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Erie County IDA claws back tax breaks to mortgage firm

The Erie County Industrial Development Agency on Wednesday held off on clawing back the sales tax breaks it gave to Niagara Blower for a 2013 expansion that failed to yield the new jobs the heat transfer equipment maker had promised, mainly because of the slump in its key oil and natural gas markets.

But the IDA didn't cut any slack for an Elma mortgage services company, Seneca Mortgage, that sold its Jamison Road facility this summer and failed to create any of the 165 new jobs it promised to bring to the site. The agency demanded that Seneca Mortgage repay $219,000 in sales tax breaks it had received for a $2.5 million expansion project in 2014.

And it agreed to make changes to the job requirements for the FedEx Trade Network facility in the Riverview Solar Technology Park in the Town of Tonawanda to reflect the company's growing work force in the town, even though the company has fewer jobs than it promised at the 555 Riverwalk Parkway facility.

Together, the three companies are among a group of five local businesses that have come under scrutiny by the IDA 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Earlier this year, the IDA rescinded tax breaks granted to API Heat Transfer in Cheektowaga, while Derrick Corp.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 company had agreed to a potential compromise settlement that would have forced the company to repay nearly $16,000 of the $42,000 in sales tax incentives that it received for a $1 million renovation project in 2013. The slump in the energy markets has since caused Niagara Blower's work force to shrink from 127 when the project was approved to 79 today.

Some IDA board members, including Buffalo Niagara Partnership President Dottie Gallagher-Cohen, argued that Niagara Blower should not be penalized at all because it went through with the project in good faith, only to be hurt by a global plunge in energy prices that was beyond its control. Others, including Erie County Executive Mark Poloncarz, said the partial clawback was the right thing to do because the company hadn't lived up to the terms of its agreement with the agency.

In the end, the IDA board put off taking action on the Niagara Blower clawback, sending the issue back to the agency's policy committee in hopes that the panel could devise a different proposal that would win broad support within the board.

But the IDA board unanimously agreed to claw back the tax breaks it had granted to Seneca Mortgage, which 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 also noted that Seneca Mortgage executives failed to inform the agency about the sale.

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.

"If there's any case that says we should support a full recapture, this is it," Poloncarz said.

Seneca Mortgage, Niagara Blower could face clawbacks on tax breaks

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