The $100 million medical office building proposed for the Buffalo Niagara Medical Campus is getting its tax breaks after all.
The Erie County Industrial Development Agency on Monday approved $4.2 million in tax breaks for the project, a month after the agency’s board delayed a vote to provide incentives for what critics called a “glorified medical office” that didn’t require taxpayer help.
The ECIDA approved the incentives Monday by a 13-1 vote after the project’s developer, Ciminelli Real Estate Corp., made a case that the building would be much more than medical offices.
They described the building as a medical health center that would become a vital link between the new pediatric hospital planned for the Medical Campus and ancillary services that would be located in the new building, along with the relocated University at Buffalo medical school and the physicians who are part of the UBMD practice.
“This is not simply a medical office building,” said Buffalo Mayor Byron W. Brown. “It is a medical center that is a critical component in the siting of the new Women’s and Children’s Hospital.”
Erie County Executive Mark Poloncarz, who joined three other board members in challenging the tax breaks last month because he believed the development and growth of the Medical Campus should serve as enough of a draw and an incentive to ensure that the project happens, cast the lone vote against the tax breaks.
“This is an excellent project,” he said. “While they did provide us with additional information, they did not provide information that indicated they would not go forward with the project without tax breaks.”
“They’re going to make a lot of money on this project in year one,” he said, noting the handful of major developments now under way on the Medical Campus and along the waterfront. “When do we stop giving tax breaks? Or do we give them to everyone? We’re not so desperate for projects as a community anymore.”
But Ciminelli executives said the tax breaks were essential for a building that they said would earn a below-average return of about 9 percent, even if it is almost fully occupied, because of costs that are about one-third higher than for a comparable building in the suburbs. Even with the incentives. Ciminelli said the Medical Campus costs are higher because suburban development could have surface parking and could use lower-paid construction workers. Using nonunion firms in the city frequently draws protests.
To help gain ECIDA approval, Ciminelli reached an agreement in principle with the Buffalo Building and Construction Trades Council to hire 90 percent of the project’s construction workforce locally, with a goal of at least 20 percent being women and minorities. Ciminelli agreed to focus its hiring first on workers from Erie County and then from the seven other counties in Western New York in filling the construction jobs.
“This is the first significant piece of a game-changing development,” said Michael Hoffert, an ECIDA board member who also is president of the Buffalo AFL-CIO Council. “This agreement will certainly promote the growth of the Western New York building and construction trades.”
UBMD executives, answering critics who questioned the project’s benefits to the nearby community, told the board that it provided more than $5 million in unpaid health care to the community last year and that it believes the project will provide Medicaid recipients and other low-income patients with greater access to its services.
“We’re pleased they took a thoughtful approach and approved the project,” said Dennis M. Penman, Ciminelli’s executive vice president and a former ECIDA chairman. “I understand the nature of a retail medical office project. You have to drill down and see what the community benefit of this project is.”
The project involves the construction of a six-story building with 287,000 square feet of space and two levels of underground parking, Kaleida Health has tentatively agreed to lease 30 percent of the space and would locate ancillary services there, including rehabilitation and ambulatory surgery facilities.
UBMD, which has tentatively agreed to lease slightly more than 20 percent of the space, said its location next to the planned John R. Oishei Children’s Hospital would enhance its ties to the UB medical school, which also is set to relocate to the Medical Campus, and would enhance the training and educational opportunities available to the medical students who work with its physicians.
“We’re sort of moving toward the medical university center concept. It’s a medical center. It’s collaborative between the hospital and the university. It has a research component to it,” through a potential medical device research center being discussed with Moog Inc., Penman said. “The project will help realize the potential we’ve all been hoping for with the Buffalo Niagara Medical Campus.”
The tax breaks include $3.5 million in sales tax savings and a $740,000 reduction in mortgage taxes. The project, which would not receive property tax breaks through the ECIDA, would generate $1 million a year in new city property tax revenues and an additional $191,000 annually in county property taxes.
While the eligibility guidelines followed by all of Erie County’s IDAs generally prohibit tax breaks for medical office buildings, the policy does allow incentives for facilities that go beyond simple office space. “Without the sexy components to the project, it would not be eligible,” said Andrew J. Rudnick, an IDA board member and president of the Buffalo Niagara Partnership.
Developer Paul Ciminelli, who was angry after last month’s vote was delayed because the board was one vote short of the support needed to approve the incentives, took a more understanding view Monday. “It’s a big project and it’s a bit complicated. It’s also unique in the implications with medical office policy,” he said.