More on tax breaks for rich condo buyers

When you add it all up, the Avant, and to  much lesser lesser degree, Waterfront Place, got built with the help of about $47 million in state grants and tax breaks.

One can make an argument about the value of bringing the abandoned Dulski Bulding back to life as Avant. The same argument can -- and will -- be made about the Statler Towers now that it has been purchased by a group with plans for a $100 million renovation.

Here's the "but."

Economic development efforts by government ought to be first and foremost about creating jobs, and not just any old job. They ought to be about (1)  creating jobs that pay a living wage that you can support a family on for lesser skilled and educated people and (2) creating good paying jobs, i.e., for the better skilled and educated, that promote the growth of a middle class.

But neither Avant nor Waterfront Place does that -- at least not in a cost-efficient way.

According to the applications each project filed with Empire State Development Corp.:

-- Waterfront Place will create four permanent jobs. ESD has calculated the developer's tax savings under the Empire Zone program at $1.9 million, which works out to $475,000 per job. Add the $5.3 million in property tax abatements that I calculated for my story that ran Sunday and you're talking $1.8 million per job.

-- Avant will create 42 permanent jobs, primarily at the hotel. (Actual  employment at the hotel is 112, although many of those jobs are part-time. No one from the hotel called me back Monday to provide details). The project has received $20 million in state grants and tax breaks, which works out to about $475,000 per job. There's another $20 million the project will achieve in property tax savings. Add it all up and you're talking about $950,000 per job.

Keep in mind that the benchmark used by the federal government for some of its major economic development programs is $35,000 per job.

Now I realize that no one based the decisions to publicly assist Avant and Waterfront Place on the cost per job. Nor should it be the only consideration.

But geez.

Now there are other benefits to the two developments. But I go back to my original point.

At the end of the day, economic development in the third-poorest city in the nation, in one of the most economically sluggish regions in the nation, needs to be first and foremost about helping companies provide people with jobs on which they can support a family.

And in this town, project after project fails to meet that standard. In fact, in some instances, that standard isn't even part of the mix.

 

Comments

[Mark]

Until our elected officials trash the friends, family, and incompetent political hack programs and hire professionals who will hold all projects to the same standards, this is the end result. We should not be subsidizing high end condos.

[karen]

Rich people pay as much taxes as you at 35.9% in federal. Come 2010 when the tax breaks end. They will be paying 39.9%. And we will be at 35.9% still. So they will pay in the long run. Twice as much. Thats alot, alot , of tax money.I just read about the taxes in the tonawanda news. Lees conference with Amherst.

[Rich]

take a look at who is reaping the windfall from the construction of these.
It's class ic Buffalo.
Classic Erie County.
Business as 'usual'

[Pirate's Code]

"Economic development efforts by government ought to be first and foremost about creating jobs, and not just any old job. They ought to be about (1) creating jobs that pay a living wage that you can support a family on for lesser skilled and educated people and (2) creating good paying jobs, i.e., for the better skilled and educated, that promote the growth of a middle class."

Um, no. Government efforts in economic development (an unfortunate circumstance of our current economy, but that's another discussion) should be about creating opportunity. Let the market determine the wages.

If govt. were to focus its efforts on sectors (high tech, for instance) rather than scattershot, unrelated projects, it wouldn't have to worry about pay scales and livability.

As an aside, your argument also (conveniently, some might say) ignores what I expect were dozens or perhaps hundreds of construction jobs while such projects were in development. You can say those jobs are not permanent, but isn't that the nature of such work? Shouldn't those jobs be factored into your math?

[Buffalo Libertarian]

Ah, yes, another member of the leftist-dominated media who thinks it's the government that creates jobs in the private sector! Stop drinking the Kool Aid and get it through your thick skull that it's the private sector that creates jobs in the private sector, not the government.

I don't doubt that Waterfront Place and Avant were poor uses of Empire Zone funds; but since I'm opposed to such corporate welfare programs anyway, I'm hoping that such examples of government ineptitude in running these kinds of programs will result in the program being shut down.

