Corp., and the Small Business Investment Companies.

The appropriations act provided $20 million in APIC credit subsidies, which is really a provision for losses, on $540 million in guaranteed debt in fiscal 2000, which ends Sept. 30.

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