Delaware North's ECIDA Request Tarnishes Jacobs Family's Image
by Arthur J. Giacalone
Delaware North Companies recently won approval for $807,000 in sales tax relief from the Erie County Industrial Development Agency (ECIDA) to build-out and furnish its proposed new headquarters in downtown Buffalo. In exchange, its principals, the Jacobs family, may have lost something of far greater value, their reputation as respected citizens and philanthropists.
Many Western New Yorkers consider IDA incentives as little more than “corporate welfare.” Given that fact, it is unwise for a company to boast in its financial aid application that it is one of the largest privately owned companies in the US, with $2.6 billion in annual revenues, and then have its principal publicly complain that “it hurts our feelings” to have members of the public criticize the request.
It is also invites distrust and derision when a company spokesperson proclaims loyalty to Buffalo and Western New York, and then suggests, in the next breath, that it would be “hard to turn down” a better offer from another city if the application for sales tax relief is turned down. After all, “we are running a business.”
More troubling than these statements, however, is the handling of the technical aspects of the ECIDA application process by Delaware North and its cohort, Uniland Development Company.
Uniland seeks real property tax abatements worth about $3.2 million to construct the “Delaware North Building” at Delaware Avenue and Chippewa Street, less than three blocks from Delaware North’s current offices. The building’s namesake would be the anchor tenant, occupying 110,000 square feet of the proposed 12-story structure. The facility would also include a 119-room hotel, retail boutique stores, 94,000 square feet of additional office space, and a parking ramp.
Two constraints—each having legal and political implications—complicate and potentially jeopardize Uniland’s request for real property tax relief and Delaware North’s sales tax exemption.
The ECIDA is prohibited by law from granting incentives for Uniland’s multi-tenant facility unless at least two-thirds of the total project costs is used for “permissible business activities.” The proposed hotel and the retail space are not permissible business activities under the existing criteria.
Intentionally or not, neither Uniland’s nor Delaware North’s financial assistance application provides the IDA or the public adequate information to determine whether the two-thirds requirement would be met by the proposed development. Delaware North’s estimate of $17 million to build out and equip its headquarters is far less than two-thirds of the $51.7 million “total cost” noted in Uniland’s submission, or the $80 million project cost reported by local media. Notably, no figures are publicly available regarding the costs to build the hotel portion of the project
In an apparent effort to circumvent this obstacle, the ECIDA conveniently chose to treat Delaware North’s application as a separate project. In doing so, the agency’s board ignored the fundamental question: Would two-thirds of the costs to develop the Delaware North Building be used in support of eligible business activities? It also disregarded the multiple references in the Uniland application to the fact that “these two applications are for one integrated project.”
The second complication tarnishing the image of the Jacobs family (as well as the reputation of Uniland and the government officials and business leaders on the ECIDA board) is the agency’s obligation to consider “the impact of a proposed project on existing and proposed business and economic development projects in the vicinity.” Delaware North’s exit from seven floors of the nearby KeyCenter, when combined with 90,000-square-feet of subsidized office space at the proposed Delaware North Building, would undoubtedly have an adverse effect on the city’s fragile economy. In the words of Buffalo News reporter David Robinson, construction of the mixed-use facility at Delaware and Chippewa would “add to a glut of empty space that further depresses rents across downtown.”
If the Jacobs family wishes to revitalize its once-sterling reputation as outstanding community citizens, it should publicly reject the $807,000 incentive, and then work in concert with local and state officials to end the “corporate welfare system” (as well as the business community’s sense of entitlement) that permeates their hometown.
Now that would be a truly philanthropic gesture.
> Arthur J. Giacalone, East Aurora
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