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Tax credit law change hailed as boost for projects downtown

Two major downtown projects -- the Hotel Lafayette and the former AM&A's building -- may be back on track thanks to proposed changes in New York State's historic tax credit program.

Developer Rocco Termini hailed the changes, finalized during a meeting Tuesday night in Albany, as a vital step in acquiring financing for the Hotel Lafayette and AM&A's projects downtown.

"I'm 90 percent sure this is going to be enough," Termini said of the changes in the law, "but I'm keeping my fingers crossed."

The changes, included in a bill Gov. David A. Paterson will send to the State Legislature today, reopens a state law that developers once hailed as a boon to historic rehabilitation projects but now realize, a year later, is flawed.

The reforms, many of them pushed by Assemblyman Sam Hoyt, D-Buffalo, solve the biggest problem with the law -- its prohibition on selling tax credits to banks and insurance companies.

"It dramatically increases the pool of entities that developers can approach to do deals," Hoyt said Wednesday.

Hoyt said the much-needed amendments will help move forward nine Western New York projects with an estimated investment value of more than $175 million.

He said the reforms also should help with the rehabilitation of the former Statler Towers, which recently was boarded up.

"This will make it a more competitive process," Hoyt said of the problems private developers have had in selling state tax credits.

Two of Paterson's top aides -- Secretary Larry Schwartz and Budget Director Robert Megna -- confirmed the governor's support for reforms to New York's historic rehabilitation tax credit.

Schwartz said the governor agreed to the changes several weeks ago and that a bill with those changes will be sent to the Legislature today.

"The governor understands the importance of economic development, especially in Western New York," Schwartz said Wednesday.

He said Paterson agreed to the changes last month and that Tuesday's meeting was simply an attempt by Hoyt and Termini to add more changes to the
law.

Those changes included a reform giving developers the ability to allocate their state and federal tax credits to different investors, a reform the budget office considers too costly and problematic.

"There were serious concerns about the misuse of tax credits and fraud," Schwartz said of the proposed reform.

Until recently, the biggest obstacle to changes in the tax credit was a budget office convinced that any change would add to an already-ballooning deficit, now estimated at $9.1 billion.

Budget officials know that every dollar of tax credit issued by the state represents a dollar of lost tax revenue.

Paterson backed off his opposition in recent months and, during a visit here in January, said his administration was addressing the concerns of developers across the state.

In their eyes, there is at least one fundamental problem with the state's new tax credit law. It disqualifies banks and insurance companies, two of the largest users of federal tax credits, from taking part in New York's program.

The result is a limited pool of investors, devalued credits and delays in important development projects across the state, critics say.

Developers expect that will change now that Paterson has agreed to support reforms to the program.

"This is the greatest thing New York State has ever done for upstate," said Anthony M. Kissling, head of Kissling Interests, a real estate company with numerous local properties.

Kissling thinks the result will be a "landslide" of investment in historic rehabilitation projects across upstate.

They include Kissling's "Remington Lofts on the Canal," a mixed-use development on the Erie Canal in North Tonawanda.

"We have no offers yet," Kissling said of his efforts to sell tax credits, "but I think this will help a lot. The state did the right thing."

e-mail: pfairbanks@buffnews.com

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