News Column

Hotel in Lancaster seeks tax breaks from town IDA

May 10, 2014

By Stephen T. Watson, The Buffalo News, N.Y.

May 10--The developer of an $11.5 million hotel in Lancaster is seeking $1.05 million in tax breaks from the town Industrial Development Agency for the project, which would be built on a section of Transit Road that has nine hotels within a quarter-mile.

Scott Enterprises of Erie, Pa., is planning to build a 108-room SpringHill Suites by Marriott at 6647 Transit Road, near the Thruway exit, and is requesting property, sales and mortgage-recording tax exemptions.

The Lancaster IDA follows the same policy on hotel tax breaks as the Erie County IDA, which grants them only if a hotel is part of a regional tourism attraction, the reuse of a long-vacant property or a development in an enhancement zone. But the interpretations of that policy are vastly different.

Lancaster officials say the new hotel merits assistance because of its connection to area tourism destinations.

"Why would we shy away from a project like this? said Lancaster Supervisor Dino J. Fudoli, who also is chairman of the town's IDA. "We're doing what we can to bring economic development into the town."

The Erie County IDA, on the other hand, has all but stopped granting tax breaks for standalone hotel projects, and county officials say they don't believe the proposed Lancaster hotel meets the definition of a tourism destination as included in IDA policy and state regulations.

"That's a loophole through which you could drive any hotel, of any size, and it makes a mockery of the state law," said Deputy County Executive Richard M. Tobe.

IDAs have received criticism for granting tax breaks to hotel projects, such as the renovation of the Millennium Hotel in Cheektowaga and the Hyatt Place Hotel in Snyder.

The Lancaster IDA will hold a hearing Tuesday on the tax breaks, which include $550,000 in sales exemptions; $358,729 for a 10-year payment-in-lieu-of-taxes, or PILOT, agreement; and $114,600 in mortgage-recording tax exemptions, according to Paul R. Leone, an IDA consultant.

Scott Enterprises, which owns the Peek'N Peak resort in Clymer and a Staybridge Suites in Clarence, would build a 71,500-square-foot hotel and hire 45 people. Lancaster IDA officials estimate the project would provide community benefits of $10.7 million in direct and indirect economic impact.

Scott Enterprises bought the vacant, 3.6-acre parcel in 2011 under the name Scott's Buffalo Inn Inc.

The company, which owns nine hotels in its home market, wants to add to its holdings in the Buffalo area because of the strong performance of its Staybridge hotel here, said Chris N. Scott, a vice president and co-owner.

The hotel would be built in the middle of a quarter-mile stretch of Transit Road that already has a Salvatore's Grand Hotel, Clarion Hotel, Motel 6, Econo Lodge, Hospitality Inn, La Quinta Inn, Red Roof Inn, Microtel Inn & Suites by Wyndham and Salvatore's Garden Place Hotel.

Leone said Scott Enterprises officials analyzed the local hotel market and determined there is sufficient need for a hotel there, given the continued growth in travelers, primarily Canadians, who stay overnight here before flying out of Buffalo Niagara International Airport or shopping at local malls.

He said the Lancaster IDA adheres to the hotel tax-break policy used since 2012 by the Erie County IDA.

The Lancaster IDA received an opinion from its attorneys, the firm of Magavern Magavern Grimm, that the Scott Enterprises hotel would fit within that policy because of its link to the airport and the Walden Galleria, Leone said.

Fudoli said town officials believe the ever-expanding Russell's Steaks, Chops & More and Salvatore's Grand Hotel complex is an attraction in its own right. The hotel would be built next to that development, behind a Friendly's restaurant.

"It does meet all of the legal requirements of a tourist destination," Fudoli said.

Tobe, the deputy county executive, said he doesn't believe a standalone hotel counts as a major tourism destination.

The county IDA revised its hotel policy after its decision in March 2012 to grant $275,000 in tax breaks for a $5.5 million renovation project at the Millennium Hotel proved controversial.

Additionally, regulations included in last year's state budget restrict tax breaks granted to retail projects, unless the development meets one of three exceptions: It must be located in an economically distressed area, be part of a broader tourism project, or provide goods or services that aren't now available. Tobe said hotels fall under the state law because they are considered to be retail in nature.

Over the past several years, the Erie County IDA has approved tax breaks for multi-use projects that include hotels. Uniland Development Co.'sDelaware Avenue office and hotel project, the future headquarters of Delaware North Companies, received $10 million in tax breaks but the hotel portion did not receive tax breaks.

The county IDA did approve $37 million in tax breaks for the HarborCenter hotel and hockey complex, with IDA officials citing its transformational impact.

The Lancaster IDA will hold a public hearing on the Scott Enterprises request at 8:40 a.m. Tuesday in Town Hall, 21 Central Ave. If the tax breaks are approved, Scott Enterprises would look to begin work on the hotel site as soon as the next day, with a planned opening of late spring 2015.

Fudoli said he expects the tax breaks to be approved. Scott Enterprises' planning for the project counts on the tax breaks, Scott said. A rejection of the company's request would require reassessing the project's financials, he said, but "I think we'd move ahead even without it."

Also Tuesday, the Lancaster IDA is set to vote on tax breaks for a company, Innomotive Solutions Group, part of the Whiting Group of Canada, which plans to spend $5.5 million to acquire and renovate a site at 4304 Walden Ave. to establish its first U.S. manufacturing facility.

The company, which makes roll-away doors used on emergency vehicles, would employ 17 people in Lancaster, said Leone, the IDA consultant.

The IDA would approve $64,000 in sales tax breaks and a PILOT agreement whose value isn't known yet because it hinges on the assessed value of the property after the renovations are completed.

email: swatson@buffnews.com

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Source: Buffalo News (NY)


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