Big tax breaks offered by the Erie County Industrial Development Agency helped lure a Canadian firm to invest $50 million for a new industrial facility at the former Bethlehem Steel site in Lackawanna.
But now, Lackawanna city officials are asking why they had no say in the negotiation process that led Welded Tube of Canada to locate a 109,000-square-foot facility on 45 acres of the brownfield along Route 5.
The deal will bring industrial activity to an area that has been dormant for decades. Welded Tube plans to take flat steel at the site and cold-form it into rounded tubing for sale to oil and natural gas drillers.
The facility could mean as many as 120 jobs, although it’s unclear whether any of those employees will be Lackawanna residents, causing city officials to wonder what benefits the city will get out of the deal.
The ECIDA’s standard payments-in-lieu-of-taxes agreement, or PILOT, with Welded Tube waives property taxes for the first seven years of the project. Welded Tube will be required to pay 10 percent of property taxes in the eighth year, 20 percent in the ninth and 30 percent in the final year of the 10-year agreement.
Mayor Geoffrey M. Szymanski said that most IDA tax-abatement projects don’t last beyond seven years for a host community to realize any significant tax benefit, and they often end up costing city taxpayers.
“They leave us with abandoned buildings, they punish our infrastructure, and we get nothing in return,” Szymanski said.
The mayor has been at odds with City Council members over other city issues, but the two branches of government were united in their distaste for how the ECIDA crafts its standard PILOT deals.
At its most recent meeting, the Council voted unanimously in favor of a resolution asking that city officials be brought into negotiations that involve “tax alleviation” for businesses locating in Lackawanna.
The resolution cited negative effects on the city that can accompany ECIDA tax breaks, including “heavy abuse of infrastructure, leaving prior to the end of the agreement, leaving unusable buildings” and putting a burden on city services such as police and firefighting.
“It’s more or less ridiculous that the municipalities involved with these projects do not have a seat at the table,” said Henry R. Pirowski Jr., Council president.
ECIDA officials said they were willing to sit down and discuss the concerns of city officials. But Executive Vice President John C. Cappellino disputed the notion that Lackawanna would receive no tax benefit from the project.
The tax abatement applies to improvements to the property, but Welded Tube is responsible for property taxes on the assessed value of the land it purchased for $812,700.
“We don’t provide any abatement to the land values. It’s only on the new value added to the land,” Cappellino said. “There will be some fairly good taxes brought in just on the land value of that site.”
In the case of Welded Tube, the tax breaks will amount to about $7.7 million over the life of the agreement.
ECIDA Chief Operating Officer Alfred D. Culliton said that New York State prefers uniform tax-abatement agreements and that the idea of bringing in localities to negotiate deals “runs contrary to that.”
Such negotiations would “get pretty overloaded with bureaucrats,” he said, because representatives from Erie County and the school district also would have to be involved.