Tag Archives: Tax credits

Something is Better Than Nothing, but Worse than Everything

8 Mar

Albany’s dysfunction is definitely at fault for “killing” the city, as Donn Esmonde calls it. But not for the reasons – or the issue – he cites.

Buffalo developer Rocco Termini has become the official developer by appointment to the court of Mayor Brown in recent years, and without a doubt has taken up and actually completed a number of high-profile projects in the city. His specialty, for which he’s received the most accolades, is to take an abandoned shell of a building and rehabilitate it to something beautiful and useful. Termini is the principal of Signature Development, which offers lots of rehabbed lofts for rent around town. He has cultivated a reputation as a forward-thinking, city-friendly doer, and it’s well-earned.

His two recently announced projects involved complete rehabilitation and renovation of the decade-long vacant AM&A on Main Street, and the Lafayette Hotel Flophouse on Lafayette Square. Both buildings are beautiful grande dames of downtown, both are dead buildings. To renovate both and lurch them into the 21st century would cost almost $100 million apiece.

Because Buffalo is Buffalo, one can’t just plug $100 million into a dead building and expect to get a reasonable return on that investment (See: al-Issa, Bashar). Tax credits and other government incentives need to be part of the financing mix in order for these projects to get done.

Without them, the buildings are vacant and boarded-up.

But the plans for both the AM&A and Lafayette Hotel projects have been halted. Termini blames 2009 Albany legislation that was supposed to ease the path to completion. As Esmonde puts it,

The law was supposed to hand developers the tax-credit help they needed to revive big, historic buildings. Instead, in typical Albany fashion, it turns out we were handed a near-empty bag. The law touted by Hoyt as a cure-all is, we are painfully finding out, missing key pieces that are the difference between a bang and a whimper.

“It’s not even half a loaf,” developer Rocco Termini told me last week. “It’s nothing . . . This law is useless.”…

…Paterson and his bean-counters are to blame for neutering the law over concerns about its costs. That view ignores the bigger picture: Albany’s short-term outlay in tax credits pays off in the long run as people are put to work; as grand downtown buildings are revived and spur other development; as new property tax dollars flow.

Hoyt slammed Paterson’s budget director, Robert Megna, for persuading Paterson last summer to de-fang the tax credit bill. Hoyt said he is trying to persuade Paterson to now sign a full-package tax-credit law, one that does what last year’s law was supposed to: Make it financially doable for developers to revive historic buildings.

A lot of fingers get pointed at Assemblyman Sam Hoyt over this, because he was one of the law’s sponsors, but also because Termini’s high-profile, well-publicized halted projects and pointed criticisms are directed his way. To ignore the fact that it’s an election year and Hoyt is despised by the Mayor, facing a challenge from Golombek, who is seeking Golisano/Pigeon funding, and is, frankly, an easy target because of who he is. You know – a legacy with a checkered past.

You get the feeling that, when it comes to this disagreement and moaning over historic redevelopment tax credits, that you’re only getting one side of the story. Esmonde spoke with Hoyt, and quotes him selectively to make him sound like a feckless milquetoast.

Termini? He may be the savior of the Webb Building and a media darling, but it’s not widely known that he’s a principal in Burke Brothers Construction, which has had its share of housing court issues, and was cited in yesterday’s Buffalo News story about the failures of the city-subsidized home-ownership program.

When Hoyt’s Historic Rehabilitation Tax Credit legislation was passed by the Albany legislature unanimously in both houses, it contained all of the provisions Termini is complaining about. The governor vetoed the bill as too expensive, and he explained to Hoyt that he would sign it into law if this was corrected.

In the end, the veto threat centered around a few important provisions that enabled banks, insurers, and out-of-state investors to buy the tax credits. So, the choice was: pass a watered-down imperfect law, or risk another veto.

Yet since that time, Paterson has signaled twice that he might allow the necessary changes to go through. If made, there would be a huge positive impact on the budget. Once made, shovels go into the ground throughout upstate. The Lafayette and AM&A’s would be among them, but it would hugely benefit all of upstate. Naturally, this puts thousands of people to work, pulling people off unemployment, returning income and sales taxes to the state. At the same time, the expense to the state is deferred as the tax credit only gets paid out after the project is complete which, in the case of the bigger projects, is likely to be several years down the road when, presumably the economy is much healthier.

Esmonde’s petulant retort:

And if a frog had wings, it would not bump its butt. Look, I want this to happen as much as anybody. But I doubt that a politically wounded governor will agree to something that, in the short run, adds an expense when he is facing an $8 billion budget hole. The time, in my view, to get this done right was last summer, and—as we are painfully learning —that did not happen.

Nor would it have.

Now, an imperfect bill may not work wonders for Rocco Termini, but Hoyt has cited some smaller developers who have hired people to help with their workload since the law was passed.

There was a strategy behind all this. After the veto, the choice would have been to do nothing, or to engage in negotiation and compromise. Choosing the latter path was the only way to retain and maintain the leverage to push for the amendments that were lost – the ones about which Termini is complaining. Without the existing law, they’d be pushing a much heavier cart up a much steeper hill. The law itself is targeted to especially defined parts of upstate that are whacked with economic blight. Not just Buffalo, but Rochester, Syracuse, Jamestown, and other places looking for their rust belt revival.

While Hoyt’s strategy to push through the changes to this law that were excised from it during last year’s negotiations at least make sense, the criticisms don’t. Maybe the law as written doesn’t help Termini rehab AM&A and the Lafayette, but there are loads of smaller-scale projects throughout upstate that have been directly helped along by this tax credit scheme.

Eliminating blight and putting people to work is an objectively good thing.

According to Hoyt, there were two choices last summer – compromise or do nothing. Doesn’t it make more sense for Buffalo’s biggest columnist and renowned developer to put pressure on the Governor to make needed changes, and to encourage the local delegation to get behind the bill? I’m not understanding why waging a media war against Hoyt is somehow going to make stuff happen faster or better.