Erie County’s Economic Development Arm Tries to Repair its Image

Two weeks ago, the Erie County Industrial Development Agency (IDA) announced a new, almost unprecedented project. Winter Storm Knife, as the epic blizzard that pummeled Western New York in November is known, had smashed up countless small businesses in Erie County's southern area. In response, officials with the Erie County IDA created a $2 million fund to lend between $5,000 and $500,000 to help the businesses recover from the storm. “It’s a live program today,” said Steve Weathers, the IDA's chief executive. “People can come in and apply right now!”

This is just the latest in a yearlong effort by the Erie County IDA to reform its practices and its image. Faced with a rising number of local and statewide critics—and a state legislative proposal to completely reform the way IDAs work—the agency hired Weathers to increase transparency and to engage with local critics. He has taken to his job with gusto—partly because he knows the agency’s reputation is so poor.

“We’re not perfect,” Weathers said. “I wish we were. But we are always trying to listen to the community. We’re always open to any group that wants to talk with us. We’re part of Erie County, after all.”

For years, the Erie County IDA has been denounced as dysfunctional and disinterested in listening to public input. In addition, five smaller towns in operate their own IDAs, which they allegedly use to poach local businesses from each other—essentially giving away taxpayer money without luring outside businesses to the area. Finally, critics have long complained that the Erie County IDA has spent millions of dollars to subsidize companies that are perfectly capable of financing their own downtown construction projects—projects that they say can actually impede downtown development.

The unmistakable resurgence of downtown Buffalo has prompted community organizing groups and senior elected officials to ask whether Erie County still needs to offer such subsidies to attract major projects. Local Democratic Assemblyman Sean Ryan has become so incensed by the county’s more extravagant payouts that he has been pushing a bill to reform all of the state’s IDAs and plans to reintroduce it in January.

Although the Erie County IDA was originally created in 1970 to lure manufacturing facilities back to Buffalo’s dying industrial sector, officials eventually changed its focus to revitalizing the downtown area with office, hotel and residential development through millions of dollars in abatements on property, sales and mortgage recording taxes.

This may have made sense in previous years, considering the moribund state of downtown Buffalo, but now many residents are fed up with both the size and ubiquity of the subsidies.

“You could pick out any downtown development—I dare you to find one that didn’t have a put-in by the public,” Ryan said. “That’s what we’ve done in our Western New York marketplace. We’re still stuck in 1982, when in fact we have a very vibrant economy.”

Two major subsidies have put the IDA on the defensive in recent years. In 2013, the agency gave HarborCenter, an entertainment and hotel complex located near the Sabres’ arena and centered around two ice rinks, $36.7 million in tax abatements. While many people acknowledge that the project is a valuable addition to Buffalo’s waterfront development, critics found the massive subsidy inexcusable—especially since hydrofracking magnates Kim and Terry Pegula could so easily afford to finance the project themselves.

“This was one of the largest, if not the largest tax break in years, if not in decades,” said Andy Reynolds, spokesperson for local community group Coalition for Economic Justice. “We were very critical of that.” Reynolds added that by subsidizing a project that included a 205-room hotel, the Erie County IDA was spending millions of dollars merely to create hundreds of low-wage hospitality jobs.

But the worst handout, from the critics’ perspective, was the IDA’s decision to award $10.8 million to Uniland Development. Uniland received the enormous tax abatement subsidy not to build a mixed-use project out of the shell of an older building, but to develop a brand new office and hotel complex. Although IDAs are designed to entice new businesses to the area, the primary tenant will be Delaware North, a multinational venue and hotel management company that is currently located just three blocks away. Moreover, critics were enraged at the prospect that a company that makes $2.6 billion in annual revenue should reap the benefits of so much public money.

This particular payout has left Ryan livid. “Why are we subsidizing a brand new office building at Delaware and Chippewa?” he asked. “That’s arguably the strongest city corner in our regional economy. … Uniland is the model of successful development in Western New York: learn how to get the public to subsidize your risk for your private gain.”

For years, Ryan has been developing and sponsoring the JOBS Act, a bill that would require IDAs to submit uniform and comprehensible annual financial reports to the state comptroller; as it now stands, some IDAs give away millions and barely bother to account for their spending. But the provision with the most teeth would completely change how tax abatements are awarded.

“IDA members are not elected by anybody, but they give away millions of taxpayer dollars,” Ryan said. “Under the JOBS Act, the IDA members who approve a project must then submit it for approval to elected officials like the town council. And when there’s public scrutiny, big massive projects tend to go away.”

So far, Ryan’s bill has stalled in the state Senate, but he intends to resubmit it in January. As to whether Ryan's bill could pass the chamber, Republican state Sen. Patrick Gallivan said that he hasn't read the bill closely enough to make that determination. Some of Ryan's provisions made sense to him, such as requiring standardized reporting to the state comptroller. But the provision requiring IDA projects to be submitted for approval by a body of elected officials gave him pause. "I worry about bottlenecking the process," Gallivan said.

Meanwhile, Ryan’s ideas are gaining traction among Erie County IDA’s own board of directors. “We in the labor federation supported it,” said Richard Lipsitz, vice chair of the IDA board and president of the Western New York Labor Federation AFL-CIO. “We’ve been in support of Sean’s reform legislation ever since he proposed it first. It meets some of the basic criteria that we’re looking for, in that it reforms subsidies to big developers.”

Faced with this sort of pressure, Steve Weathers has spent a year working on a combination of policy reform and public relations initiatives. Driven by Democratic Erie County Executive Mark Poloncarz, an IDA board member, the board passed a resolution to create a “recapture policy." Recipients of tax abatements must agree to achieving certain goals, such as meeting a quota of good-paying jobs; if they fail to achieve 85 percent of these goals, they must give the money back.

In addition, the IDA now follows a policy of so-called “adaptive reuse.” Downtown Buffalo contains large numbers of neglected industrial buildings and one of the IDA’s top priorities is to subsidize their conversion into mixed-use developments with apartments, shopping and office space.

When he is not working on these new priorities, Weathers is spending a lot of time trying to project an image of a newly responsive, progressive IDA.

“One of the things that people don’t always read about is our $10, $20 million small business loans to restaurants, auto body shops, just small businesses,” he said. “So one of the values of the Erie County IDA is using all the tools we have for job creation. … Until now, we never told this story.”

Although Weathers stands by the practice of tax abatements, he claims that he is making it a priority to meet with any group that objects to any given project, including the Coalition for Economic Justice. On the other hand, he added, he cannot meet with his critics unless they actually reach out to him. “We rarely have anybody who shows up to voice their concerns. We usually only hear about the complaints after the vote,” he said. “After that, the cow’s out of the barn.”

But critics claim that while the IDA has gotten slightly more transparent, it still fails to give the public adequate notice of its agenda and it holds meeting on weekdays, when most people have to work. And that speaks to the uphill battle Weathers must undertake: how to convince people of his good intentions when so much of the county’s public has soured on his organization.