BUFFALO, N.Y. — 500 Pearl Street is one of the newest buildings in the city of Buffalo.
- Many developers in Buffalo take advantage of the 485-a tax exemption
- Some lawmakers believe there are loopholes and want to pass legislation to close them
- Ellicott Development Chair Carl Paladino said reform could mean less new buildings in Buffalo and other cities
Like many other projects, the developer took advantage of New York state's 485-a tax exemption.
"They're great buildings. They add greatly to the community and we're spending big money but without those tax benefits, we couldn't build them here," Ellicott Development Chairman Carl Paladino said.
The 485-a freezes tax rates on a sliding scale based on the pre-construction assessed value of a property for 12 years. Paladino said it creates tax revenue for the city where otherwise there would be none.
"It's not a handout of money," he said. "It's money that doesn't exist. It's not somebody giving away current taxes or taxpayer money."
However, Assemblyman Sean Ryan, D-Buffalo, said the exemption was always meant for adaptive reuse, not new buildings like 500 Pearl.
"Every city that we've seen, or town that's opted into this, has seen a problem in scandal," Ryan said.
He said across the state developers have also taken advantage of loopholes, claiming to meet mixed-use requirements when in reality they haven't.
"The cities often don't have the tools to fight against it because when they tell a developer they're not eligible, the cities or the towns are then threatened with lawsuits," Ryan said.
The Assembly passed legislation this past session meant to clarify the language of the exemption.
"We just make abundantly clear this is for only adaptive reuses and not new builds," Ryan said.
We want to make sure that at least half the building, 50 percent, is residential. So we can't have one tiny apartment in a major office building and say it's mixed use."
It also would require developers to put retail space on the first floor of buildings and actively try to rent the space out.
"I know we use it in its right format," Paladino said. "We do it the right way. Are we taking advantage of a loophole? Not that I'm aware of. I don't know what others are doing."
He said if the Legislature restricts the exemption to adaptive re-use, cities like Buffalo will simply see far fewer new buildings.
"Nobody's come and talked to us about any of this," Paladino said. "Nobody's talked about the impacts of certain legislation."
Ryan does not believe the legislation will slow development in Buffalo and said it could potentially mean millions for city tax rolls.
The Senate did not pass the bill but the assemblyman is hopeful his colleagues will take it up next year.