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Lackawanna Council reaches agreement with Orchard Park developer

The five-year standoff between the Lackawanna City Council and an Orchard Park developer over $4 million in taxes owed on a Commerce Drive industrial property has been tentatively resolved, marking the second time in a week that the Steel City has taken steps to resolve tax disputes with major developers.

In the most recent case, developer Peter Krog – who purchased 300 Commerce Drive in 2009 – agreed to pay $2.3 million in back taxes, plus $260,000 in taxes owed to date this year, to satisfy the $4 million claim by the city. Krog faces a payment deadline of Oct. 13, according to Antonio Savaglio, the city attorney.

Earlier this week, Tecumseh Redevelopment Inc. – owner of the 943-acre former Bethlehem Steel site along Route 5 – was successful in reducing the property’s assessed value from $31 million to $15 million for the 2013-2014 tax year.

That agreement translated into a $700,000 refund in taxes Tecumseh already paid under the higher assessment. But because Lackawanna, its school district and Erie County couldn’t give immediate cash refunds, they agreed to “artificially” lower the assessed value to $10.9 million through 2019 so Tecumseh could recover its overpayments.

Lackawanna Council President Hank Pirowski was buoyed by the city’s efforts to remedy its contentious relationships with business owners.

“Of course, we don’t like to let business out of paying taxes, but right now Lackawanna is seen as an enemy of business,” noted Pirowski. “You have to become friends with your business residents.”

Third Ward Councilman Joseph Jerge helped to broker the proposed settlement with Krog Corp. on 300 Commerce.

“We voted to eradicate a large part of the interest owed us,” said Jerge. “The problem started in 2009, and we, the City Council, voted to accept $2.3 million. At some point, someone had to step up. We’ve got an agreement in principle. You never know how it will play out.”

The Commerce Drive site consists of 253,000 square feet of space in the city’s 1st Ward. Its two buildings had recently been home to Great Lakes MDF until the company shut down operations in January 2008. The fiberboard manufacturing plant opened in 2001, when it was known as CanFibre.

Earlier this year, the cash-strapped city filed a lawsuit against Krog Corp. seeking to foreclose on the 30-acre industrial site for nonpayment of taxes.

A tax assessment challenge by Krog was resolved in 2011. It reduced the property’s assessed value from $7 million to $4.1 million.

Council members last week voted, 5-1, to accept the negotiated settlement. The vote was unanimous in executive session, but when it came time for the official vote, Councilwoman Annette Iafallo voted against the proposed settlement with Krog.

“It’s setting a bad precedent to let him go with all this interest,” Iafallo said. “My concern is the normal mom and pop out there who have come in and asked for relief on interest and have been denied. But our city does need the money. … I hope he pays it.”

Councilman Keith Lewis shared Iafallo’s concern but voted for the proposed settlement with Krog.

“My concern is that I don’t know Mr. Krog,” Lewis said. “His corporation has not paid the city anything since he took over 300 Commerce in 2009. I wanted a show of good faith that he would pay the settlement in the time dedicated.

“The city is in dire straits, and (Krog) has been delinquent for five years,” Lewis said. “What was the alternative? If we don’t get this money, we’re talking from 10 to 20 layoffs.”

Krog’s attorney, Jonathan D. Schechter, could not be reached to comment.

The Tecumseh agreement, meanwhile, was reached after a trial had started. It ended 12 months of litigation and avoided an extended court battle between the parties, who had already hired high-powered representation to help their cases.

Paul Werthman, president of Benchmark Environmental Engineering, directs the remediation efforts on the Tecumseh-owned land. Werthman recalled similar litigation involving Tecumseh and the previous administration of Mayor Norman Polanski Jr.

“At the end of the five-year ‘repayment’ period to Tecumseh, the new mayor (Geoff Szymanski) put the assessment right back up again,” said Werthman. “The reality, from my perspective, is the city could care less about the cleanup and redevelopment of this site. All they want is somebody to pay their tax bill.”

Szymanski contended there is nothing he wants more than to have the prime parcel of property cleaned up.

“It’s waterfront property that is completely buildable,” said Szymanski. “It’s reusable. There is an infrastructure. I don’t think they are doing anything to market their property. I want nothing more than to have that property cleaned up. I’m told there are buyers around the world who are interested in that property, and they are being stonewalled.”

The Council is scheduled to meet at 6:30 p.m. Wednesday.