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Donovan project gets IDA boost

by chocieni
Tue, Aug 21st 2012 12:00 am

Revival of the former Donovan State Office Building downtown got a boost Monday, with the Erie County Industrial Development Agency approving tax breaks for it.

The ECIDA board approved $900,000 in sales tax savings for a Benderson Development affiliate, Harbor District Associates LLC, to support the project at Main and Scott streets.

When redeveloped, the building will consist of office, retail and hotel space. Phillips Lytle plans to move its law offices there from One HSBC Center, and a 96-room Courtyard by Marriott hotel is expected to open in the property.

The redevelopment comes amid rebirth at Canalside and plans for additional development just across the street at the Webster Block, in front of the First Niagara Center.

The incentive package sought by Benderson was narrower in scope than what many applicants seek from the ECIDA, which increased its likelihood of passing and addressed concerns board members had raised.

Benderson, in a letter Managing Director Randall Benderson sent last week to ECIDA Chairman John LaFalce, withdrew a request to receive property tax breaks through the ECIDA. However, Benderson is expected to apply for a real estate tax exemption through the city's 485a program, according to the ECIDA. The application voted on Monday also did not include a request for mortgage recording tax savings, although the letter from Randall Benderson indicated such a request is still coming.

The value of the Benderson project put before the ECIDA board was $22 million. But the build-out of Phillips Lytle's space - in the form of furniture, fixtures and equipment - was purposely excluded, so that portion of the project will not benefit from the approved $900,000 in sales tax savings.

Both LaFalce and County Executive Mark C. Poloncarz, who is also an ECIDA board member, said they had reservations about incentives for the project, but they said their concerns had been addressed, winning their support.

One concern LaFalce mentioned was facilitating Phillips Lytle's move from One HSBC Center to the Benderson property. "The fact of the matter is, that move is going to happen no matter what," he said, noting the law firm's lease will expire in late 2013 and the firm sought proposals from developers before deciding where to go. LaFalce emphasized the ECIDA's incentive package offers sales tax breaks, but not property tax breaks, for the project. "There has been a carve-out, so Phillips Lytle will be doing their own improvements."

Poloncarz said he also had reservations about assisting Phillips Lytle in moving from one building to another. But he said he was persuaded to vote in favor by "the withdrawing of the application for a [payment-in-lieu-of-taxes agreement] as well as the assurance there will be no granting of sales tax for the build-out of Phillips Lytle."

The Partnership for the Public Good had submitted a letter to the ECIDA objecting to sales and property tax exemptions for the Donovan Building project, targeting its hotel component. The letter argued that hotel "subsidies and tax breaks aid the owners of the hotels, but they do more harm than good for the residents of a city."

"Hotels do not draw tourists to a region; they simply compete with each other for the tourists' trade," wrote Sam Magavern, co-director of the Partnership for the Public Good.

The ECIDA has imposed a moratorium - and extended it until Oct. 1 - on providing financial assistance to existing hotels. While the Benderson project includes a hotel, it is not affected by the moratorium since it would be a new hotel in a property defined as "adaptive reuse."

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