Dec 1
2022
Erie IDA eyes largest subsidy package in years
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Updated: 2:50 p.m.
The Erie County Industrial Development Agency is entertaining a request for the largest package of tax breaks it has awarded in the past five years.
The $11.8 million in tax breaks for Sonwil Distribution work out to $621,000 per new job. In addition to hiring 19 new workers, the company would relocate 22 of its current employees.
But Erie County Executive Mark Poloncarz, a member of the IDA board of directors, has raised “serious concerns” about the size of the subsidy package, according to a spokesperson.
“There is no way I am in favor of $11 million in tax breaks for a $62 million warehouse. No. Dead on arrival,” he wrote in an email Monday to a member of his staff and Erie County IDA Executive Director John Cappellino. Peter Anderson, a spokesperson for Poloncarz, shared a copy of the email with Investigative Post on Thursday.
Without the payment-in-lieu-of-taxes discount on Sonwil’s property taxes — the biggest portion of the subsidy package — the company would have paid $10.5 million in property taxes over 10 years. Instead, the company will pay just under $2.5 million.
The property tax abatements would cost the West Seneca School District $4.6 million in revenue over 10 years. For the Town of West Seneca, the lost income totals $2.2 million. Erie County would be out $1.3 million.
The IDA tax breaks are just the beginning: Sonwil, in its application for Erie County IDA incentives, said it’s also seeking state tax credits and discounted hydropower from the New York Power Authority.
Poloncarz's concerns about the size of the incentives could affect the deal. According to Anderson, the county executive has requested property assessors to reassess the value of Sonwil's planned warehouse and for the IDA to pause the project until that new assessment is complete.
Poloncarz "asked for [the incentive package] to be paused until all due diligence and a full review of [West Seneca's] assessment of the property could be done," Anderson said.
Redoing the property assessment for Sonwil's project could change the amount of taxes the company would owe, meaning the size of its incentive package could change. If a new property assessment found Sonwil's new warehouse is worth less than the original assessment found, Sonwil's tax bill would go down as would its property tax discount. Property tax breaks are commonly the largest share of IDA tax incentives.
In addition to sitting on the IDA board, Poloncarz chairs the Industrial Land Development Corporation board, a related entity.
Cappellino, the IDA executive director, said in an email Thursday that the IDA is working to address Poloncarz's concerns.
"The County Executive raised concerns about the overall level of subsidy, and we will work with all parties to see how we are able to address that," Cappellino said.
A Sonwil representative did not immediately respond to Poloncarz's concerns Thursday.
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IDA data reviewed by Investigative Post shows the proposed $11.8 million award to Sonwil is more than double the next-largest subsidy the agency has granted since the start of 2018.
That next-largest project was a $5 million award to build the Northland Workforce Training Center, a for-profit company started by the Buffalo Urban Development Corp. in 2018. The third-largest project was a $4.6 million award to Time Release Sciences, which manufactures products for Procter & Gamble, in 2021.
The Sonwil package, while large by Erie County IDA standards, is much smaller than those approved by IDAs in neighboring counties. For example, the Niagara County IDA this summer approved a $124 million incentive package for an Amazon warehouse in the Town of Niagara. The Genesee County Economic Development Corp. approved a $270 million package for Plug Power in 2021, with a portion of the subsidies coming from the state power authority.
About the subsidy package
Sonwil Distribution’s project would see the company build a $62 million, 323,000 square foot warehouse in West Seneca to expand its warehousing and shipping operations for national clients like General Mills, Georgia Pacific and J.B. Smucker. The company said the incentives will allow it to relocate 22 jobs and add 19 more. The jobs will pay an average of $44,000 per year.
In its application, Sonwil noted that incentives in Erie County would help it choose West Seneca over locations near Allentown, Pennsylvania or Northern New Jersey. Sonwil plans to locate in the North America Industrial Park.
A representative for Sonwil Distribution did not respond to an interview request prior to publication.
The Erie County IDA had planned to vote on the subsidy package for Sonwil on Wednesday, but postponed the vote. IDA officials said Wednesday that was due to a delay with the project's environmental review. Anderson said Thursday that was due to Poloncarz's concerns regarding the size of the incentive package. It's not clear when the package could come up for a vote.
Sonwil Distribution also plans to apply for state tax credits and discounted hydropower from the state power authority, according to its Erie County IDA application.
Pamm Lent, a spokesperson for Empire State Development, and Paul DeMichele, a spokesperson for NYPA, both declined to comment.
Elizabeth Marcello, senior research analyst at Reinvent Albany, a good government group, estimated that the state tax credits are worth $1.2 million. That would push the company’s total subsidy package north of $13 million, or 21 percent of the total project cost.
The Erie County IDA incentive package for Sonwil Distribution breaks down like this:
- A discount on property taxes worth $8,086,908 over 10 years.
- A sales tax discount valued at $3,336,875.
- A mortgage tax discount valued at $359,640.
Total savings come to $11.8 million.
Largest subsidy package in five years
But even though the company is investing $62 million in Erie County — among the most expensive projects the Erie County IDA has supported in recent years — the size of its subsidy award still makes the project an outlier.
Developer Peter Krog, for example, is spending $107 million to turn the former Trico plant in downtown Buffalo into offices and apartments, a project to which the IDA awarded $3.7 million. That’s the second-largest Erie County IDA project this year.
Then there’s Thermo Fisher’s expansion to Grand Island in 2021. That project was an $85 million investment, and netted the company $2.9 million in subsidies. Thermo Fisher won those incentives in part because the project retained more than 800 jobs and added 60 more.
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Cappellino on Wednesday declined to comment on the Sonwil incentive package until after the IDA board of directors votes on it. He noted, though, that the size of the subsidy package is determined by the value of the project. In Sonwil’s case, the value of its refrigerated warehouse determines its tax bill which determines its subsidy amount.
“It's driven by the project size and the tax rates,” Cappellino said. “If you look at our [Payment In Lieu Of Tax] schedule, it's a percentage of the taxes so it's always the same percentage of what they're paying in taxes vs. what they're getting.”
“It depends on what they're doing in the building,” he added. “It's an assessor question as to what they assess a building at.”
It’s not clear whether the IDA board will approve the subsidy package, and Poloncarz's objections raise issues for the project.
IDA Board Member Richard Lipsitz said he prefers supporting subsidies for projects that “create good industrial or manufacturing or warehousing jobs.” He said he also looks at the location of a project, the quality of the developer, and if the company seeking the subsidies is friendly to labor unions and equity issues.
“This is an industrial project and so if it provides good jobs and good wages and it expands our industrial base and our workforce base, I like that,” he said.
Marcello, though, of Reinvent Albany, said distribution facilities like Sonwil's shouldn't qualify for subsidies.
“Distributions centers are located based on the market they serve and access to transportation,” she said. “Every dime these guys do not pay in taxes is a dime more existing businesses have to pay for basic services.”
