An Amherst development company that used tax breaks to lure a business from downtown Buffalo has been ordered to pay more than $106,000 in retroactive taxes and interest in a long-festering "anti-pirating" legal fight.
But the company and the city have each vowed to appeal, for opposite reasons.
The order signed this month by State Supreme Court Justice Joseph R. Glownia is the latest twist in a three-year-old court battle that pits Amherst developers against several downtown landlords and the City of Buffalo.
The suit was filed after BDO Seidman in 1996 moved its accounting offices from space in the Statler Towers on Delaware Avenue to an Amherst office park owned by Uniland Development Co. The plaintiffs accused Uniland and the Amherst Industrial Development Agency of ignoring the state's anti-pirating laws when they allowed the firm to move to 300 Corporate Parkway.
In 1998, a state appellate court ruled that the Amherst IDA violated the law when it approved a sublease for BDO Seidman in the agency-assisted complex. The law prohibits IDAs from giving incentives to help relocate businesses unless failure to do so would mean loss of jobs or the company leaving the state.
The appellate ruling reversed an earlier court decision that had sided with Uniland, the Amherst IDA and BDO Seidman. The decision resulted in a formula being devised to calculate how much taxes are owed based on the amount of space that the accounting firm occupies. BDO Seidman leases about 4.5 percent of the rentable floor space in the 132,500-square-foot complex. Based on the formula, the court has determined that about $81,000 in retroactive taxes are owed, plus interest that is likely to exceed $25,000.
But James L. Magavern, the attorney for city interests, said plaintiffs are appealing because they don't think Uniland should have qualified for any tax breaks for the project, based on state laws governing IDA activity. At stake could be more than $2 million in property and sales tax breaks that were awarded to Uniland over a 10-year period.
Magavern said he thinks the legal fight has focused attention on the problem of how inter-regional competition can erode communities' tax bases. "We would like to think that this will cause IDAs everywhere to be more careful about what they're doing," Magavern said.
On the other hand, Uniland President Carl J. Montante argued that the plaintiffs' interpretation of the law would hinder efforts to retain businesses in Western New York. Montante said local companies should not be deterred from moving into another municipality to accommodate expansions.
"Retention is very important to Western New York," Montante said. "Why shouldn't a company be able to make that move and receive those benefits?"
William M. Murray, the Amherst IDA's attorney, confirmed that the agency and Uniland are appealing, but he declined to comment on the ongoing litigation. In June, the agency board voted to require Uniland to pay an additional $26,000 in property taxes for abatements that were granted over the past three years. The board was awaiting the court judgment to determine how much Uniland would have to repay for sales tax abatements and mortgage recording tax exemptions.
Montante characterized plaintiffs' push to have an appellate court nullify all tax breaks to the building at 300 Corporate Parkway as "a real stretch."
"Many downtown landlords fail to realize that you have to spend money on these buildings to make them attractive. Many downtown buildings are obsolete," Montante said.
David Sweet, a plaintiff and owner of downtown's Main-Seneca building, noted that there are a few legal challenges pending in the courts that deal with claims that Amherst is improperly using tax incentives to lure local businesses into the town.
"This case finally shows that there can be financial consequences if a developer leases space to a Buffalo company in a facility that received IDA assistance," said Sweet. "It's the first solid result in our long legal fight."