For the second time in recent months, the Erie County Industrial Development Agency on Wednesday voted to recapture tax breaks previously granted to a company that failed to live up to its job commitments.
By a 13-2 vote, the board agreed to immediately cancel a property tax break for API Heat Transfer in Cheektowaga, and to give the company two years to restore the jobs or face a prorated “claw-back” of its sales tax breaks as well.
The company, which laid off 40 workers last year, had received $73,866 in sales tax benefits from purchasing equipment, furnishings and materials, as well as $12,379 in property tax discounts for 2016 through a payment-in-lieu-of-taxes. Its property taxes will now revert to full payments for the county, town and school district.
“This is a proportional, fair, thoughtful proposal to recapture for jobs that are not there that were promised to be there,” said Richard Lipsitz, chair of the ECIDA’s Policy Committee, which recommended the action from among four options. The Policy Committee in August voted 7-1 in favor of the recapture.
API Heat officials could not be reached for comment.
The unusual action by the ECIDA comes as state and local governments face increased criticism of tax incentives granted to companies, and more pressure to crack down when commitments aren’t fulfilled. Critics ranging from taxpayer advocates and good-government groups to state Assemblyman Sean Ryan, D-Buffalo, have complained that IDAs give out too much taxpayer assistance and aren’t stringent enough with their expectations in return.
It also follows a very similar step taken in June against Derrick Corp., an oil-and-gas equipment maker, which cut more than 100 jobs since getting its tax breaks two years ago.
Both Derrick and API operate in the oil-and-gas industry, which has suffered an economic downturn that both companies blamed for their financial and job woes.
In API’s case, the company received the tax benefits in 2013 as part of a $1.7 million privately funded project that was completed in 2015. The project involved construction of a 6,000-square-foot addition to its existing facility, to house the global corporate headquarters of API following a merger, as well as the purchase of new product-testing equipment.
API agreed to maintain 287 jobs and create six new ones. Instead, the company laid off 40 jobs last year and didn’t add any new ones, for a total difference of 46 positions from what was promised.
Two board members, Buffalo Niagara Partnership Chairman Louis Panzica and Erie County Legislator Edward A. Rath III, opposed the board’s decision as too strong. Panzica questioned the recapture of sales taxes when the company spent the promised money on its building and equipment.
But Erie County Executive Mark Poloncarz responded that the company’s obligation is not just the financial investment, but also job creation. And he argued that the ECIDA’s recapture policy is now the model for the entire state. “We would never, ever enter into a tax break for a small addition if they were not going to create jobs and keep the jobs that they have,” he said. “When we give a tax break, it’s because of the jobs they’re creating in the community.”