The tenuous future of the state's Empire Development Zone program has turned competitors in the local commercial development community into allies.
Several of the Buffalo area's most powerful commercial developers gathered behind closed doors Friday to plot a strategy to keep the incentive-laden program alive.
"We have a common problem, and everybody recognizes we can't solve it individually. We need a united front," said Rocco Termini, the Buffalo developer who organized the session.
The rare development-industry session focused on Gov. David A. Paterson's proposal to significantly restrict the type and scope of projects eligible for Empire Zone incentives. The revisions would be retroactive, applying new rules to thousands of ongoing projects.
Those around the table appeared to reach a consensus that the proposed changes would stymie most local projects, especially those downtown.
"There was 100 percent agreement that if Empire Zone incentives go away, so will development," Termini said. "The program's intent is to drive development and jobs to blighted areas -- and that will come to an immediate halt."
Termini said the governor's call for $20 million investment thresholds and steeper job-generation counts will force him to shelve his $11 million conversion of the former AM&A's downtown warehouse to housing.
Ronald Alsheimer, of Buffalo's Plaza Group, said he would have to consider whether to continue to own several properties he has acquired in recent years.
"Empire Zones made it possible for us to invest about $4.5 million in properties that otherwise wouldn't have made economic sense," Alsheimer said.
He cited the $2 million overhaul of the Pierce Building at 685 Main St., in the city's Theater District, a ramshackle structure that Plaza Group converted to four luxury apartments and five storefronts.
"Empire Zone benefits allow me to keep rents about 25 [percent] to 30 percent below where they'd otherwise be and helps attract residents and businesses to downtown," Alsheimer said.
He likened the program's proposed clawbacks to an old "Peanuts" cartoon strip.
"Charlie Brown is trying to kick the football, and Lucy keeps pulling it farther and farther back," Alsheimer explained. "That's how we feel. The state is putting our projects out of reach."
Howard A. Zemsky, a partner with CityView Properties, also decried any retroactive revisions.
"The notion of inducing someone's investment in a project with Empire Zone benefits, then pulling them away retroactively is surely . . . illegal, immoral or, at a minimum, unreasonable," he said. "It also creates a toxic business environment for development going forward."
Carl J. Montante Jr., vice president of Uniland Development Co., described the timing of the Empire Zone overhaul as bothering.
"We appreciate that the governor is trying to find ways to save money and don't disagree that the program needs reform," said Montante, whose company is involved in large-scale urban and suburban projects. "But it doesn't make sense to jam Empire Zone reform into the state budget process."
The Uniland executive also took issue with Paterson's push to eliminate development zones in non-urban areas. He noted decisions by GEICO insurance and Citibank to locate major facilities in Uniland's CrossPoint Business Park in Amherst.
"Right there, you've got 3,000 jobs we probably wouldn't have if the incentives weren't there to offset the high cost of doing business in New York," Montante said.
A Buffalo News investigation in 2003 found numerous problems in the program, particularly in Buffalo, where it is used primarily to provide tax breaks to downtown business interests rather than promote employment and investment in blighted areas, as the law intends. The News found that the program failed to attract many businesses or generate many new jobs and created mostly low-wage positions when it did.
Several reports by the state comptroller over the past decade have reached similar conclusions. In December, a report by the Citizens Budget Commission of New York called for an elimination of the program, quoting one former high-ranking state economic development official as saying Empire Zones were a "gross failure." Under the program, some companies are able to operate tax-free for up to 10 years.
Paterson, faced with projected budget deficits of $14.6 billion for the current and coming fiscal years, has proposed reducing the program's drain on state finances to $600 million from $1.2 billion a year. He also calls for eliminating participating companies that fail to generate at least $20 in investment and payroll spending for every $1 in tax breaks.
Friday's closed-door session drew executives from several of the area's other leading development companies, including Benderson Development Co., Ciminelli Development, First Amherst Development Group and Ellicott Development Co.
Several Democratic members of the Western New York legislative delegation also took part in the discussion, including Assemblymen Sam Hoyt of Buffalo, Dennis H. Gabryszak of Cheektowaga and Robin Schimminger of Kenmore and Assemblywoman Crystal D. Peoples of Buffalo.
State Sens. Antoine M. Thompson of Buffalo and William T. Stachowski of Lake View also participated, along with representatives of city and county development agencies. Thompson said he agrees that retroactive modifications would be unfair to current program participants.
"I say no pull-backs. That's not constructive reform," Thompson said.
Thompson, a member of the State Senate's Finance, Economic Development and Small Business Committee, said enhanced local administration would be a big improvement.
"If you want better accountability, there should be greater local policing and monitoring," he said.