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Hard questions on Empire Zone subsidies

The idea behind Empire Zones is to promote investment and job creation in economically distressed areas. Brownfields, abandoned factories, inner-city neighborhoods -- places like that.

City Hall, however, is using the program to help underwrite a new waterfront hotel in the shadow of million dollar condos.

Is this the best use of the program in this, the third poorest city in the nation?

And does the parcel need the help in order to be marketable?

We're talking a 1.4-acre parcel that one of hotel developers who wanted to build on the site was willing to pay $1.2 million. It's near the entrance of Erie Basin Marina, adjacent to the Shanghai Red's restaurant.

Does that sound like a distressed property to you?

This isn't the first time the city has blessed land at the Erie Basin Marina with Empire Zone benefits. In 2006, the Common Council, acting on a request from Mayor Byron Brown, approved Empire Zone designation to a parcel where Carl Paladino is building condos selling for up to $650,000.

That caused a flap when my colleague Phil Fairbanks reported on it last year, but the mayor and Common Council are poised to do the same thing again with this hotel parcel down the street. Unless the property is removed from the Empire Zone, the benefits will flow to whoever builds there, assuming they meet state criteria. The benefits will come to millions, if not tens of millions of dollars, and both developers who submitted proposals to the city said they intended to use what is available to them from the city and Erie County Industrial Development Agency.

A year ago, Assemblyman Robin Schimminger, who serves on a state board overseeing Empire Zones, termed the designation of the Paladino property for pricey condos as "a marginal use of the program."

How is the use of the proposed hotel site down the street any better?

Council President David Franczyk said the site's designation as Empire Zone-eligible warrants further review.

"You raise a legitimate policy issue that we should examine," he told me in an interview earlier this week.

Another policy concern: Should the city be using subsidies to promote competition against other subsidized hotels that are struggling. I covered this point in a story and a blog post post earlier this week.

Yet another: Could the city get more bang for its Empire Zone buck in a different area?

The Brown administration is talking up the redevelopment of a brownfield corridor that starts in the Old First Ward and stretches to the Bethlehem Steel site in Lackawanna.

As I blogged back in May in a post about Brian Reilly, the city's economic development commissioner:

He's trying to market brownfields in South Buffalo, including the old Republic Steel site, as a renewable energy and technology corridor. Also working with Lackawanna to include the Bethlehem Steel site. Selling points: lots of land and lake and highway access. And, I found out, home to a huge 42-inch water main capable of pumping as much water in a day as the rest of the city consumes.

However, little of that corridor in Buffalo is designated as an Empire Zone and that won't change until the city frees up some real estate that now carries the designation.

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Economic Development
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