Watchdog group says developers in Buffalo saving millions by abusing tax program
The Public Accountability Initiative reports major developers in the city of Buffalo have abused the 485-a program saving over $63 million in property taxes.
For much of the 90’s and early 2000’s Buffalo was home to many commercial buildings with high vacancy rates. The 485-a program was designed to take vacant and underutilized commercial buildings in downtown areas and transform them in to vibrant mix use buildings to include both residential and retail spaces.
Buffalo opted in to using the project in 2002 and for a while Assemblyman Sean Ryan said, it was used to the benefit of the city.
“The Hotel Lafayette is a great example of how this program can be used to positively impact the community,” said Ryan. “What had been an underutilized eye sore in downtown Buffalo is now a vibrant mix use building. It’s got everything in there. Hotels, apartments, banquet halls, shops.”
But in 2015, applicants for the tax break rose from 3 to 19. The report done by the PAI indicates as of May 2018, 89 different properties in Buffalo had been awarded 485-a exemptions, more than any other city in the state.
Ryan said after projects are approved, there is little or no oversight to ensure that they are complying with the intent of the statute. The largest user of this is the One Canalside Building downtown.
“It’s home to restaurants, a hotel, and a lot of office space. But guess what else is tucked in there? One small apartment unit,” said Ryan. “That one apartment building in the eight story building in the eight-story building is set to cost tax payers and net the owner 620,000 per year. $5.9 million dollars over the lifetime of the program. All for one 900-square foot apartment building”
Ryan said it has morphed in to a program that subsidizes brand new buildings.
“This is not what was intended,” said Ryan. “There’s a new building at 301 Ohio Street that was built on a piece of empty land. That land had been owned by the same developer for well over a decade. Now that developer will avoid paying $118,000 in city taxes for that property per year.”
That developer is Ellicott Development. According to the PAI report, they have 16 exemptions worth $9.5 million. Ryan said these projects are largely being used to subsidize luxury housing.
“The average apartment in the city of Buffalo rents for $799. The lowest rent we could find for a program that gets the tax payer subsidy is $1100 a month. That’s the lowest rent,” said Ryan. “But guess what? That’s 45% higher than the average fair market rent. We all know that most of those apartments are renting for way more than $1100.”
The PAI also reported similar abuse of the program in Albany and Syracuse and recommends the state repeals the law or that Buffalo opts out of it. So are these developers not in compliance or is it a loophole? Ryan said it’s in the eye of the creator to figure that one out.
“It’s clear that municipalities across the state have widely opened the eligibility for this program. Things that should not be eligible are now eligible,” he said.