Is it possible that a lot of local residents are missing a bright spot amidst the dustup and controversy over Carl Paladino’s Waterfront Village residential development on the city’s lakefront? Most of the objections to the project center on the steep property-tax breaks buyers of the homes—15 townhouses and 49 condos in a tower—will receive because the development is in a New York Empire Zone. (It didn’t used to be. The zone was redrawn to include the property in the waning days of Mayor Anthony Masiello’s administration.)

These homes are going to be sold at prices ranging from $500,000 to $659,000. The purchasers will be entitled to property-tax exemptions worth an average of $100,000 over a ten-year term. Some people evidently find all this a little hard to take, something like shipping coal to Newcastle, or Paris Hilton begging the paparazzi for photo ops , except not as necessary.

But there may be an upside that’s being missed. Kenneth Berlinsky, a senior aide to Assemblyman Robin Schimminger (D–Kenmore), who’s a member of the panel that oversees the Empire Zone program, told me in a telephone interview that this application of zone benefits is virtually unprecedented. “In a preliminary investigation,” Berlinsky said, “we haven’t been able to uncover any other situation involving residential rebates like these.”

Maybe we should keep our fingers crossed. If this initial finding holds up, Buffalo could lay claim to an important public-policy innovation. It’s been awhile since we’ve been in the forefront of ideas on urban redevelopment. Hey, no Stanley Cup, but we’re on the frontier of efforts to accommodate the affluent with public monies. Maybe we could market ourselves as cutting-edge public thinkers. Or maybe not.

As Bob Hope used to say, “But seriously folks.” These tax breaks do seem to constitute an olfactory offense. Which may be why I experienced a fair amount of difficulty getting folks in City Hall to comment on the matter.

When, after a large number of unsuccessful attempts, I lucked out and reached Timothy Wanamaker, the city’s strategic planning director, I was a little surprised at his comments. He seemed to be confusing the Empire Zone local-tax rebates businesses get if they live up to promises to create jobs—and sometimes, it’s been charged, even if they don’t—tax exemptions localities are reimbursed for by the state, and this use of the program to radically reduce the tax obligations of purchasers of top-of-the-market waterfront homes. For this there’s no reimbursement. (He later corrected his misstatements in an e-mail exchange.)

This confusion may have been wishful thinking on Mr. Wanamaker’s part. It would be understandable, though wholly inaccurate, if he wanted to present this project as conforming to the economic revitalization goals of the Empire Zone legislation.

What’s the best case for the tax gifts being provided to Paladino’s customers? Both Wanamaker and Paladino point out that the Waterfront Place complex is being built on land previously owned by the city’s urban renewal agency, which paid no tax revenue, and that after the ten-year term of the exemptions, property owners will have to assume regular tax obligations.

This tack was recently echoed by The Buffalo News in a blandly evasive editorial, which observed that “...upscale housing pays the bills by triggering...richer property tax revenue streams.”

The assumptions behind this kind of thinking are considerably less self-evident than project proponents seem to believe. First, there are the gamy whiffs of collusion with special interests that the deal keeps giving off. City Council members, including Council President David Franczak, claim that they didn’t know rich property-tax benefits were involved when they signed-off on the deal to expand the zone in January of 2006. Former Councilmember Albert Coppola told me, “Tony Masiello cut a deal, no doubt about it. It’s pretty embarrassing for the city.” As Assemblyman Sam Hoyt, a Buffalo Democrat, put it, there’s a sense of “lawyers finding loopholes, ...of creative legal work.”

A senior member of the Assembly’s Democratic majority staff, who didn’t wish to be identified, said that he thought it was “inconceivable that [this deal] would pass the cost-benefits test implemented in the 2005 Empire Zone reforms.”

Then, there’s the proposition, as Paladino argued in an interview, that only with the extensive tax exemptions could his development go forward. Why he couldn’t have discounted costs and purchase prices to make up the difference isn’t something he addressed. Of course, if he’d done that, his profit would had to have been discounted too.

In any case, how are purchasers expected to resell these units after the tax breaks expire? The News editorialists wrote as if the local market could absorb what they called a “housing surge” that’s supposedly bringing “vitality, activity, wealth” to the downtown area. So why give aid and comfort to the already very comfortable to get them to buy?

What Wanamaker, the News and others supporting these exemptions are really advocating is the old, rightist “trickle-down” theory that promises, in the words of Yale political economist Charles E. Lindblom, that “...gains will trickle down from elites to mass if elites are well enough treated.” And the gains are at their discretion, presumably.

If this kind of thing worked even modestly well, after a quarter-century of tax-rate reductions and other tax benefits, poverty in this country wouldn’t be on the increase, and the income gap between the wealthy and working families wouldn’t be widening.

Let’s consider who will occupy the units in Paladino’s development. If a purchaser earned $310,000 last year—a realistic possibility, I think—he or she would be in the top 1 percent of earners in this country. The median household income in Buffalo in 2005 was about $27,000. That’s 40-45 percent less than the state’s median.

Lindblom has observed that the acquisition by elites of tax and other benefits tends to “dull” democracy, to encourage political and economic elites to combine “in a homogeneous defense of existing political and market institutions.” In other words, “God bless the child that’s got his own,” as Billie Holiday’s old song puts it.

The Brown and Masiello administrations’ collaboration with Paladino in this venture amounts to a further redistribution of income and wealth to the already wealthy, and a concomitant increase in the burden on everyone else. The people in these two mayoral administrations who helped perpetrate this deal probably regard naysayers as naïve. But their posture offers only cynicism and a capitulation to greed.

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