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Editorial: 2 struggling companies present ECIDA with contrasting decisions on clawbacks

One company is struggling to keep its head above the fast-moving current pulling down an industry; the source of another’s problems is less clear.

The Erie County Industrial Development Agency is determining whether to claw back the tax breaks of one or both. The ECIDA allows clawbacks “if a company fails to come within 80 percent of its job creation or investment promises.”

The decision appears straightforward in one case.

Seneca Mortgage promised in 2014 to create 165 new jobs at its Elma mortgage servicing center and to protect 270 existing jobs in exchange for $219,000 in sales tax breaks that were tied to a $2.5 million expansion project.

Not only did those new jobs fail to materialize, employment dropped and the company sold its Jamison Road operations to a competitor, Nationstar Mortgage Holdings, in June. Nationstar has about 230 employees, as News business reporter David Robinson wrote, far below the 435 promised. Moreover, Seneca Mortgage did not tell the ECIDA about the sale, and while a Seneca attorney attributed that non-disclosure to an oversight, it raises questions.

Seneca Mortgage is the poster child of the need for clawback provisions. A more difficult decision involves Niagara Blower, a Town of Tonawanda manufacturer. Just as Cheektowaga-based Derrick Corp., a maker of oil and gas equipment that cut more than 100 jobs, and Cheektowaga manufacturer API Heat Transfer, which fell short of its local jobs pledge, Niagara Blower finds itself caught in the downturn of the oil and natural gas industry.

Niagara Blower received $42,100 in sales tax breaks in 2013 for a $1 million renovation project. From that, 17 new jobs were expected to be created, while retaining 100 existing positions at its Sawyer Avenue factory.

But, as Robinson wrote, the weak energy market led to a drop in sales of its liquid cooling and vapor condensing products for the oil and gas drilling industry. The company now has 80 employees.

The companies are in a cyclical industry that may turn around, allowing them to meet their jobs pledges. Niagara Blower says things may pick up by the end of 2018.

The clawback rules are there for a reason – to keep taxpayers from being fleeced. However, the agency can’t risk delivering a financial hit that would threaten those 80 good jobs, as long as there is some likelihood the goal can be met.

While it is important to be tough when necessary, in some cases giving companies more time to comply is appropriate.

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