A state appeals court has ruled that the Amherst Industrial Development Agency was within its rights to deny Iskalo Development an extra $1.1 million in tax breaks for the company's revamped Lord Amherst project.
The decision released Friday afternoon by the Appellate Division, Fourth Department, reverses a ruling from last summer by State Supreme Court Justice John Michalski.
The appeals court found the agency acted reasonably in rejecting the additional tax breaks for the project.
David Chiazza, Iskalo's executive vice president, said the decision was disappointing but it would not stop progress on the hotel, which is being rebranded as the Reikart House, a new boutique hotel.
"We've gone too far with the project, so we have to finish," he said.
David Mingoia, the agency's executive director, said IDA officials would not comment until they had a chance to review the decision with legal counsel.
The Amherst IDA approved a $1.07 million package of tax breaks in December 2012 for Iskalo’s original $9.9 million plan to renovate the Lord Amherst into a mid-range hotel and restaurant. That’s the second phase of a larger hospitality campus that includes the new Hyatt Place Hotel behind it.
But after workers began asbestos abatement and demolition on Lord Amherst, they discovered “rampant mold infestation” that required replacing every interior wall, according to court documents. This prompted Iskalo to abandon the mid-range project in favor of a 92-room upscale boutique hotel and restaurant, and pushed the cost up to $19.9 million.
So Iskalo returned to the IDA in March 2016 to seek $1.1 million in additional tax breaks.
In between the two rounds of incentives, state lawmakers had modified the code to bar financing for retail projects unless the applicant proves it qualifies as a “tourist destination.”
Iskalo argued that the hotel qualified as a tourism destination and was located in an enhancement zone that the town targeted for redevelopment. The developer cited data that three-fourths of the Hyatt guests were from outside the state, submitted a detailed endorsement from former Amherst IDA Executive Director James Allen, and provided records that other IDAs have found hotels to be tourism destinations.
Agency staff supported the application but the board rejected the claim in a 4-3 vote.
Iskalo executives argued the IDA “acted arbitrarily and capriciously.” Michalski agreed, citing no evidence or explanation to support the IDA vote.
But the Appelate Division judges reversed that ruling. Their decision said the IDA didn't act in an "arbitrary and capricious" manner, in light of the state law that was approved between the two rounds of incentives.
In a small victory for Iskalo, however, the Appellate Division said the company does not have to pay the IDA's attorneys' fees, Chiazza said.
Chiazza said Iskalo does not yet know whether it will appeal the decision and it is weighing all of its legal options.
He said the company feels it has been hurt for doubling the scale of the project.
"Geez, you know, we're getting punished because we decided to spend and invest more money in the Town of Amherst," Chiazza said.
Separately, Iskalo and hotel operator Greenwood Hospitality of Colorado announced Friday that they had hired Karen Oleszak as general manager for Reikart House and Susie Pieri as director of sales and marketing.
Oleszak is the former general manager for the Staybridge Suites Buffalo-Airport, and spent 18 years previously with Marriott Corp. in hospitality sales and management. Pieri formerly worked at the Buffalo Marriott HarborCenter in catering sales and entertainment groups. Previously, she worked in sales and director roles at Hyatt Regency Buffalo, the Adam's Mark Hotel and the Buffalo Niagara Marriott.
The Reikart is named for vaudevillian couple Frank and Dolly Reikart, who moved to Amherst in the early 1900s, welcoming visitors with services and entertainment, including their pet capuchin monkey, Jacko. It's slated to open in the spring.