Taxes and Fees
Resident petitions Lancaster IDA for transparency and verification
By Lee Chowaniec
Mar 25, 2007, 16:26

Lancaster resident Henry Gull attended the recent Lancaster Industrial Development Agency (LIDA) meeting to seek clarification as to whether the agency was acting appropriately in holding one of its recipients accountable.

Over the years Gull has been perturbed over what he considered “favorable treatment” to the owners of the TOPS warehouse located on Genesee Street, west of Pavement Road.

Gull believes TOPS received a “sweetheart” deal when the property received rezone and IDA application approval. Both were prefaced on the promise that at some time in the future there would be 800 full time employees working in the warehouse

At the recent Town Boar meeting, Lancaster Supervisor Robert Giza gave Gull a run down of the taxes that the current TOPS warehouse owner, Buffalo Logistics, was paying:

Town - $154,541
Lancaster Schools - $455,074
Erie County - $145,074
Special District - $154,354

Total taxes paid - $909,431

Giza also told Gull that the TOPS is now paying 50 percent of the assessed valuation according to the terms of the Payment in Lieu of Taxes (PILOT) and will continue paying at that level until the PILOT runs out in 2013.

Giza also declared that TOPS warehouse manager Tom Fitzgerald informed him that there were 550 to 600 employees at the warehouse. If the there were no warehouse and the land was vacant, the taxes received for the land, valued at $3 million, would only be $90,000, an $819,431 difference.

Gull interjected that an “inside source” informed him that there were only 300 full time employees in the warehouse and perhaps another 150 part time employees. Considering TOPS has not lived up to the agreement made, has the town ever considered using the available “claw-back” provision? The PILOT agreement requires TOPS to provide employment records to the LIDA.

“Not to my knowledge,” replied Giza.

Council Member Mark Ruffino interjected that losing TOPS warehouse revenues would be more devastating than considering such tactic.

Town Attorney Richard Sherwood asked Gull whether it made more sense to get $909,000 in taxes from the business or $90,000 for vacant land.

At the public comment session, Gull informed the board that his questions were intended to gain knowledge as to whether PILOT recipients were held accountable to the lease agreements forged. “There was no intent in bringing any action that would jeopardize receiving $909,000 in town revenues, due to the 50 percent abatement,” said Gull.

“However, at the same time, it should be noted that TOPS is being absolved from paying $909,431 in property taxes. Taxpayer money, Sir! And, we taxpayers want to make sure that there is transparency and accountability.”

Giza told Gull there was an IDA meeting scheduled for Thursday and that he was welcome to come and address the board.

Gull at the LIDA

Gull did attend the IDA meeting. In his opening comments he reviewed the tax revenues that Giza had presented at the town board meeting. He declared he was elated to hear that TOPS was paying such revenues to the county, town school and special districts.

However, he was quick to point out that a predictability tax payment chart that had been developed in 1995 for town and school tax revenues was not in sync with the town and school taxes now being paid.

Gull asserted that the chart indicated that 2007 was the first year that TOPS would be paying 50 percent taxes on their $54.5 million assessment. “They would be paying this 50 percent rate until the end of the PILOT agreement, in 2013 declared Gull. Is this a standard contract?” He was informed it was.

“Looking at the chart,” said Gull, had the assessment stayed the same ($46.5) at the time the PILOT was struck, it was predicted that the town would receive $252,200 in tax revenues and the school $440,800.”

“In 2007 the town will receive $154,544 and the school $455,074. The school number is close, but the town revenue is off by near $100,000.

“The property assessment increased from $46.5 million to $54.5 million and I am being told they are paying on $25.5 million. That’s not half!”

“The revenue distribution between school and town has become disproportionate. According to the chart the split ratio was 63 percent school and 37 percent town. It is now 75 percent school and 25 percent town.”

No IDA responses were made to the revenue information presented.

Gull commended the town for taking litigation to prevent TOPS from seeking to lower the $46.5 million property assessment to $8 million. “The town saved its residents a lot of money, although it cost the town thousands of dollars for outside hired attorney fees.

Gull asserted that at the time the TOPS PILOT was being discussed, TOPS made reference that they would build the town a school. IDA Board Member Dominic Terranova told Gull that he must have misunderstood the statement. “The school would be built through the taxes they would pay.” Gull responded that that way it would take two decades and that didn’t seem like his intent at the time he made his statement.

Gull went on to declare that unlike the charges that were made against him that “he was kicking someone when they were down” he would not do that. “Absolutely not! $909,000 is nothing to sneeze at.”

“However, are they paying a fair share and are they meeting they’re lease obligations? My TOPS contact person has told me that there are only 300 full time workers, 150 part time workers and 30-50 clerical and supervisory positions. That does not agree with the number that is being given by the Supervisor and does not follow the PILOT promises made. It can also be stated that the warehouse is now 40 percent vacant.

