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Sweet development deal IDA tax breaks for new hotel projects rightly concern Niagara Falls officials

Apparently, owning a hotel in Niagara Falls means never having to pay property tax. That's the impression one could get from a recent decision by the Niagara County Industrial Development Agency to allow a Canadian developer, Merani Hospitality, an enviable and long-term holiday from paying property taxes -- five years on a Niagara Falls hotel, the former Fallside Hotel at 401 Buffalo Ave., so that it can buy and rebuild the closed facility.

The break reportedly is tied to another project by the same hotelier to purchase and reopen the former Inn on the River at 7001 Buffalo Ave. Both hotels would receive sales, mortgage and property tax breaks for between 15 and 20 years under the payment-in-lieu-of-taxes deal; only the Fallside property would be fully tax-free for the first five years.

That's a nice deal if you can get it, and apparently Merani can -- despite the cautionary signals sent by the city's top economic development official, Peter Kay, who had the audacity to request that the IDA cooperate with the city in order to determine whether tax breaks are necessary for the project.

Questions naturally arise when an agency that should be protective of public money refuses to provide answers, or even to retrieve the necessary documentation that would support its decision.

IDA members reportedly have said that one reason for providing a full tax break for the Fallside hotel property is that it will have to compete with the Seneca Niagara Casino & Hotel. That hotel doesn't pay property taxes, but pays a portion of its slot machine revenue to the state.

And IDA Chairman Henry M. Sloma points out that these are two abandoned properties, sitting and decaying with no one paying taxes on them -- a good reason for the IDA to work with a developer who may be interested in resurrecting the facilities. These structures are located generally in downtown Niagara Falls, which obviously is hungry for development.

But consider that last year the casino paid to the city, school and various local entities about $18 million under the state-Seneca compact. That's far more than what the casino would have paid had the city simply taxed the hotel. Further, the casino is a four-star hotel attempting five-star status; this developer is proposing another three-star hotel amidst a galaxy of three-star hotels.

There are indeed reasons for IDA involvement. The project could result in millions of dollars of private investment used to restore two broken-down facilities -- putting them back on the tax rolls, employing people and creating vibrant businesses in an area that needs them. At least in the initial stages of development, that's worth committing incentives, and the deal includes benchmarks so that the aid correlates with the investment.

Further, the IDA process does not require the agency to figure out whether a developer needs the incentive, but rather to track down people willing to invest within the community. For example, the Yahoo! deal -- in which the company wasn't exactly a hardship case -- still merited incentives and low-cost power. That flaw lies with the state legislation creating IDAs, not with the "IDA itself.

Merani Hospitality has a good reputation, has been cooperative with the city and should not be faulted for asking for incentives. But the county IDA should also be cooperative with the city that will host these businesses and rightly is concerned that too much is being asked of it in terms of forfeited future tax revenue.

Careful analysis normally answers such questions as whether more help than actually needed is being given, and whether the end result would simply be more of an existing class of hotel with an unfair economic tax advantage that could put other such hotels out of business.

The IDA should do such studies, and share them proactively with the city. The abatement level in this case is enough to give any economic development official pause.

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