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Questions linger about legality of GCEDC's approval of COR Development tax breaks

By Howard B. Owens

Was the Genesee County Economic Development Center Board of Directors' decision to provide $1.7 million in tax abatements to COR Development legal?

That depends on who you ask.

A Buffalo assemblyman thinks the GCEDC board violated provisions of the 2013-14 budget act, which attempts to curtail state sales tax abatments for retail projects.

Assemblyman Sean Ryan is asking for an investigation by the state's tax commissioner, but when The Batavian contacted Taxation and Finance Department last week, it took awhile to get a response and when we did, the agency passed the buck to the state's Budget Office.

So far, no state agency has expressed much interest in taking a closer look at GCEDC's actions.

At issue is a resolution passed by the GCEDC board that found COR's proposal to redevelop the former Lowe's location in Batavia Towne Center meets the necessary legal requirements to receive state aid.

Specifically, under terms of the law, an IDA cannot provide relief on state sales tax without making certain findings. Among the possible findings are that the project will serve as a tourist destination or that it's in a highly distressed area.

The finding for the COR project by the GCEDC board was that the project provides goods and services that are not readily available to local residents from current retail stores.

At the time the board passed the resolution, the only publicly announced tenant for COR's project was Dick's Sporting Goods.

Last week, at a Town of Batavia Planning Board meeting, it came out that Kohl's is a likely tenant.

There may be at least one other, and possibly a fourth, tenant, but there's no reliable indication of who those tenants might be.

Today, GCEDC Chairman Charlie Cook said at the time of the vote, the board had been given two other names, but acknowledged negotiations were still under way between the retailers and COR at the time of the vote. There is no guarantee that those retailers will be the ones to eventually occupy the space.

The big question is whether Dick's meets the requirement under the law for providing goods and services not readily available in the local market.

Ryan has pointed out -- as most Genesee County residents know -- there are four sporting goods stores in Batavia. There are also three department stores that sell sporting goods.

Cook said he's not much of a sporting goods shopper and is largely unaware of the type of merchandise carried by Dick's or what local retailers might offer that is similar or different.

"I feel the input that I had from the people in the community was that having Dick's here would be a huge draw for the surrounding area, and I guess that's something people will always have a differing opinion about," Cook said.

Prior to approving the COR abatements, the GCEDC conducted a public hearing on the project, as required by law.

COR VP Joseph B. Gerardi made a presentation about the project at the hearing, but no GCEDC staff covered the agency's position on the project. 

The pending resolution, with its key finding about the uniqueness of the project, was not made available by GCEDC staff at the meeting or prior to the vote by the board the following Thursday.

In other words, the public had no opportunity to review specifically what the board would vote on and comment on it.

State law enacted in 2012 requires "to the extent practicable" that resolutions to be voted on be made available to the public prior to the meeting.

We requested an interview with GCEDC CEO Steve Hyde this afternoon, but he was tied up in meetings and unavailable.

After the May 2 vote approving package of incentives, The Batavian began making inquiries trying to find out who, if anyone, would enforce the IDA law if there was any question about its application for a retail project.

We found press offices with state agencies willing to provide information "on background," but nobody willing to provide on-the-record information about the law and how it's enforced, if at all.

One exception was the Comptroller's Office, where spokesman Bruce Butry was willing to be as helpful as he could be.

The Comptroller's Office could conceivably audit the GCEDC and even focus on this specific project, but an audit would merely result in a written report, leaving it up to the County Legislature to act, or not, on any findings.

"At the end of the day, it's up to the people in the local community," Butry said. "Some of these IDAs operate with very little accountability other than the pressure put on the boards by the public regarding the types of projects they're going to approve."

The Governor's Office had no on-the-record comment about the law or the local situation.

Butry suggested we try Taxation and Finance. Once we reached the right person, he was very friendly, but he said it was up to the state's Budget Office to answer any questions about the law.

In response to a long list of e-mailed questions, Morris Peters, spokesman for New York State Division of Budget, provided some information "on background," and this statement for publication:

“Under these reforms, grocery stores will no longer be given tax breaks to move across the street. Tax dollars will be focused on those industries that create jobs and companies who will move to New York to help build our economy.”

Assemblyman Steve Hawley, who represents Genesee County, isn't surprised that Albany is keeping this issue at arm's length. He believes the decisions to provide abatements is a local issue and should be considered beyond interference from state agencies.

"I try not to meddle in local decision-making because there are too many people who do, like Mr. Ryan," Hawley said.

