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Clarence IDA defends tax breaks for Paula's Donuts; Economic benefit seen exceeding $8,000 cost

The Clarence Industrial Development Agency is defending tax breaks it approved for Paula's Donuts, contending the economic payoff to the community will outweigh the dollar value of the abatement.

The Clarence IDA earlier this year approved $8,000 in sales tax exemptions related to Paula's opening a location in a Main Street retail plaza in Harris Hill. Paula Huber opened the business in April, between Clarence Pediatric Dentistry and Clarence Eye Care.

Responding to controversy over the tax break, IDA board members Thursday discussed an economic impact study of the Paula's project that was prepared for the agency.

The analysis said Paula's will generate a community benefit of nearly $708,000, including a $342,000 payroll from its 12 full-time and 14 part-time jobs. The study also estimates more than $263,000 in spending by employees on restaurants, stores and service providers.

Paul Leone, a consultant to the IDA, said Paula's is not strictly a retail outlet, since it also bakes doughnuts. "If a bakery came in here [seeking incentives], we would approve it," he said.

Lawrence M. Meckler, an IDA co-counsel, said that while the $8,000 tax break was a one-time abatement, many of the economic benefits generated by the business will recur annually and ripple beyond the town.

The abatement for Paula's has fueled a broader debate in Erie County over which projects should receive tax breaks from IDAs and what role the county's five local IDAs ought to play in economic development.

Local IDAs such as Clarence's contend they are essential for supporting local enterprise, doing the smaller deals that they say the Erie County IDA would bypass. But critics, including County Executive Mark C. Poloncarz and Assemblyman Sean Ryan, D-Buffalo, have faulted IDAs for granting tax breaks for projects they say do not grow the region's economic pie. Amid the debate, the Lancaster IDA last week rejected a request for tax breaks for a Depew pizzeria's planned expansion.

David C. Hartzell Jr., the Clarence IDA's chairman, said a project like Paula's benefits the community by filling vacant space and generating jobs and spending.

"I don't think the scrutiny is bad, though," he said. "I think the IDAs are doing what's right. They should be able to answer. We're a public agency. So let's take a look, let's make it better."

The study of Paula's was prepared for a fee for the Clarence IDA by the Amherst IDA, which has access to modeling software called IMPLAN Pro. The software is widely used to analyze projects' economic impact.

In other business:

*The Clarence IDA approved $196,191 in tax breaks for Rockledge Professional Park. Steven R. Kieffer plans to build a $2.1 million office park, consisting of three buildings that will go up in phases, on four acres at 8175 Sheridan Drive, just east of Transit Road.

The park aims to attract tenants such as small-business startups, professional firms and medical offices. The first of the three "spec" buildings will contain about 5,100 square feet.

A smaller version of Kieffer's project went through the IDA approval process in 2008 but was not built. Kieffer said Thursday that "2009 was an interesting year financially, so we just kind of sat it out." The project also needed more time to resolve some water and sewer service issues, he said. "We're all set on that and ready to go," he added.

*The agency's board is finalizing plans for a part-time economic development officer, whom the IDA would pay $10,000 a year to help businesses expand or move into Clarence. The person would work as an independent contractor, rather than an employee.

Hartzell said he hopes the job description will be firmed up by the IDA's June 21 meeting. "Hopefully by July we have some candidates to talk about," he said.