Niagara, N.Y. (WBEN) - Even online retailing behemoth Amazon isn't immune to rising construction costs.
Amazon.com Services LLC - an Amazon affiliate - that's developing the 3.1 million-square-foot Town of Niagara "First Mile" fulfillment center has confirmed the construction price tag has risen nearly 7% - going from $550 million to $587.5 million.
The culprit?
Since the project was first announced in 2022, "construction scope increased due to advancements in material handling equipment systems and updates to new generation facility design," said Brad Griggs, Amazon director of economic development.
Because of the rising costs, Griggs has asked the Niagara County Industrial Development Agency to increase a previously approved sales tax exemption package of $26 million to $29 million. The NCIDA directors will consider the request at its Sept. 9 meeting.
"This request is driven by the evolving operational requirements of the facility as well as broader cost pressures during the construction period," Griggs wrote in a letter to NCIDA Executive Director Andrea Klyczek,
At $587.5 million, the Amazon project is the largest private sector-backed development in the Town of Niagara.
In August 2022, the NCIDA directors approved tax breaks and incentives that totaled $124 million.
Amazon, however, is not seeking $3.5 million in mortgage recording tax breaks that it is, technically, eligible to receive
"This was not a surprise," said Mark Gabriele, NCIDA counsel. "The $26 million (in sales tax exemptions) was our best guess four years ago."
Jason Krempa, NCIDA chairman, said the difference in the economy of 2022 and this year is huge and is impacting construction projects nationwide.
"It is a different economy," Krempa said.
Amazon is expected to open the center this fall where at least 1,000 people will be employed.
Griggs said the first wave of hiring will start in the next few weeks,
The additional sale tax exemption is key for the project to be completed, Griggs said.
"It will help the project cross the finish line," Griggs.
Tax breaks may be adjusted for rising development costs
Tax breaks may be adjusted for rising development costs
