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By Mike Hudson

Off the record, any number of developers and entrepreneurs will tell you that the biggest obstacle now standing in the way of the revitalization of Niagara Falls is the city's mayor, Irene Elia.

Over the first three years of her administration, she raised property taxes by a whopping 23 percent, and a controversial 2001 reassessment increased the tax value of many hotels and other commercial properties in the city's South End by as much as 50 percent.

Additionally, she has embroiled the city in numerous lawsuits with developers, unions and individuals which have drained precious resources and taken attention away from the far more pressing issue of redevelopment.

Few are willing to go on record with their criticism, however, citing Elia's well-known penchant for seeking revenge against those she perceives as enemies. That she has the power to make life difficult for those seeking to do business in the city is a given, and she has shown a willingness to exercise that power on many occasions.

But last week, when millionaire Toronto developer Eddy Cogan sold his stake in Niagara Falls Redevelopment to his former partner, billionaire New York City real estate mogul Howard Milstein, he became free to discuss his often frustrating dealings with Elia and her administration.

The partnership agreement between Cogan and Milstein included what is known as a "shotgun clause," allowing one to buy the other out for the amount invested plus a profit. Cogan exercised the clause last month and Milstein made a higher counter-offer on Dec. 6, effectively ending the partnership.

Cogan and NFR officials refused comment on the terms of the deal, but Cogan is rumored to have received upwards of $10 million for his stake. Both sides described the deal as amicable.

While NFR holds options with the city on approximately 160 acres of South End real estate, and the company recently reached an agreement to buy the former Nabisco plant from Kraft foods, a key holding is the former Splash Park property at the intersection of Rainbow and John B. Daly boulevards.

In its gaming agreement with the Seneca Nation of Indians, the state cited the Splash Park property as a site for parking at the temporary casino, set to open New Year's Eve at the former convention center, and for construction of the permanent casino.

There was just one problem. While the Elia administration assured the state that it had control of the property, a complex 1999 agreement gave NFR an option to buy the Splash Park in return for local attorney John Bartolomei dropping his multi-million dollar lawsuit against the city. At that point, Bartolomei and NFR became partners in future development at the site.

"The city -- at that time it was (former mayor) Jim Galie -- begged us to get Bartolomei off their back, now he's become a friend and a partner," Cogan said. "No taxpayers got burned on the Splash Park deal, and it got rid of an $80 million legal liability on the part of the city."

But Elia decided she didn't like the deal, and acted as though it didn't exist. The administration went so far as to give the Senecas permission to begin demolition work on the property until state Supreme Court Judge Ralph Boniello issued a temporary restraining order halting the work. After Bartolomei complained that the order was being ignored, Boniello directed the city, at its own expense, to build a fence blocking access to the site.

"I offered to buy Howard Milstein out and he turned around and bought me out," Cogan said. "What does that tell you? It tells you that both he and I, our attorneys and our bankers, are very confident of our position in the Splash Park litigation."

Various appraisals on the Splash Park land since the Senecas signed the casino compact have ranged from $30 million to $60 million, sources said, and any attempt to take the property over through eminent domain could delay the permanent casino plans by as much as 18 months. Given what's at stake, it isn't likely that Bartolomei and NFR will give up their claim without a protracted legal battle that could cost the city millions in attorneys' fees alone.

Additionally, Bartolomei has indicated he will likely reinstate the lawsuit he dropped as part of the 1999 agreement and NFR could seek damages as well.

Why would the mayor risk placing the financially strapped city in such a precarious legal position?

"I don't think she's making these decisions," Cogan said. "Whoever's pulling the strings is starting to smell money and they see us as standing in the way of the money."

Cogan said that, despite Elia's intransigence, he sees a bright future for Niagara Falls. He is currently working with Norstar Development and TBI Airport Management on plans to return the Niagara Falls International Airport to local control, and is assisting hotelier John Prozeralik and the Niagara Falls, Ont., Gracechristi Co. in turning the Days Inn Riverview and the Inn on the River into luxury timeshare condos and a four-star hotel, respectively.

He also expects to be working with NFR as projects come up, and said that the company -- which has spent more than $20 million here since 1997 -- will be a major player in the future revitalization of the city.

"I put five years of my life into this city, it's been my dream," he said.

A big part of that dream has centered around the concept of "two countries, one city." Cogan has frequently accompanied Niagara Falls, Ont., Mayor Wayne Thomson to this side of the river in order to discuss areas of mutual interest -- such as the airport -- with local business people.

This is in sharp contrast to Elia, who once referred to her Canadian counterpart as "Mayor Thomas" during a ceremony held on the Rainbow Bridge.

The fact that the two Niagara Falls are linked in his mind has often put Cogan at odds with the Buffalo Niagara Partnership, which sees Niagara Falls, N.Y. as little more than a colony for the City of Buffalo. In addition to Elia, Niagara County Legislature Chairman Bradley Erck and the Niagara USA Chamber, both of the area's daily newspapers have close ties to the Buffalo interests, making it difficult to get anything done here.

"Those people are brain-dead," he said of the Buffalo Niagara Partnership's leaders. "If they weren't, you wouldn't see the differences between Fort Erie and Buffalo, between the two Niagara Falls."

Niagara Falls Reporter www.niagarafallsreporter.com December 17 2002