The Erie County Industrial Development Agency on Monday approved $4.9 million in incentives for Catholic Health System’s planned $46 million headquarters in Buffalo after a lengthy debate about when incentives are truly necessary for projects.
The board approved the incentives by a vote of 12-1, with one abstention. County Executive Mark C. Poloncarz cast the lone “no” vote, saying he was not convinced that the project hinged on the incentives.
Uniland Development Co. will build the six-story headquarters and regional training center for Catholic Health, consolidating hundreds of employees from several locations into one building at 144 Genesee St., between Oak and Elm streets. Catholic Health will lease the building from Uniland, but Catholic Health ultimately plans to buy it, possibly in two years, said John C. Cappellino, the ECIDA’s executive vice president.
A Uniland affiliate applied for the $4.9 million in incentives, but the tax breaks are structured to flow to Catholic Health, ECIDA officials said. The tax breaks consist of property tax abatements of $3.5 million, a mortgage recording exemption of $320,000 and a sales tax exemption of $1.1 million. Catholic Health will reimburse Uniland for the property tax bill, and the sales tax savings will be passed on to Catholic Health via a reduction in rent, according to the ECIDA.
The $3.5 million in property tax abatements is based on a seven-year schedule. But if nonprofit Catholic Health buys the 140,000-square-foot building, the property would be removed from the tax rolls, Cappellino said, because nonprofits do not pay property taxes.
Employment is projected to rise by about 50 employees, to 652, at the building two years after the project is completed, the ECIDA said.
Mayor Byron W. Brown said the headquarters project “meets the test to be induced.” The project is also receiving $3.8 million in state development funds obtained through the efforts of Brown and Assemblywoman Crystal D. Peoples-Stokes, D-Buffalo.
“It’s been demonstrated to us, on the city economic-development side, that there is a significant-enough gap that this project would not go forward without the assistance that the city was able to provide working with the state, and I think it would not go forward necessarily without this inducement,” Brown said. “And so this is not the case or the story of a developer trying to put more profits in its pocket. I think this is certainly incentives and benefits that are necessary to move this project forward.”
Catholic Health CEO Joseph D. McDonald has previously said the organization considered a number of proposals from developers in the city and suburbs but leaned toward a downtown location.
Poloncarz praised the headquarters project but questioned whether the tax breaks were necessary.
“This project, while it is a great … for the expansion of downtown Buffalo and for the Medical Campus, is in some ways similar to the smaller projects that I have been critical of, and that other people have been critical of, the town IDAs passing, which is just shuffling pieces on the chessboard and offering incentives to make that happen,” he said.
Poloncarz made a broader point about the purpose of incentives: “We’re inciting a party to do something they otherwise would not do. It’s a carrot. … It shouldn’t be a reward for something that they were going to do otherwise.”
Michael J. Montante, vice president of Uniland, said the ECIDA incentives were essential to the plan. As an example, he said, a city-based project such as this comes with much higher costs than a “greenfield” suburban site to provide parking for 700 vehicles.
The city site, he said, will require a three-story parking garage to help create that many spaces.
“That difference alone, between a greenfield and urban structured parking, is $9 million,” Montante said. “That’s a significant difference to the project. So the inducement you’re contemplating today is extremely important based on just that one factor. There are other factors, as well.”
Assemblyman Sean M. Ryan, D-Buffalo, had urged board members to reject tax breaks for the project, saying he did not believe they were necessary. Ryan has called for IDAs to be more selective in awarding incentives.
“I was at the groundbreaking” in November, Ryan said in an interview. “We cut the ribbon. The project is going forward.”
Ryan also said he wanted to see written documentation that the approved incentives would flow to Catholic Health, instead of Uniland.
Montante addressed why a ceremonial groundbreaking was held before the ECIDA voted on the incentives.
“We went forward in good faith,” Montante said, “because we felt that this project was eligible for inducement.”