Regional staffing agency SelectOne Search is getting $141,000 in tax breaks from the Erie County Industrial Development Agency for a $1.7 million project to convert a vacant 120-year-old building in the Larkin District into its new offices.
But the IDA balked Wednesday at providing $35,000 in tax breaks for another project that would covert the former Christian Science Reading Room at 483 Main St. into apartments and retail space because of concerns that the incentives would make a very profitable renovation even more lucrative.
Both projects involve the renovation of century-old buildings that have been vacant for years. But while IDA board members embraced SelectOne’s plan to upgrade the former F.X. Winkler & Sons Building because it would help workers find good-paying jobs, especially in the banking industry, they delayed consideration of the Christian Science Reading Room upgrade because of concerns over the level of returns it would generate for its developers.
SelectOne plans to buy and renovate the three-story brick structure at 760 Seneca St. so it can move its corporate offices from leased space at 2813 Wehrle Drive in Lancaster to one of the last undeveloped properties in the Larkin District.
SelectOne, which provides both permanent and temporary placement services, will occupy the top two floors and plans to lease out the first floor to a commercial or professional services tenant.
“This is not just moving from one town to another to take advantage of the tax breaks,” said Erie County Executive Mark Poloncarz. He said the project will create 14 full-time and two part-time jobs at a growing company that now has 20 full-time and two part-time employees, earning an average salary of $75,000.
SelectOne officials said the project needed IDA tax breaks because, without them, the renovation work would have a negative return on investment of 1 percent over the next 10 years. With the tax breaks, the project would generate an estimated return of 2.8 percent.
“The incentives we’re providing here push them across the finish line,” said Edward Rath, an IDA board member.
But the board took a more skeptical view of the Christian Science Reading Room project, which its developers, Peter and Rebecca McCauley, already estimate will generate a nearly 11 percent return on their investment without any tax breaks, and a nearly 28 percent return if the IDA approves the $35,000 in incentives they are seeking.
The agency typically looks for adaptive reuse projects to yield returns in the 10 percent to 12 percent range after incentives are factored in, so the estimated returns on the Christian Science Reading Room renovation would be two to nearly three times higher than that target level if the tax breaks were approved.
Poloncarz described the project as “questionable,” and the agency’s policy committee, which reviews each proposal that comes before the board, did not make a recommendation to either approve or reject it.
The board pulled the project from the agenda on Wednesday and sent it back to the policy committee for further review.
“It’s fair to say questions abound,” said Richard Tobe, the deputy county executive who also serves as chairman of the policy committee.
Rebecca McCauley told IDA officials that the projected returns were high after factoring in the tax breaks because the developers don’t plan to borrow any money to carry out the project. If the developers were to borrow money, the returns on the project would drop to the 10 percent to 12 percent range. She also said the project would fill in the gaps between larger projects by deeper-pocketed developers along that part of Main Street.
McCauley also presented the agency’s policy committee with a revised calculation of the project’s rate of return that showed it would generate a negative return.