In response to Ryan's making public statements about the COR abatements, Hawley and Sen. Mike Ranzenhofer, who also represents Genesee County, were trying to organize a press conference for tomorrow to highlight the successes of GCEDC and invite Ryan to take a closer look at the agency, with an eye toward how he might better help his own constituents in the City of Buffalo achieve greater economic prosperity.

Scheduling conflicts may prevent that press conference from taking place.

Earlier today, Ryan and Hawley had a brief phone conversation in which Hawley said he asked Ryan, "Have you moved to Genesee County?"

When Ryan returned a call to The Batavian, he said, "I understand some people there are upset with me."

But Ryan said it was legitimate for him to call into question the GCEDC giveaway of state tax money because it affects his constituents, too, as it does all taxpayers in the State of New York.

"It all goes back to this: whose tax dollars are they handing out?" Ryan said. "Those tax dollars belong to every taxpayer in the State of New York."

A cynic might think that Ryan's real motive is to keep Dick's Sporting Goods out of Batavia so that Genesee County residents continue to drive to Erie County to shop.

Ryan said, "You could say that, but you should say he wants high wage jobs so that people can raise families and that we should use our scarce revenue to bring in those high wage jobs, not low-paying retail jobs that require people to draw on Medicare and food stamps because the wages are so low. That's not good for our economy and that's not good economic development."

To Ryan's point, the Comptroller's Office has a long history of taking a critical look at IDAs, even before Thomas DiNapoli held the office, particularly in the area of tax abatements for retail projects.

The current law attempting to curtail tax breaks for retail projects is based on a similar law that the state Legislature allowed to expire in 2008.

In 2006, the Comptroller's Office issued a report looking at implementation of the law and found that IDAs found creative ways to skirt it.

(The) exceptions, all of which are applied at the discretion of local IDA boards, can make the retail prohibition ineffective.

Since the application of these exceptions is determined at the discretion of each IDA, these criteria are sometimes subject to expansive interpretations.

The examples given were out of Erie County and included "tourism destination" designation for projects because they were located near an airport or Thruway exit.

Last week, the office again issued a report on IDAs and included a discussion of why it's important to curtail tax breaks for retail projects.

Retail projects generally do not increase the level of jobs available in a region or economic activity, as project-related gains often come at the expense of other retail enterprises in the area, and the jobs associated with retail trade tend to pay significantly less than manufacturing or other professional jobs. The restriction on retail projects was reinstated in the 2013-14 State Fiscal Year Budget, indicating that State policymakers understand the limited usefulness of these projects for economic development.

And ...

Very few of the IDAs sponsoring retail projects reported the estimated salaries of the jobs to be created, but data from the New York State Department of Labor shows that the average starting salary for a retail salesperson is $17,250, while the average for first line retail supervisors is $28,720.

IDAs, Ryan said, have become "subsidy machines."

"COR gets these subsidies from Buffalo to Syracuse," Ryan said. "They've figured it out. They know they can come to these IDAs and have their project viewed favorably because they say, 'see what a great thing we're doing for the community,' and everybody can say they're a part of it. The politicians run for election and stand in front of the place and say, 'look at what we brought here.' "

Ryan doesn't even believe it's about the commission check GCEDC will get for the project, which could total $100,000. It's about looking good, he said.

Even if Ryan is successful -- and Hawley doubts anybody in Albany will take serious an out-of-district assembly member calling for an investigation -- in getting the tax commissioner to look at the project, it's unclear from the IDA law what power, if any, the commissioner has to overturn a local decision.

Here's the relevant section of the law:

The commissioner is hereby authorized to audit the records, actions, and proceedings of an IDA and of its agents and project operators to ensure that the IDA and its agents and project operators comply with all the requirements of this section. Any information the commissioner finds in the course of such audit may be used by the commissioner to assess and determine state and local taxes of the IDA's agent or project operator.

And even if the commissioner can recapture the tax revenue, Butry, from the Comptroller's Office, said it only applies to the state sales tax incentive.

COR received a tax break on state and local sales tax for the purchase of building material, as well as a revised PILOT (Payment in Lieu of Taxes) on the increased assessment and mortgage tax relief.

Ryan agrees that there is no provision in the law for anybody in Albany to overturn the PILOT, the local sales tax or mortgage tax abatement. Those are entirely local decisions.

At the public hearing, Gerardi said the local share of sales tax revenue from the project would be $1 million.

Using that as a base for calculation, that puts projected annual gross revenue at build out at about $26 million.

Gerardi said the retailers coming into the project would invest $11 million.

Those don't sound like numbers, Ryan said, of companies that need tax incentives to build retail projects and create a playing field that isn't level for existing retailers.

