The bill stands at $3.3 million and counting.
That’s how much the City of Lackawanna says a local company owes in outstanding property taxes and interest going back to 2009.
City officials say the overdue bill – which amounts to 13 percent of Lackawanna’s budget – is causing havoc with the city’s finances, and they’re pushing the owner of the vacant manufacturing facility to pay up.
The company says the city erred in how it calculated taxes for the 31-acre site in 2009 and 2010.
In addition, the company maintains that the site isn’t worth nearly the $4.1 million at which it is assessed.
And yet the property currently is on the market for $7 million and was previously assessed at $12.5 million under a different owner.
The dispute pits a well known developer – Peter Krog – with several major projects on his resume, against a city with limited funds and its mayor – Geoffrey Szymanski.
G.K. Commerce Drive – and not Krog personally – is the owner of the property, but the distinction hasn’t hindered Szymanski from putting the onus for the tax payment upon Krog, whose parent firm established the company in 2009.
“The money he owes in back taxes is nothing to sneeze at,” Szymanski said. “He doesn’t like the assessment and he says it’s worthless property, but it wasn’t worthless when he bought it.”
The lawyer for G.K Commerce Drive sees it differently.
“We believe there is absolutely an incorrect tax roll that generated a significant amount of taxes that should not be there,” Jonathan D. Schecter said. “We’re trying to get that ultimate number correct.”
The lack of payment has been particularly onerous for the city, because the city treasurer collects taxes on behalf of both the city and the Lackawanna City School District, and the city guarantees payment to the school system, the mayor said.
The city already has paid the district for the past due taxes – more than $1 million.
The mayor was so frustrated by the pace of negotiations with Krog that, earlier this year, he sent forceful letters to Gov. Andrew M. Cuomo, County Executive Mark C. Poloncarz and several state legislators, urging them to intervene.
In the letter, the mayor accused Krog of agreeing to a structured payment plan in 2012 and then reneging on the deal and trying “to walk away from paying back taxes owed.”
But Schecter said no deal was ever reached.
“That is completely false,” he said.
Schecter also described the mayor’s letter as “borderline slanderous.”
“We’ve been trying to find a valid, fair resolution,” he said. “There has been open communication with the city trying to resolve the situation. There has been no ducking the city whatsoever. Nobody’s looking for a freebie here.”
At a combined 253,000 square feet, the two-building plant is the size of several football fields. It formerly housed Great Lakes MDF, which made fiberboard until shutting its doors in 2008.
G.K. Commerce Drive bought the property for $3.6 million in 2009 and challenged the city’s then $8 million assessment. The city agreed to cut the assessment in half, but the company still hasn’t paid a dime in property taxes, according to city tax records.
City and school taxes over four years amounted to $2,052,219. An additional $1,328,134 accumulated in interest.
The company also owes Erie County $458,277, according to county tax records.
Schecter would not specify an amount that G.K. Commerce Drive believes it owes, but he said the company has “offered some good solutions to get the rightfully due taxes paid.”
“My client understands how important this is to the city,” he said. “We would like to continue to find an amicable resolution. I hope that we can get there. I think we’ve had some positive meetings recently.”
The city twice has initiated foreclosure proceedings, but city officials currently are in negotiations with Schecter and Krog, whose Krog Corp. established G.K. Commerce Drive as a limited liability company in 2009.
Szymanski has been critical of Krog, an engineer and developer who has won several large design and construction contracts in Western New York and other parts of the state.
In 2011, the Town of Hamburg selected Krog Corp. as the designated developer for redevelopment of a 145-acre former Bethlehem Steel property near Route 5 and Bayview Road. Krog also is designated developer for the Tecumseh Business Park, an industrial park being developed on the former Bethlehem Steel property now owned by Tecumseh Redevelopment Inc.
The plant on Commerce Drive – which consists of 170,000 square feet of manufacturing space and an 83,000 square feet of storage – hasn’t lived up to the great promise that accompanied its opening on 31 acres in 2000.
CanFibre Group, a Toronto company, received tax breaks from Erie County Industrial Development Agency in return for spending $135 million to build the plant.
The facility was sold in 2003 to Great Lakes MDF.
Great Lakes, which employed about 90 people, tried to initiate an appeal of a $12.5 million assessment on the property shortly before shutting down operations in 2008.
G.K. Commerce Drive acquired the property in 2009 for $3.6 million, according to a News listing of real estate transactions. It’s unclear whether the company paid an additional sum for the equipment inside. But the equipment apparently was sold and removed, and the buildings are now empty.
The property currently is listed for sale by Hunt Real Estate for $7 million.
Schecter said the company has been courting potential tenants.
“G.K. Commerce is trying to actively lease it ... put employment in there and keep it going,” he said.
The company is seeking an assessment closer to $2 million and wants to be able to spread the payments owed to the city over a number of years, according to city officials.
“We’re willing to listen, but we can’t just forgive everything,” said Frank E. Krakowski, city assessor. “Nobody likes to pay interest, but to some extent, you’re creating the interest and penalty by not paying the principal.”