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Round and round the money goes for manufacturing hub project

If you like circular reasoning, here's a transaction for you.

Buffalo Manufacturing Works, the nonprofit advisory organization that helps small and mid-sized businesses use technology to improve manufacturing operations, will be moving from its current location on Main Street to 683 Northland Ave., where it will be the second anchor tenant alongside the new Western New York Workforce Training Center. It will occupy 51,000 square feet of space in what was part of the original foundry portion of the building, as part of the second phase of redevelopment.

The sprawling former industrial complex, which is owned by the Buffalo Urban Development Corp., is being renovated as part of the state-backed Northland Corridor light-manufacturing hub. The Buffalo Manufacturing Works portion will be paid for with $21.5 million in Buffalo Billion funds, through the Empire State Development Corp., which insists that the 15-year lease must be rent-free as part of the deal.

But the project also relies on $18 million in federal New Markets tax credits, and the tax rules require the payment of market-rate rents in order to "unlock" those credits. So the lease calls for an annual base rent of $7.85 per square foot, plus taxes, insurance, maintenance costs and utilities.

To make that work, while still complying with the state demand, BUDC has to provide a subsidy to Buffalo Manufacturing Works, which will use that money to pay the rent to an affiliate of BUDC that actually owns the building.

BUDC will provide a similar grant to the operator of the Workforce Training Center — using a portion of the state, city, New York Power Authority and National Grid funds it will receive for the entire Northland project — so it can in turn pay the prepaid rent back to another affiliate of BUDC.

In other words, BUDC is loaning or giving money to the Workforce Training Center and Buffalo Manufacturing Works to then repay to BUDC — just to comply with tax rules and state demands.

"Does anybody feel like we're standing on the streets of Las Vegas, and some guy is standing there with three cups and a ball?" asked BUDC Board Member Dottie Gallagher-Cohen, president of the Buffalo Niagara Partnership.

Buffalo Manufacturing Works targets small and mid-sized businesses

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