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Story We Broke Last May About Uniland-Delaware North Deal Is Suddenly a Hot Item as Taxpayers Question Public Incentives

By Tony Farina

Delaware North currently leases space at the Key Center, but wants to move its global headquarters two blocks to Delaware and Chippewa in downtown Buffalo as part of Uniland's proposed $94 million hotel, parking garage, and office space project. Both companies want big government subsidies to complete the deal that would cost Key Center its major tenant.

I wrote a story last May that Uniland Development was likely to seek taxpayer funds to lure Delaware North from its current home in the south tower of the Key Center to its recently acquired property at the corner of Delaware and Chippewa in downtown Buffalo, just a few blocks away.

None of the players were talking when I wrote that story, but now it is happening and the effort is under way to get that local and state assistance to assist the two giant companies complete the move that some critics see as the kind of corporate welfare that creates an uneven playing field and reduces revenue to surrounding municipalities and school districts because of the tax breaks involved.

A public hearing on the $94 million Uniland project was held last week at the offices of the Erie County Industrial Development Agency with Uniland requesting a public assistance deal that would include sales and mortgage tax abatement and a payment-in-lieu of taxes package. But that's not all. Uniland is also working with Empire State Development (the governor's chief economic development agency) on an incentive package to harness even more taxpayer assistance for the project. And Delaware North says it needs, along with Uniland, millions of dollars in tax breaks to make the move work.

Uniland's Jill Pawlik says ECIDA's mission "is to support projects that ultimately improve the quality of life for its residents," and "ECIDA and Uniland have a unique opportunity at 250 Delaware to structure the development of a parking garage (515 cars) that provides a community benefit by alleviating a public parking shortage in the area."

So there it is! Uniland says ECIDA is justified in handing out a big incentive package because the developer is going to build a parking garage. Never mind that some see Delaware North's move out of its current home at the Key Center as the death knell of that building.

While critics of the proposed government incentive package are starting to come out of the woodwork, only one spoke at last week's ECIDA hearing. Civic activist Ellen Kennedy, a retired college professor, questioned why such hugely successful companies like Uniland and Delaware North would need taxpayer assistance to do the project.

Kennedy said of the tax breaks being sought that "I can't imagine that they [Uniland, Delaware North] need them," an obvious acknowledgement of the enormous wealth possessed by the two companies seeking the taxpayer handouts.

Prominent Buffalo developer and former state gubernatorial candidate Carl Paladino has weighed in on the suddenly controversial deal and in a memo to city and county leaders said the following:

"It appears from the limited information available that by combining the Brownsfield program with enhanced benefits of an En-Zone and a PIF (PILOT Incremental Financing): (a) Uniland will pay little or no real estate taxes on the project for the next 10 years and will get a free parking ramp in the process; (b) the city and county will realize little or no incremental real estate taxes from the project for 10 years and will suffer a reduction in real estate taxes from Key Center; and (c) the State will end up paying for the parking ramp with tax credits."

Paladino questions how state and local development officials can possibly justify "subsidizing a new spec office building when HSBC Tower is about to dump 850,000 square feet of Class A office space on the market, the relocation of Delaware North from Key Center will dump another 110,000 square feet on the market, and Uniland is proposing to construct 100,000 square feet of spec office space as part of the project? How can the State justify subsidizing a new hotel property?"

Paladino also responded to Uniland's warning that unless the deal gets taxpayer assistance Delaware North may move its global headquarters out of Buffalo, saying there is no substantiation from Delaware North that it will leave as claimed "which we assume is a misrepresentation."

The owner of the Key center, New York City-based Erwin Zafir, told us last May that Delaware North was a good tenant and that he didn't want to be left holding the bag in a Delaware North-Uiland deal that will seriously devalue his property and leave it 50 percent vacant. But that's exactly where he is today, with Delaware North bound for Uniland when its lease expires in the summer of 2015, assuming Uniland and Delaware North are successful in getting the public help they are seeking, although the strong criticism now beginning to emerge may give pause to county and state officials on agreeing to the requested public incentives.

Ironically, according to sources familiar with the impending move, the Key Center had signaled its intent to raise Delaware North's rent after losing its own puiblic subsidy. Now, Delaware North will move two blocks to the Uniland site and a brand new building and save on its rent because, thanks to the expected tax relief and other public assistance, Uniland will be able to charge a lower rent and make life is a little better for Delaware North, which according to public documents will put up $7.6 million toward the project, chicken feed for a $2.6 billion company.

The ECIDA is expected to vote on the handout to Uniland at its meeting on Nov. 18. The authority's policy committee is currently reviewing the aid packages which until the last few days seemed like a fait accompli which is the way it looked last May when I first wrote about Uniland's plan to seek taxpayer help for the move.

In addition to providing a new home for Delaware North's new global headquarters, the Uniland project will also include, besides the parking garage, a 119-room hotel.

What will happen to Key Center, if, as expected, Delaware North bids farewell, is anybody's guess. But if the owner was correct last May when he told us it would devalue his property by 50 percent, the future of the twin tower Key Center is not very bright. Replacing the 350 employees that make up Delaware North's global headquarters will not be an easy task.

We reported last May that Uniland, the largest developer in the Buffalo-Rochester corridor, had acquired the property at the corner of Delaware and Chippewa last September for $3 million. And in that story we raised the question about whether it was good policy to hand out taxpayer money to hugely successful Uniland to lure Delaware North from Key Center and change the downtown landscape.

Among those who were questioning what is now happening was David Sweet, president of Main Seneca Corp., who believes corporate welfare in the form of IDA handouts "creates unfair competition" by luring tenants away from competitors.

"My slant is companies should start doing [things] with their own money," said Sweet. "I don't agree the competition should be buttered up with money. Why do they keep handing out taxpayer money to change the competition," adding that it has happened time and time again in the local development arena.

Well, Mr. Sweet, it might happen again. Developers get public dollars to solidify their profits while other building owners get hurt and injured through the loss of tenants to a building which is newer and can now afford to offer lower rents because of the government subsidies.

What was especially amazing about the Uniland deal was that until the last few days, it was being treated so casually in local media reports with almost no input from the damaged party (Key Center) and no concern about another major giveaway of tax dollars to a rich developer looking to sweeten his profits. All that seems to have changed in the last few days as details of the big incentives being sought have finally caught the public's attention.

Uniland is one of two groups selected to take part in the RFP process to bid on developing the vacant portion of the Rainbow Mall in downtown Niagara Falls. USA Niagara, a subsidiary of Empire State Development, led the process to select potential developers for the Rainbow Mall, and the two finalists are Uniland and Canadian-based Intertrust Development Inc. Interestingly enough, Uniland's partners on the Rainbow Mall project include Delaware North and Canon Design from Grand Island. The RFP's for the mall development are due shortly and a selection could be made by the end of the year, according to published reports.



Niagara Falls Reporter - Publisher Frank Parlato Jr. www.niagarafallsreporter.com

OCT 29, 2013