The state put a ban on handing out tax breaks to retail projects this spring, yet that didn’t stop a new Dick’s Sporting Goods store in Batavia from landing $1.8 million in incentives.
The Clarence Industrial Development Agency this summer had lengthy discussions about providing tax breaks for a project to build a new dog kennel in the town. The kennel’s backer, James Dorigo, argued that his project merited taxpayer help because it filled a unique void in Clarence – one of the loopholes in the retail ban – since there’s a severe shortage of dog boarding facilities in the town that forces dog owners to make reservations months in advance. Erie County Executive Mark Poloncarz disagreed, writing to the IDA board that there already were 37 kennels in or near Clarence.
Ultimately, the IDA said no to the tax breaks, but the fact that it was discussed at all shows that the new state law has not slammed the door closed on all but the most unique retail projects. Far from it. Some IDAs are continuing to test the boundaries of the new restrictions.
In fact, getting a group of IDAs to agree on a common policy is anything but easy, and that creates the unfortunate situation where communities with their own, more aggressive IDAs are backing projects that couldn’t be done in municipalities that are served by the more conservative Erie County IDA.
The rift would get even wider under a proposal in the state Legislature – the supervisors in Concord, Hamburg and Lancaster, along with the chairman of the IDA in Amherst – that would allow communities without their own IDAs to establish ties with the IDA of their choice.
It’s already hard enough to get the six IDAs in Erie County on the same page.
The Erie County Industrial Development Agency in May adopted a new policy requiring contractors on taxpayer-backed projects to hire at least nine of every 10 construction workers from within the eight counties of Western New York. The hope was that suburban IDAs would follow suit and adopt the plan, too. They largely haven’t, preferring to stick with their own labor policies.
And then there’s the issue that for years has created a gulf between the Erie County IDA and its suburban counterparts: What to do about tax breaks for buildings that have been vacant for years, especially if they might end up being used as stores, doctor’s offices or some other retail use that primarily serve only local consumers and doesn’t do much to expand the region’s economic pie?
“We’re struggling to come to any kind of consensus,” said James J. Allen, the Amherst Industrial Development Agency’s executive director.
The Erie County IDA has a narrow view of the question. While there’s more flexibility to back retail projects in economically distressed areas, the Erie County IDA takes more of a hard-line stand in more prosperous areas.
The question is even stickier on speculative projects, where a developer may not have signed up any tenants to move into the building after it’s renovated.
The Erie County IDA’s view is that, if a tenant isn’t known, it should be assumed that it will be a retail project and ineligible for incentives.
“I think there’s a consensus that there should be a need to do adaptive reuse projects,” said Deputy County Executive Richard Tobe. “The state law now says you can’t do retail. So asking what you’re going to do with it becomes relative.”
Some of the suburban IDAs generally think that’s too restrictive. Allen, for instance, thinks it’s so important to support projects that will breathe new life into buildings that have been empty for at least three years that IDAs should be able to provide scaled-back incentive packages, even on projects that involve retail tenants.
If a project revamps an empty building, the work that upgrades the shell of the structure should be eligible for tax breaks, Allen says. If a store or some other retail tenant moves into the building, the portion of the project that is devoted to improving the interior of the structure would not qualify for incentives.
“I’m talking about an old building that’s vacant. I think you ought to be able to do that,” Allen said. “Just do the shell and bring it up to code and then walk away.”
And now, the region’s IDAs are being asked to reach a consensus on still another issue: How to handle the state-mandated clawbacks now required for every taxpayer-backed project that doesn’t live up to its investment or job creation promises.
The Erie County IDA approved a draft policy this week, one that sets up a procedure to identify laggard projects and a process for determining if the business should have to repay some, or all, of the tax breaks it has received. Companies that never meet their investment or job targets potentially would be liable for repaying all of the tax breaks they received. Businesses that meet their promised goals at one point, but then fall short in later years, would only be subject to clawbacks from the time they fell out of compliance, Tobe said.
The policy gives companies the chance to explain why they fell short, and it gives the IDA board plenty of room to use their own judgment over whether the tax breaks should be rescinded or if the shortfall was due to extenuating circumstances.
“We’ve built into it broad discretion to waive the penalty,” Tobe said.
Tobe hopes the county’s suburban IDAs will review the draft policy, suggest revisions, and that all of the agencies will be able to agree on common recapture provisions by the end of the year.
“The recapture policy should not be controversial,” Tobe said. “In the end, the intent is to let companies know that it won’t be on somebody’s whim or based on politics. I liken it to having a bill of rights.”
But that only works when those rights are the same countywide.
“We can’t have a situation where clawbacks are offered by one IDA one way but not by others,” said Dottie Gallagher-Cohen, an Erie County IDA board member and the president of the Buffalo Niagara Partnership.
She’s right about that – and more.