Board members informed Gull that by law they get a document from TOPS, or any of the other 72 PILOT recipients, presenting information that includes number of employees. “We have to take them at face value, which complies with the law’s requirement,” said Terranova.

Gull was told that sometimes businesses have a tough time making a go of it and can’t meet their labor requirements. “These business employees have family members and kids,” Gull was told. Gull interjected, “That goes for resident families as well.”

Another IDA member told of having had a Lackawanna business PILOT and had lost over half his work force because of foreign trade. Empire Zones give much better deals. “We should worry about other companies leaving the country.”

Gull asked the board how many companies receiving PILOTS demonstrated they were beneficial to the town. “All of them,” he was informed.”

Gull was told the IDA was established to attract business to the community, “and that’s what we do.” “Businesses like coming to Lancaster. It’s a good community with good schools, a good government, sewers and water.”

“What is your objection,” Terranova asked Gull.

“We taxpayers need verification that we are getting from TOPS, as well as other IDA recipients, the tax dollars we are due and that they are complying with conditions agreed upon for them getting IDA related tax breaks,” Gull responded.

“If they violate the lease agreement, they should be held accountable for compensation. It is resident tax dollars that are involved.

Gull would also like it made known that at the time of the lease agreement, then Supervisor Lucien Greco and TOPS warehouse manager Fitzgerald were promising that 50 percent of the warehouse would be staffed with Lancaster residents. As of now, there are only 12 Lancaster residents employed at the TOPS warehouse.

Comments

Gull has taken heat for accusing TOPS of failing to live up to its IDA agreements re labor pool and challenging whether TOPS is paying the amount of taxes due. For this he is considered “meddlesome”, to say the least.

Truth be told, he has many supporters that think along his lines, especially since learning what IDAs are about and how they can negatively impact other businesses and taxpaying homeowners if they don’t live up to their agreements.

Industrial Development Agencies (IDAs) reason that a new company will bring new jobs into the community and add to the tax base. As Gull was told by the Lancaster IDA, “IDAs attract businesses to the community.” The feeling is that if the local IDA didn’t sweeten the pot enough, the business would seek a better deal elsewhere.

Such competitive bidding could be eliminated if all the IDAs consolidated into one. Amherst is now talking about a merger, but many individuals believe it is just talk and will not take place – as happened in the past.

Gull asked whether the 72 LIDA agreements were beneficial to the town. He was told they were. It was an appropriate question considering studies have shown that labor force, transportation, utilities, and various quality of life factors are more important to relocating companies than tax incentives. The revenues gained by the municipality and county may not offset the tax incentives given to the new company.

The kinds of incentives IDAs offer in our area are:

* State and county sales tax exemption for construction materials, equipment and fixtures purchased through the agency in connection with the improved project.

* Mortgage recording tax exemption

* Financial support from Industrial Revenue Bonds issued by the IDA, some of which are exempt from federal taxes.

* Property tax abatement: The IDA will usually enter into a Payment in Lieu of Taxes (PILOT) Agreement with a project developer in regard to real property tax – payments according to a graduated scale over a period of time, based on the percentage of the taxes that would otherwise be due on the value-added portion of the tax assessment.

In 1997 Uniland Partnership LP saved nearly $420,000 in property taxes, $14,343 in sales tax payments and $32,650 in mortgage recording taxes on the new Dodge Road office building.

Again, who pays for the tax exemptions and abatements given as incentives? Ultimately, other businesses and tax-paying residents must compensate for the lost revenue.

Is a half-loaf of bread better than nothing?

What would you have us do asks IDA Chair Giza and other board members ask Gull? “They have created jobs and are paying much more in taxes than if the land were vacant.”

As for the job creation and increased tax base, they may be worth more than the loss of some open space. But too often the jobs promised don’t materialize. A 2006 state audit of six IDAs found that the Amherst IDA gave incentives in 2000 and 2001 to businesses that projected increasing jobs by a total of 1,205. By the end of 2004, they had actually reduced the number of jobs by 324 (14 percent).

What is most puzzling is why the town will receive near $100,000 less in real property taxes in 2007 than was predicted when the PILOT was struck. Through reassessment the property value increased by $8 million, nowhere near the 40 percent cut off number that would have established a no tax increase.

However, considering the 2007 school tax revenues are slightly over original prediction, why is the 2007 town tax revenue 39 percent under what was originally predicted?

Considering the town is not receiving the tax revenues predicted when the PILOT was approved and since there seems to be a difference in thought between Gull and Buffalo Logistics (new owner) management on how many full time employees there are at the TOPS warehouse, Gull is right in seeking transparency and verification to determine whether the former owner (TOPS) and Buffalo Logistics is meeting IDA conditions.

Neither Gull nor anyone else wants to see the town lose $909,000 in tax revenues. However, they do want to see the PILOT recipient live up to the conditions agreed upon in a lease that grants him a $909,000 tax break for the next six years.

Transparency, credibility and accountability, what’s wrong with that?


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