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Seneca Mortgage, Niagara Blower could face clawbacks on tax breaks

An Elma mortgage servicer and a Town of Tonawanda industrial equipment maker are in danger of being forced to repay tax breaks for expansion projects that didn't pan out as promised.

The Erie County Industrial Development Agency is considering steps to claw back tax breaks granted to Seneca Mortgage, an Elma mortgage servicer that has since sold its local operations to a competitor, and Niagara Blower, a Town of Tonawanda manufacturer that has been battered by the slump in the oil and natural gas industry.

Both companies received tax breaks from the IDA for expansion projects that were expected to create new jobs. Both companies failed, not only to create new jobs, but have fewer workers than they did when the tax breaks were granted.

The IDA hasn't taken any formal action to claw back the tax breaks, but the agency's policy committee has been discussing the failure of both companies to meet their job promises and could take action as early as its late December meeting.

The companies are the third and fourth local businesses this year that are in jeopardy of losing tax breaks because they failed to meet the IDA's requirement that employment at companies receiving subsidies decline by no more than 15 percent from its level at the time the incentives were granted.

Earlier this year, the IDA rescinded tax breaks granted to API Heat Transfer in Cheektowaga, while Derrick Corp. walked away from a previously approved package of incentives, after softness in the oil and natural gas markets led to job cuts at each firm.

Like those companies, Niagara Blower executives said the weak energy markets are behind its failure to meet its job promises. The manufacturer received $42,100 in sales tax breaks in 2013 for a $1 million renovation project that was expected to create 17 new jobs and retain 100 existing positions at Niagara Blower's Sawyer Avenue factory.

Instead, the weak energy markets led to a slump in sales of its liquid cooling and vapor condensing products for the oil and gas drilling industry. The company now has 80 employees in the Town of Tonawanda.

Patrick Curtin, Niagara Blower's human resources manager, said the company is trying to diversify into new markets to find new clients, although those efforts are only likely to stabilize employment next year. Curtin told IDA officials he believes business could pick up by the end of 2018.

IDA officials, not wanting to inflict further pain on a company that already is struggling, are discussing the possibility of giving Niagara Blower more time before clawing back the tax breaks or doing it gradually.

The agency may take a harder line with Seneca Mortgage, which promised in 2014 to create 165 new jobs at its Elma mortgage servicing center and to protect 270 existing jobs there in exchange for $219,000 in sales tax breaks tied to a $2.5 million expansion project.

Seneca Mortgage sold its Jamison Road operations to a competitor, Nationstar Mortgage Holdings in June and only has five full-time employees in Elma. Nationstar has about 230 employees in Elma, leaving total employment far below the work force of 435 people that had been promised.

IDA officials noted that Seneca Mortgage executives failed to inform the agency about the sale - a move Seneca attorney John Anderson described as an oversight.

As part of the sale, Nationstar did not assume Seneca Mortgage's job commitment, which means that any clawback efforts likely will be focused on Seneca Mortgage, IDA officials said.

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