And this constant whine about jobs that pay a "living wage," please, enough already! This nonsense about trying to dictate what kinds of wages businesses should pay is part of what has priced American labor out of the market, resulting in more and more jobs going overseas. Why should a business pay someone $25 an hour when they can get someone else to do the same job for $10? Besides, if you start paying $25 an hour for people with real job skills, you're going to make the UAW upset because they'll start thinking that the over-value of those unskilled factory jobs at GM and Ford is decreasing.

And let's face it: companies aren't exactly beating down the door trying to get Western New Yorkers to go work for them. Given the situation in our part of the rust belt, a situation where we haven't experienced an economic recovery in my lifetime (which goes back to the early 1960s), we have to take what we can get - particularly since New York State is one of the most hostile-to-business environments in the country.

The best thing government can do for business is to just get out of the way.

[Buffalo]

Again, Jim, I think you miss the point, which was well illustrated by Pirate's Code. Which is to say, it is not the government's job to create jobs, but rather to create a sustainable environment for jobs. If the government is doing all the creation of jobs, where are we? Socialism. As evidenced by our current state of affairs in this city, look around; if the state, local, and federal governments pulled out and took all their jobs, this city would be a ghost town. How much privately funded businesses would remain; not many, because the government (on all levels)sustains the livelihood of this city. Rich or poor, in ten years we will have larger high end tax base in this city, that is what we need, educated, employed citizens from the private sector living in the city, that is the only way to have a healthy city environment. We need more programs like this one.

[HI]

The Buffalo News is great!

**This comment has been heavily edited to conform to the Buffalo News censors, and contains none of the original content. This is done to test the c*ensorship c*ntrols put in place by the paper.

[Moot point at best]

That's the marginal tax rate, yes Karen. They will still pay the same rate (35.9%) on the first $250,000 and 39.5% for anything above that.

[john]

Buffalo said; "Rich or poor, in ten years we will have larger high end tax base in this city, that is what we need, educated, employed citizens from the private sector living in the city"

In ten years they can move into the next tax free project, leaving Avant and Waterfront Place empty.

[Jim Heaney, author, Outrages & Insights]

Let me expand on my point regarding the role of government efforts to promote economic development.

I agree with those who say it's not the government's job to create private sector jobs; it's up to business.

But, if and when the government jumps in - which is all the time, be it Empire Zones here or farm subsidies across the nation -I think there ought to be some minimal standards when it comes to, among other things, wages. If someone wants to open or build a business paying the minimum wage, fine, just don't ask the government for help.

The fact is, when the private sector invests, it expects a reasonable return on that investment. The public should demand no less when its finances are involved.

And in this town, the public's ROI is often middling to poor.

[commentoncrime]

Ironic how in past decaades the NYS tax system punished business growth with excessive teaxes. Businesses then moved away to more business friendly states (or countries?). Now, NYS must reverse the decades long trend. So now NYS goes too far in the other direction just to attract business to even consider moving /staying here.
Govt intervention/raising taxes didnt work back then. Govt intervention/incentives brought some business back- but at what cost? And who is on the hook if it fails?
At least in the private sector, business accepts the risk and takes the reward for its actions. When Govt acts in the place of the private sector, the taxpayers accept the risk and the business owners receive the rewards. In these cases, it appears that the worst case is the best result possible- the "rich" owners/stakeholders may profit, the taxpayers are on the hook, and little job growth/city improvement is the result.
Libertarians appear to be right in to say that the govt should just stay out of it.

[Pirate's Code]

Jim -- I got your point, I just don't agree with it. Again, governments do not create private sector jobs. Governments, if they are to be involved at all, should create opportunities.