Charlie Cook said he truly believes that in a small market like Batavia, big retailers won't come here without a reduction in their operating costs.

"You hate to see that big empty building just sitting there," Cook said. "They are offering an opportuinty to fill it with something that is vibrant and exciting and has the potential to draw in outside people."

Mike Barrett of Batavia Marine and Kurt Fisher of Fisher Sports have said they believe they can compete with Dick's on quality and service and Cook said he is hoping that is true.

"As you pointed out, these businesses have proven to be resilient and able to find niches and services that continue to make them very successful," Cook said. "That's my hope, that everyone is going to be a winner in the long run."

Cook said he and the GCEDC board are just trying to do the best they can for the community and there's no intent to subvert the law.

"We're a board of volunteers and the one thing we're interested in is promoting business development in Genesee County," Cook said. "That's our only motivation to sit on the board and when those opportunities come up, we embrace them."

As to any legal concerns raised by Ryan, Cook said that GCEDC has asked its attorneys to review Ryan's assertions, but Cook also said that prior to the board's vote, legal counsel assured the board that the action it was about to take was legal and proper.

"We're not out to push anything through that is improper," Cook said. All the information we had said it was perfectly proper and I guess at this point, we'll defend that. If it turns out that it wasn't, we'll review our policies and not do that anymore."

Robert Brown

OMG. Please just make it all stop!!!

The utter silliness of this gamesmanship is evident in the fact that the GCEDC ponied up for Lowe's which was a complete and utter disaster. That's right Charlie, "You hate to see that big empty building just sitting there...". And the GCEDC did that. And our County Legislature supported that. And none of it has moved the needle for Genesee County. And it never will.

I implore Assemblyman Hawley to take measures to fix the problem and stop pretending that Genesee County is on the road to achieving "greater economic prosperity" due to a number of GCEDC "successes". We all know what the problem is - stop ignoring the fact that we have one of the highest costs of doing business in the nation and fix it! Stop the money grab to Albany and the small percentage coming back. Abolish the mandates and eliminate the non-value added government overhead.

May 17, 2013, 1:30am Permalink
Raymond Richardson

"Cook said he's not much of a sporting goods shopper and is largely unaware of the type of merchandise carried by Dick's or what local retailers might offer that is similar or different."

Then Mr. Cook is not well versed on the subject to make any opinion of this subject.

Dick's sells a complete line of sports good such as workout attire from footwear to bottoms and tops, workout equipment, equipment for both indoor and outdoor sports, along with a large selection of equipment for hunting and fishing, and they are also a licensed firearms dealer.

Typical mentality of these EDCs to fill the plate with meat and potatoes(large tax breaks), and usually wind up with a dirty plate afterwards(no promised local jobs).

May 17, 2013, 8:44am Permalink
Ed Hartgrove

As for Charlie Cook not being very sure of what Dick's Sporting Goods has for a core business (or is it COR business? Now I'M confused), would somebody lend him a cheap computer, so he could find out? Maybe GCEDC should give some company $50,000,000, so they can purchase a Fast Ferry. Put it right on the Tonawanda Creek. Now THAT (MIGHT) qualify for a 'tourist destination'. Just don't put it by the South Lyons bridge. These pseudo-gov't agencies are money-mad!

May 17, 2013, 9:03am Permalink
Dave Olsen

Obviously, the only thing we here in Genesee County can do is keep the pressure on the GCEDC to show actual proof of their claimed accomplishments and continue to question any deals they make that appear questionable. We can also ask questions of legislature candidates about their positions and vision for this organization and hold them to their statements. It's our county and our government; that means all of us, not just a well-connected few. Typical of NY State to create the environment that causes this mess and then not have a method to straighten it out.

Great investigative work Howard. Thanks for digging into this and sharing your findings. And God bless you for your patience!

May 17, 2013, 9:27am Permalink
bud prevost

"Charlie Cook said he truly believes that in a small market like Batavia, big retailers won't come here without a reduction in their operating costs"

Which means they shouldn't come here if it's not profitable on its own. My God, how did businessmen 100 years ago survive without these quasi government entities to remove the risk inherent to a capitalistic society?

May 17, 2013, 9:48am Permalink
Mark Potwora

I guess Charlie Cook has also never been to a wal mart or kmart on top of the four local sporting goods stores..Wal Mart and Kmart also sell many of the same items that Dick's does..Raymond Richardson is spot on when he says...Then Mr. Cook is not well versed on the subject to make any opinion of this subject.......Where is Ms.Hancock on this issue after all she is the only one who we vote on...If there is an empty Lowes store it is only because as Bob Brown said is because the GCEDC gave COR a tax break in the first place to build it..If their were no tax break in the first place would there be that empty building there now..The real scam is the 100,000 dollars that GCEDC stands to collect for putting this deal together...That money would be better spent fixing roads and bridges in Genesee county..Something we all use..

