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New York State is finalizing purchase of the Episcopal Church Home property on Busti Avenue that it has long coveted for expansion of the Peace Bridge plaza, surprising Canadian members of the binational authority that runs the span and possibly ramping up an already tense standoff between the Cuomo administration and the Canadians.

Documents recently filed with the Erie County Clerk’s Office indicate Empire State Development Corp., a state agency, negotiated a purchase price of $4.7 million for the property and associated costs, approximately $3 million more than its appraised value.

The Buffalo News tried for more than a week to discuss Peace Bridge matters with the Cuomo administration, but officials in Albany and Buffalo did not respond.

But after the story appeared online late Saturday, Karen Rae, deputy transportation secretary, offered this statement: “Only New York State funds, specifically allocated for this purpose in the 2012-13 enacted budget, are being used for this purchase, which will be part of Peace Bridge Plaza and neighborhood improvements. New York will not seek reimbursement from the Peace Bridge Authority for this purpose.”

In a follow-up statement, Rae added that the Episcopal Church Home “made clear that if they could not pay their creditors, they would sue PBA to block a sale – a proposition that would result in years of litigation, delaying progress further while the blight of the property continues to wreak havoc on the entire community. The $4.7 million settlement resolves over $16 million in outstanding ECH liens, securing it for a possible expansion of the Peace Bridge Plaza and eliminating a blighting condition on the neighborhood.”

Administration sources also said a legal fight over condemnation might have resulted in a court assessing the property at its value before it was subjected to a “cloud of condemnation” created by the authority, and that a negotiated settement avoids those risks.

Peace Bridge Authority Chairman Anthony M. Annunziata – a Canadian – said the state’s move to acquire the Episcopal property was news to him, and that the imminent purchase amounts to a moot point unless New York also acquires Busti Avenue from the City of Buffalo. The street would provide access to the church property, which is the planned site of the expanded plaza, as the governor promised last August.

“There is no formal agreement or even informal discussion with ESD over that development,” Annunziata said, referring to the state agency’s plan to expand the Buffalo plaza of the Peace Bridge. “You’d think they would have a discussion with the Peace Bridge if that was their stated plan.”

Relations between Canadian and American members of the Peace Bridge Authority are at their lowest ebb in the 86-year history of the international span over the pace of development on the U.S. side. Gov. Andrew M. Cuomo’s appointees to the 10-member authority have criticized the Canadian delegation in recent weeks for “foot dragging” on projects such as acquiring the Episcopal Church Home. The Canadians in turn have accused Cuomo of failing to recognize the binational nature of the authority.

The state development agency’s latest move also contradicts the state’s original promise to buy the now-vacant nursing home complex through its power of eminent domain. Cuomo announced that plan more than a year ago via ESD regional President Sam Hoyt, who is also leader of the New York delegation to the Peace Bridge Authority.

“It’s a very clear message that this is our top priority in transportation infrastructure in Western New York and maybe all of upstate New York,” Hoyt said about 13 months ago regarding eminent domain acquisition of the Episcopal property. “We will do everything we can to make it happen quickly.”

Sources close to the situation say eminent domain would have allowed the state to purchase the properties at a much lower price, especially since it was appraised at around $1.7 million. But New York officials, they added, never followed that process and instead negotiated the $4.7 million price.

In a Feb. 21 memo to the Empire State Development board of directors obtained from the agency’s website, President Kenneth Adams acknowledges the “negotiated price is significantly higher than the appraised value.”

“However, the sale price was negotiated to permit ESD to acquire the property free of all liens and encumbrances,” he said, except for a U.S. Housing and Urban Development lien for $8 million. “As such, many of the creditors will be paid substantially less than what they are owed.”

Adams also told his board that absent purchase by the agency, the complex liens on the property “make it unmarketable and subject to potential foreclosure.”

Sources familiar with the situation said the Peace Bridge Authority was never informed of the state’s plan even though Hoyt serves as regional president of ESD as well as the state’s lead representative to the bridge’s board.

Peace Bridge officials say they paid $42,000 for appraisal services with the idea that the state would exercise its power of eminent domain for the church property. The authority last year also purchased the HUD lien for $1 million – moves Annunziata said were designed to demonstrate a spirit of cooperation with the state.

New York’s filing to purchase the Episcopal property also includes a request for proposals to begin the process of demolishing the former nursing home and related properties.

Last fall, the Peace Bridge Authority suggested it could purchase the Episcopal property and do it faster than the state could, but that suggestion came with the understanding the authority would agree to the same terms the state struck with Episcopal Church Home, according to the statement released late Saturday.

But by December, the Canadian members of the authority wanted to renegotiate the deal, which the state objected to because the deal was finalized. Any change would have set the acquistion back further, the statement said.

The purchase, which still must be approved in State Supreme Court because of liens and back taxes associated with the property, appears to sharpen even more the dispute between the authority’s two delegations. Though Canadians have long discussed the possibility of obtaining the parcels to achieve U.S. goals for an expanded plaza, they now raise questions in light of what they call unfulfilled objectives previously announced by the Cuomo administration.

Since the governor announced Aug. 24 that the state would buy the Episcopal Church Home and Busti Avenue, Annunziata said the state has offered no indication it will successfully secure either property. He emphasized the Episcopal Church Home parcels cannot be used for plaza expansion until Busti Avenue is acquired.

City officials, meanwhile, report no substantive steps toward acquisition of the city street.

In response to Cuomo administration complaints that the Canadians had stymied progress on the U.S. side of the bridge, Annunziata produced a list of actions by the New York delegation that he said delayed action.

To begin, he noted the 11-year delay caused by a required environmental impact statement when a new bridge was under consideration at U.S. insistence.

And now, he said he fears that more environmental impact studies required for some aspects of plaza expansion on the U.S. side might halt progress for $50 million in previously approved projects, plus $100 million to replace the bridge’s deck.

Acquisition of Busti Avenue is key for the plaza project, he said, and serves as another example of a delay on the American side.

“The governor announced on Aug. 4 he had an agreement with the city,” Annunziata said. “Where is the agreement? Where is the power of eminent domain you promised to deliver?

“If we had Busti and the state gets the Episcopal Church Home ... then we can talk about what plaza expansion might be – though they have not shared that with us,” he added.

Annunziata also said the Canadian delegation would be “very willing” to work with the Americans on plaza expansion as long as it does not jeopardize the other previously approved projects. He fears, he said, that the projects would require environmental impacts that could halt construction.

Annunziata expressed concern that the state’s purchase of the Busti Avenue and the church property on Busti could backfire if a planned pilot project for preclearance of U.S.-bound trucks in Fort Erie, Ont., ultimately fails. That project, aimed at opening space on the Buffalo side, will begin later this year with results expected in 2015.

If the experiment does not succeed, he noted, truck inspection would have to return to the Buffalo plaza and the state’s expansion plans could not go forward.

The international dispute that has disrupted normally friendly U.S.-Canadian relations centers around the Cuomo administration’s claims that the Canadian delegation has foiled aggressive state actions to expand the Buffalo plaza to improve traffic flow and expand economic development.

It boiled over in late April when Hoyt and company demanded the termination of General Manager Ron Reinas, a Canadian they have blamed for lack of progress but whom the Canadian delegation has defended. Annunziata, in turn, has demanded that Cuomo replace Hoyt as head of the New York team.

The situation could come to a confrontational head on Friday when the Peace Bridge Authority holds its next scheduled meeting.

email: rmccarthy@buffnews.com