Want to spend tax dollars on the economy? Fine, clean up a brownfield so a private enterprise can develop it without having the cost of someone else's past mistakes. Want to attract high tech? Cool, invest tax dollars in the infrastructure necessary to support such industry. Want to make sure people can earn a liveable wage? Invest in education and job training. Not only do those type of activities give private enterprise an opportunity, they create their own jobs (construction, environmental remediation, education, and so on -- think of it as a two-fer).

That's an ROI I can live with. However, mandating wage standards (beyond what already exist) will place articifical barriers to development in a place and at a time when the last thing we need is another barrier.

In the end, private sector jobs will pay what the market can bear. Set a mandatory bar for wages too high, and no one will even attempt to clear it.

I'm not a fan of the Empire Zone program or others like, and certainly not in instances like you've described in your articles and blog posts. It reeks of all that is wrong with WNY.

But, in fairness, both projects did create opportunity. Again, you tend to ignore the entire construction/rehabilitation phase of projects like this.

We have an imperfect system of economic development that would only be made more imperfect by attaching artifical wage standards.

[Buffalo Libertarian]

Jim Heaney wrote: "But, if and when the government jumps in - which is all the time, be it Empire Zones here or farm subsidies across the nation."

But the government jumping in is part of the problem. Every time it tries to stick its nose into private enterprise it always manages to screw things up and taxpayers are the ones left holding the bag. The solution, then, is for the government to stop engaging in all this corporate welfare entirely.

And by you insisting that those taking advantage of corporate welfare should pay their employees certain wages (never mind that the jobs in question don't rate such wages), you're making it more expensive for those businesses to operate and, in turn, you're reducing any incentive they might have to come set up shop in this town.

[Buffalo]

I think we need to get back to the business of business. We seem to get to caught up in this sense of fair and not fair, it is such a subjective topic. I think New York State coddles the poor, while another person may think not enough is done to help the poor. It seems ultimately a very fine line needs to be set and then followed, one that is advantages to both business and the disadvantaged. I understand that some people need financial help, I just think we do too much in NYS, but again, where we really need to trim the fat is at the government level, cut away all the bureaucracy and 20 forms of representation, and you will have a leaner government, and a community that can attract new business. Our taxes go to feed the pig that is Albany, we need to slaughter that pig.

[Lydia Bezou-Hojnacki]

This is totally sick and a slap in the face for your ordinary Joe Citizen.

Repent, for the end is near................

[Jay]

I will go back to my suggestion, in a city with a continuous population decline, they should give any person who builds a new single family home seven or eight years of NO property taxes. Maybe some middle class families would build here and could help this city.
Secondly, Why haven't we heard one comment on the Empire Zone and its tax advantages from Mayor Brown or the individual council members? Are they aware of the controversy?

[Buffalo Libertarian]

Jay wrote: "I will go back to my suggestion, in a city with a continuous population decline, they should give any person who builds a new single family home seven or eight years of NO property taxes."

Why does it have to be a new-build? Given the large stock of vacant homes here in Buffalo, wouldn't it be better to do the renovations on some of those and help reduce the stock?

[joe]

Empire Zone, what a joke. Like Barnes needs a tax break, or Paladino.

[Jay]

To Buffalo Libertarian, My suggestion is just a start and I am serious. I would like new builds and you may want renovations but neither option is being discussed. My only qualification is that it should be owner occupied. Every option should be used. When you have lost as many residents as this city has, it should be clear that different policies should be attempted. Do you see one of those intellectual minions in the Mayor's office or the common council attempting to do anything different from the past. They have all the answers when you engage them in talk but when their plans are implemented fewer people want to live in the city.he The vacant home problem is so large after being ignored for 15 years that renovation is probably not a plausible action by itself. It was once only white flight but now it is families of every ethnic background that are leaving. What is discouraging is that the News is incapable of presenting the picture if disintegration in a manner that asks to public to do some critical thinking. Last summer there was a housing-neighborhood meeting in the council chambers and I thought that there were more excellent ideas from the citizens that attended than I have heard from any of the politicians in the last ten years. Our local political leaders have made this city a rural community.