Buffalo, N.Y. (WBEN) - Despite facing some criticism from local developers, state lawmakers and others over a 30-year property tax exemption for the housing development project in the North Aud Block at Canalside in Downtown Buffalo, New York Gov. Kathy Hochul supports the tax break granted to Pennsylvania-based Pennrose LLC by Empire State Development (ESD).
During a visit to Western New York on Thursday, Gov. Hochul said the North Aud Block lies in a critical part of the rebirth of Downtown Buffalo, and she is tired of that land having sat vacant for 17 years.
"Not a penny was collected in taxes during that time. So to help make the project pencil out and to get the support from the lending agencies, the company had to show that they are doing something different. And for us to let this project go forward, the 30 years is what Empire State Development decided was the right number," said Hochul of the project. "Now it may be unusual, but so is allowing a hole in the heart of Buffalo go on for almost 20 years."
Hochul seems aware of the criticism from developers and others, and did not hesitate to push back with some questions of her own.
"I say to them, 'Where were you all these years? Where was your sit in the game? Why didn't you put up your own resources to make this happen?' I would have loved to have this done earlier, but I deal with the facts in front of me, and I could not go on for another decade with an empty hole in Buffalo," Hochul said. "So we had allowed the Empire State Development to work with the developer to figure out a path, and this is going to bring 250 homes to Canalside that are not there now, bring economic development, bring commercial development. I think we should look at the big picture. Let's do what it takes to get the job done. I'm tired of waiting as a Buffalonian and a neighbor who walks that area."
Earlier this week, in response to ESD's tax exemption for Pennrose with the redevelopment of the North Aud Block, State Assemblyman Pat Burke crafted a bill that would prevent state entities operating under the New York State Urban Development Corporation Act from granting property tax exemptions or PILOT (Payment In Lieu Of Taxes) agreements benefiting private development projects without the approval of a local governing body.
Hochul says she is more than happy to have conversations with Burke and other elected partners that may disagree with the exemption handed out, but similar to the criticism she faces from developers, she pushes back a bit on this bill.
"What is their choice? Have they found another developer that can do it out of their own money without having to find a lender? I mean, bring them to me, but you haven't," she stated. "So I'm asking them to understand the choices here: Leave it vacant for another decade or 20 years, collect no taxes, have no housing, have no hope in that area; or do what it takes so people in a couple years will say, 'Yes, this is a great project.' That's the path I'm on."
One of those detractors of the North Aud Block project and the property tax break granted to Pennrose is local developer and former Congressman Chris Jacobs.
He feels there are a number of concerning elements with such a project, and he feels the amount of people sharing their concerns is growing. The overarching concern with this project is a lack of transparency from the state.
"When the developer, Pennrose out of Pennsylvania, was awarded this RFP, all these additional sweeteners to the deal were not part of that RFP. Nor was changing the the project dramatically from 75% market rate and 25% income restricted to now it's the exact opposite - It's 75% low income housing and 25% market. I think that should have called, since this is a public entity, a reissuing the RFP. I think the change of the mix and also the amount of subsidies, there may have been other developers that would have bid on that," said Jacobs in an interview with WBEN.
Jacobs feels the state should have made the details of the PILOT for the North Aud Block project publicly known.
"The state had a press release when they did the the groundbreaking two weeks ago, they never listed the PILOT. They listed the many other subsidies - which if you added that all up, it was I think close to $1 million in subsidies per-apartment - but they were remiss in the fact they gave this unprecedented 30-year abatement, avoidance of taxes to this developer," Jacobs noted. "There are standing PILOTS the city can issue for certain types of projects, and the Erie County Industrial Development Agency, they are 10-to-15 at the most. But this is a 30-year avoidance, and my back of the envelope math is if the project was assessed at $100 million - 50% of the total project cost of $225 [million] - the amount of taxes this PILOT alone would give this developer, they'd be avoiding close to $50 million in taxes. And that's local government taxes that's avoided. So if that developer on that project is not paying the taxes, someone else has to, and that's you and me."
In conversations he's had with local government officials, Jacobs says the city nor the county were aware of any of this.
"It just smacks of lack of transparency, kind of done in the back rooms, and this is the type of thing that makes people very skeptical about government. And I really think we should have opened this back up to have a discussion," he added. "If we're spending this kind of money on one project, maybe it would be better to have done 300 or 400 houses where people could have had ownership opportunities. We didn't have that discussion. So I think that's another element and why it would have been so much better to do this in the light of day and not the way I think most people felt it was done."
When it comes to the pushback Gov. Hochul expressed with local developers, Jacobs says he's speaking up because he cares about Downtown Buffalo, and shares his concerns about the impact of this project.
"We also are developers that have done a lot in downtown, and one property doesn't stand alone. It impacts other other properties. So the fact that I, a small developer, didn't bid on this, that doesn't mean that I don't have the right to speak up when I'm concerned about the unbelievable amount of taxpayer dollars that are going into one project in Downtown Buffalo. All I want is transparency, and I just don't think this process has been transparent at all," Jacobs elaborated.
"I also think the amount of money we're talking about here - what we could do on a broader scale if this was talked about other alternatives - and alternatives is one of the elements of the state environmental review that they're supposed to do, which they didn't do. We believe that should have been reopened, and another hearing should have happened because of the significant changes in this project."
Jacobs understands why not just fellow developers, but also concerned residents and lawmakers are angry about this project.
"When you award an RFP and then down the road you give the person you awarded many, many more sweeteners - it may be an illegal violation - but at the minimum, you're violating the spirit of the RFP. I bid an RFP, this is what you said it was going to be, this is what you said the benefits were going to be. Then you give it to one developer and you keep sweetening that pot, that just doesn't pass the smell test," Jacobs said.
That's why Jacobs is firmly in support of Burke's bill in Albany.
"I was floored - I served in the state legislature, and I was not aware that the state economic development had the ability to lay on top of a local government this massive tax obligation. I think it's unbelievable," he said. "And somebody said, 'Oh, when we talk to the mayor...' You talk to the mayor? You should have had a hearing, and the city council should have been able to weigh in. The county's losing out, in my mind, probably $10 million in taxes over this 30 years. Did they have any say in it? Any elected that I've talked to is not aware of it.
"We passed in New York State the property tax cap, which was a state saying you can only raise taxes a certain amount every year. One element of that was the local government could override that. They had the preserved local autonomy to be able to override that. If that council, the town board said, 'No, we need more,' they could do it. Here, they didn't do that. They just imposed this obligation, and they're imposing this obligation on the City of Buffalo, which just raised taxes 19% on all the taxpayers. And these people, these outside developers, are not going to have to pay their fair share."
