Buffalo, Rochester fail transparency test

• Share on
• 
• 
• 
• 

The cities of Buffalo and Rochester have received failing grades for a lack of transparency involving tax breaks given to the owners of old commercial buildings converted to new uses.

The 485-a program is often used to retrofit office buildings into mixed uses that include housing and retail. The report by Good Jobs First found that the granting of the tax breaks is done by bureaucrats without any public review and the cities don’t readily disclose the award. 

The report, however, gave high grades to the industrial development agencies in the cities of Utica, Albany and Syracuse.

Transparency improves public engagement in tax subsidy programs, Good Jobs First researchers concluded, and could result in officials voting down bad deals. The watchdog group has previously found New York schools lose more than $1 billion each year due to various property tax abatements, several of which are in Western New York.

In its new study, the watchdog group studied 229 small and medium cities across the country, including five in upstate New York. It considered the transparency of a single subsidy program in each municipality. 

Researchers found just 37 percent of cities nationally have good transparency both before and after a subsidy is awarded.

In Buffalo, the group assessed the 485-A program. That’s a property tax abatement for converting a commercial building into a mixed use property. The program allows the building owner to pay taxes on the old value of the building, not the new improvements, for 12 years.

The Canalside Courtyard hotel, also home to the Phillips Lytle law offices, was one recipient of the tax break. Benderson Development received the tax break by including a single residential unit in the building, which is primarily used for office space.

Because developers automatically qualify for the program, there are no public hearings and no public votes on who gets those tax breaks. Elected officials aren’t involved in the process. Instead, the city assessor determines eligibility. Good Jobs First said the tax break is not disclosed on the city’s website or other public postings, earning the program a “no transparency” label.

The office of Acting Mayor Chris Scanlon did not respond to a request for comment.

The program cost Buffalo $9 million in tax revenues in the 2022-23 fiscal year.

In Rochester, the group assessed a similar tax break, called the Conversion Urban Exemption Program. In the 2022-23 fiscal year, it cost the city $2.2 million in property tax revenue. Like Buffalo, the report said the tax breaks are granted by the city assessor and not disclosed. The Rochester program too was tagged “no transparency.”

Mayor Malik Evans’ office did not return a phone call requesting comment.

The IDAs in Albany, Syracuse and Utica were given higher grades for practices that include disclosing the size of the tax break and hosting public hearings before it was granted. They were further given good marks for publishing details of the project after approval. 

Anya Gizis, one of the report’s authors, said the group felt the city IDAs were transparent. 

“Through the Authorities Budget Office, each IDA has significant transparency — because the state requires and compiles data including the company name, subsidy amount, and some job creation data,” she said.

“Transparency before an incentive deal is formally approved matters immensely for civic engagement,” the report stated. “It helps local officials better design incentive deals that respond to community needs, such as the creation of jobs that pay living wages or the construction of affordable housing.”

“Transparency after an incentive is awarded is also essential,” the authors continued. “Without post-award disclosure, public officials — not to mention journalists, academics, or community-based organizations — have no way of evaluating a program, of weighing its costs and benefits.”

John Kaehny, executive director of the New York City-based watchdog group Reinvent Albany, criticized the practices of the 108 IDAs that operate around the state, including the three municipal agencies included in the Good Jobs First study.

Kaehny noted that many times, an applicant for IDA subsidies will be a developer or a limited liability corporation, not the beneficiary of the tax break. That’s the case with the proposed construction of a data center at the STAMP industrial park in Genesee County.

Kaehny further noted that tax breaks occur “off book,” meaning they’re not part of annual budget processes.

“I think that the high-level takeaway is that it’s inherently non-transparent to have these public expenditures occurring off budget, outside of the budget process,” he said.

Ideally, Kaehny said, New York would operate a centralized, all-encompassing online database. A search would reveal a company’s  subsidies and grants, as well as information on lobbying and political campaign contributions. 

He attempted to get such a tool implemented in recent years with Empire State Development’s “Database of Deals,” but said its effectiveness is limited.

“The Holy Grail would be like being able to enter one name in a Google search box,” he said.

“That technology and the reporting and the actual data for that exists. It’s just that the will to do that does not.”

The subsidies studied by Good Jobs First are a sliver of the programs offered by state and local economic development agencies across New York. Many are administered by county IDAs, including those in Erie and Monroe counties, which were not the subject of the Good Jobs First report.

Gizis, of Good Jobs First, said county IDAs are generally transparent, in part due to disclosure rules mandated by the state Authorities Budget Office.

In a statement, the Erie County IDA said it makes “every effort to ensure the review, approval and monitoring of ECIDA tax incentives remains a transparent, public process.”

J. Dale Shoemaker