By JAMES FINK
jfink@bizjournals.com | 716-541-1611

Never one to mince words, Rocco Termini has no shortage of them when it comes to Gov. David Paterson's plan to scrap the Empire Zone program for the new Excelsior Jobs Program.

To Termini, it's like replacing a Mercedes-Benz with a Ford Maverick.

"The governor has basically written off the central business districts," he said.

Empire Zone tax credits and incentives, which can reduce a developer's costs by as much as 20 percent, are being eliminated as of June 30. Replacing them will be the Excelsior program, which puts a premium on job creation and caps tax breaks. Paterson calls it a more cost-effective program for cash-starved New York, which is facing a $9 billion budget deficit this year.

"New York needs a job-creation program that uses taxpayer dollars responsibly, delivers results and helps grow the New Economy industries that will lead the state to fiscal recovery. The Excelsior Jobs Program is the right initiative at the right time," Paterson said.

The Empire Zone program offered a combination of incentives and tax breaks for projects in one of the state's 85 designated Empire Zones, including three in Erie County. Developers and leaders praised the program for offering key incentives that took many projects from the drawing board to reality. Critics, however, cited a deep list of abuses that made the program expensive.

Termini has used Empire Zone credits to help with a number of his downtown Buffalo projects. That will end with his planned conversion of the vacant Hotel Lafayette.

"Getting rid of the Empire Zone credits is like throwing the baby out with the bath water," he said. "If you read the Excelsior requirements, it will not help any downtown projects. It will help suburban office parks that really don't need the help."

A prospective tenant of the Hotel Lafayette - the owner of the Pearl Street Grill & Brewery - may save $50,000 annually because of Empire Zone credits, he said.

On two other downtown developments, the Ellicott Lofts and Webb Lofts, Termini estimated he saved $300,000 on each because of Empire Zone credits.

He is not the only critic of Paterson's plan.

"This was a huge tool that we used that has just been eliminated by the state," said Buffalo Mayor Byron Brown. "I don't understand why they had to scrap a program and replace with something that doesn't even come close."

Erie County Executive Chris Collins has seen it from two sides - in the public sector as Erie County's top elected official and in the private sector. Three of his companies - Volland Electric, ZeptoMetrix and Niagara Ceramics - used Empire Zone credits to expand Buffalo. Without them, the expansions never would have taken place, Collins said, putting several hundred jobs at risk.

"You want my opinion of the Excelsior program? It's a joke," Collins said. "Businesses continue to swim upstream just to do business in this state, and Albany does nothing but push us in the wrong direction."

James Allen, Amherst Industrial Development Agency executive director, agrees. Given New York's sky-high tax rate, he said, incentives and abatements are crucial to luring new investment and expansion dollars to the region.

"We have to do something," Allen said. "Everyone knows that."

William Paladino, Ellicott Development Co. vice president, said he is concerned that the demise of the Empire Zone program will hurt urban projects more so than suburban counterparts.

Empire Zone credits were considered crucial parts of financing packages, especially when the projects involved renovation of older or historic properties.

Paladino said he doesn't have problems with New York putting more of an onus on job-creation stipulations in an incentive program - a key element of the Excelsior package. The new program does offer incentives from $2,500 to $10,000 per job created, depending on the project. All projects must create at least 50 jobs.

The Excelsior program also offers a 2 percent tax credit on qualified investments and other incentives for research and development-based projects.

What is bothersome, he said, is the $50 million statewide cap the Excelsior program has created - a number that is just 10 percent of the Empire Zone packages. Those packages last year topped out at $515 million.

"The Empire Zone was a nice development tool," Paladino said. "Now it's gone."

Sen. Charles Schumer said there may be federal programs, such as the Recovery Bond portion of the stimulus package, to help pick up some of the slack. The trouble is, those programs aren't funded yet, he said.

"It's great to build back downtown, but unless there are new jobs funded, you will never get people to come back downtown," Schumer said.

 

 

With the clock ticking on the final round of Empire Zone tax credits, developer Rocco Termini has fine-tuned plans for the $35 million face-lift of the Hotel Lafayette.
Termini said the redevelopment plan, much of which hinges on the soon-to-end Empire Zone credits from New York state, calls for a significant portion of the historic building to be renovated to a one-stop shop for weddings and other special events.
Among the prospective tenants seeking Empire Zone credits as part of the Termini/Hotel Lafayette project are:

• Butterwood Desserts, which will move its main bakery operation from West Falls to the Washington Street landmark. It also is opening a dessert bar in the building. Butterwood could create 35 downtown jobs with the proposal.
• Woyshner's Flower Shop in Lackawanna has proposed opening its second location in the building.
• The owner of Pearl Street Grill & Brewery has tentative plans to take over the recently closed Lafayette Tap Room location, doubling its size by adding a second floor and giving the entire operation 15,000 square feet of banquet and restaurant space.
• Businessman Mark Hamister has pledged to open a 34-room boutique hotel.
• Termini also will renovate much of the building's upper floors to house 115 apartments.
• Termini is negotiating with at least two other restaurants, but said he doubts they will make the June 30 deadline when New York's Empire Zone tax credits expire and are replaced by the Excelsior program.

"Our goal is to make the Hotel Lafayette a one-stop shop for weddings, special and corporate events," he said. "All of the pieces are coming together."
The Hotel Lafayette is one of three projects Termini has planned for a one block stretch of Washington Street that runs between Eagle and South Division streets. The AM&A's Lofts opened in early May. Termini and Hamister are jointly planning a $70 million renovation of the former AM&A's flagship department store.
The Hotel Lafayette and AM&A's projects rely on the state's historic tax credit program, which aids the redevelopment of older buildings. The tax credits, which were announced last summer and tweaked over the winter, were approved last week.