May 17, 2013, 10:32am Permalink
Mark Potwora

Charlie Cook said...."I feel the input that I had from the people in the community was that having Dick's here would be a huge draw for the surrounding area, and I guess that's something people will always have a differing opinion about," Cook said.....Must be he didn't hear all the comments on here and at the public hearing...Those are the opinions ,especially the public meeting should count also..Just goes to show that the public meeting on this was just a load of bull........

May 17, 2013, 10:57am Permalink
Mark Potwora

John when i say we i mean the public..The point is that we hear nothing from those who are elected by the public...All have been silent on this issue........

May 17, 2013, 11:24am Permalink
John Roach

Mark, Since most of them voted to give GCEDC that $215,000, I don't expect them to say anything that will draw more attention to themselves. They are probably just hoping to stay under the radar.

May 17, 2013, 1:43pm Permalink
Mark Brudz

I am not sure that they "All have been silent on this issue...." Mark. While city residents and residents of other townships in the county may take issue with all of this, did it occur to you that Town Of Batavia residents continued to re-elect Mary Pat Hancock because they see economic benefit [Real or perceived] from the tax incentives and the big box store fronts on the west side of Batavia, despite what you and other city residents might see as otherwise?

Let me be clear I do NOT like the way GCDEC is funded by the county, the IDA's are supposed to be funded through the 1% rake they get from projects they initiate, not tax dollars. IDA's are supposed to bring manufacturing and agricultural industries to the county NOT retail endeavors.

But as I pointed out before, NOT ONE STATE does not offer tax incentives and/or abatements to bring industry to their states. States by design were meant to be in competition to their borders. If you eliminate IDA's you are only kidding yourself if you believe that there would be no abatements or incentives, the state that is most prolific economically right now is TEXAS, it has no income tax, relatively low property taxes but guess what, they give the most and the largest tax incentives and abatements of all the states by a very wide margin, New York is not even in the TOP TEN states as far as tax breaks for industry goes.

What is wrong here, is that the IDA complex in New York has run amuck, and pretty much out of control, NOT on the abatements and incentives, but on the funding and procedures and that is what needs to be addressed.

Texas spends 56 cents of every state budget dollar on business incentive, over $900 per capita, New York spends 7 cents per budget dollar and $221 dollars per capita on incentives yet Texas is booming and New York is barely treading water, Why?

One reason is that Texas has NO personal income tax, another is Texas has low property taxes, and a third is the IDA's there are funded through result not tax dollars.
Texas has a comparable State Police Force to ours, it has hospitals comparable to ours, interstate highways that are much larger in mileage than ours.

It boils down to taxes and excessive administration here versus efficiency and smaller government, Authorities are supposed to be self sufficient and operate through performance like the Thruway Authority here, in Texas, authorities operate through performance, in New York State, when an authority like the Thruway performs, the state pilfers the money away like the thruway being tasked with the Canal system, and the toll funds being sucked onto the general fund rather than specifically for road repair, like GCDEC banking their 1% and asking the county to supplement their funding.

The real problem is when these Authorities become part of the political abyss and loose focus of their actually mission. The GCDEC is supposed to bring industry, meaning manufacturing and agricultural enterprise to the county, NOT shopping centers. If the GCDEC wants to pay Steve Hyde $200,000 fine let them, but out of their result generated 1%, not out of our county budget.

But do not delude yourself into thinking that if you eliminate the IDA's and not give tax incentives that you will compete with the rest of the nation for manufacturing jobs that the county will be successful. Because it won't,

Significantly reduce income tax or totally eliminate it, reduce property taxes, reduce or eliminate a large majority of the more cumbersome business and labor regulations the state places on small to mid size businesses, and yes, offer reasonable and well targeted tax incentives and abatements to MANUFACTURING businesses and the retail and service industry will grow on it's own, the average citizen will pay less taxes and the economic flurry will replace the higher tax rates with more tax revenue from a broader tax base.

Only the Town of Batavia voters can control who sits on their county seat, only the city voters can control about who sits on their seat. Blasting Mary Pat when your legislator has continuously voted for county tax dollar funding for the IDA is misdirected, perhaps targeting some of that to Mr. Ed who has largely run unopposed might yield you more acceptable results.

May 17, 2013, 1:54pm Permalink

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