In the end, it wasn’t even close.
After months of sometimes contentious debate, the Erie County Industrial Development Agency granted $10 million in tax breaks to Uniland Development Co. for its Delaware Avenue office and hotel project.
The 15-2 vote clears the way for work to begin next month on the 12-story office tower at 250 Delaware Ave., at West Chippewa Street, that will serve as headquarters to Buffalo-based concessions giant Delaware North Cos.
The new building will continue the emergence of the Delaware Avenue corridor as a premier business district. Recent nearby developments have included the New Era corporate headquarters, the Avant building and the Hampton Inn & Suites.
“We appreciate the show of support,” said Michael J. Montante, Uniland’s vice president.
“This project is also about bringing a new level of economic vitality to a portion of the central business district that has struggled in recent years,” he said, noting that the complex is expected to generate an average of $850,000 a year in additional tax revenues over the next decade. “We took the risk on the site, and there is a return for the community.”
Montante said he expects the complex to be ready for Delaware North to move in by the summer of 2015. “We’re right on schedule,” he said.
Delaware North is currently based in the Key Center two blocks away on Main Street. Delaware North would occupy about 110,000 square feet of space in the 472,000-square-foot complex. About a quarter of the complex will go toward a 119-room hotel that will also serve as a training center for Delaware North’s hospitality business. That portion of the project is not receiving any tax breaks.
The complex also includes about 94,000 square feet of office space that Uniland officials said Delaware North eventually could fill as it grows, but for now, that space will be available to other tenants. The complex also includes a 380-car parking ramp.
County Executive Mark C. Poloncarz voted for the tax breaks, saying taxpayers are protected by provisions that allow the tax benefits to be recovered if Delaware North fails to meet its investment or fails to create the 65 good-paying jobs that it is promising to add to its headquarters staff, which now numbers 350.
“We will hold Delaware North and Uniland accountable,” he said.
Poloncarz noted that both Uniland and Delaware North had indicated the project would not go forward without tax incentives.
“I want to see real, new net economic growth,” he said. “We’re looking at a project that creates 65 new jobs and retains Delaware North’s headquarters in Erie County.”
“It’s important that we look at the grand picture,” added Poloncarz, who said the approval of the project shows that the region is “open for business.”
Board members Michael H. Hoffert and Richard Lipsitz voted against the tax breaks. Lipsitz expressed concern that the benefits of the project would not help improve the standing of the region’s lower-paid workers. “The benefits must not stay at the higher level,” he said. “The benefits must spill over to the lower level.”
Hoffert said the ECIDA needs to rethink its broader policy toward providing tax breaks for projects such as the Uniland complex.
“There are community benefits here, but I don’t think it’s enough,” he said. “I think we’ve lost our way. I think we need to change our standard benefits. It’s not wealth building. I think we’re putting profits before people.”
But board member Dennis W. Elsenbeck said the vote had a broader purpose.
“For me, economic development is all about momentum and the signal that we’re sending to the market,” he said. “What’s our heritage of global headquarters? We have precious few, and we need to cherish them.”
Critics have said the project will add to a glut of vacant office space without creating any new demand to fill those vacancies. Delaware North’s move will create a big vacancy in the Key Center, while One Seneca Tower, the former One HSBC Center, on Main is on the brink of becoming virtually empty.
The owner of Key Center last week threatened to take legal action to block what it contends are “illegal” incentives for office space that does not have a tenant. Erwin Zafir, managing member of Key Success LLC, also contended that the taxpayer-subsidized office space would create a competitive threat for Key Center’s other tenants and make it a challenge for the twin tower complex to fill the 22 percent vacant space that it already has, plus the space that Delaware North would leave.
ECIDA officials Monday released an Aug. 8 letter from Zafir to Jeremy M. Jacobs Sr., Delaware North’s chairman, in which the landlord told Jacobs it was “imperative that you vacate” the Key Tower space by the end of July 2015 so it could begin construction for new tenants and common areas at the beginning of August 2015.
“We have numerous mid-size tenants interested in long-term transactions commencing on or about your expiration date,” Zafir said in the August letter.