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An Analysis of the City of Buffalo Tax Revenue

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Key Terms & Methodology

The way in which property taxes get set can be somewhat confusing. Before explaining the process, it is worth defining some key terms:

Decreases in Tax Payments By Major Taxpayers

Some of the city’s biggest taxpayers are paying significantly less in taxes since 2020 than they did in prior years. A review of major taxpayers disclosed by the city in municipal bond documents shows that many have seen their tax bills decrease significantly since fiscal year 2021 (July 1, 2020 - June 30, 2021).



Topping the list is National Fuel, which paid an average of $2 million less in taxes per year in fiscal years 2021-2024 compared with prior years. M&T Bank has also realized significant tax savings. Of the four, only National Grid is paying more.

Table: Tax Payments by Top Taxpayers, FYs 2018-2020 v. 2021-2024

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Notes:  Taxes for National Fuel, National Grid, and Verizon include special franchise taxes. The figures above are not inflationadjusted; decreases in tax payments would appear even more sharply negative if they were adjusted for relatively high rates of inflation in recent years, while increases would appear more modest or somewhat negative.

National Fuel’s valuation decreased over this period, resulting in dramatically lower tax bills, for reasons that are not immediately clear. Special franchise taxes on utility property in the right of way are subject to New York State oversight, and this may have played some role, though it is unclear why assessments for National Grid and National Fuel would have diverged so significantly. This issue demands further public inquiry – tax policy that results in a utility seeing their tax bill cut in half, essentially overnight, is not serving the public. National Fuel is not starved for cash: its CEO David Bauer made $8 million in 2023.

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Assessment Challenges Resulting in MAJOR
Tax Revenue Losses

One of the more notable assessment challenge cases involves the owners of homes on Rivermist – pricey homes on Buffalo’s waterfront. The homeowners collectively filed suit over their assessments in 2019 and 2020, arguing that their homes – which routinely sell for well north of $700,000 – should have carried fair market values of around $240,000 (the full list of homeowners and requested valuations is here). The case settled in late 2020 and the homeowners appear to have won their challenge, collectively reducing their property tax bills by $255,639, or 55%, from 2020 to 2021, and by 46% from 2019 to 2021.

Many owners of commercial property challenged their assessments, as well. The table below shows what appear to be the largest changes in assessments on specific properties from 2020 to 2023. All of the property owners shown in the table below filed lawsuits against the City of Buffalo to challenge their assessments in court. Some have been resolved, though all challenges appear to have resulted in significantly lower assessments.

Some of these owners, such as Terry Pegula, do not actually pay taxes, but rather pay payments in lieu of taxes (PILOTs) that are based on assessments. Others, such as Benderson (125 Main) are already drawing significant benefits from tax breaks as a result of the 485-a program, discussed more below. In this case, the lawsuit lowered the already subsidized amount of taxes that Benderson pays.

Table: Largest Commercial Property Assessment Decreases, 2020-2023

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Tax Subsidies for Real Estate Developers

The city’s major real estate developers benefit from tax subsidies that significantly lower the taxes they pay to the city. Two of the primary mechanisms are 485-a and PILOTs:

PILOTs (payments in lieu of taxes)

In some cases, developers negotiate PILOTs at a lower tax rate (as was the case for the Uniland-Delaware North headquarters). Others pay PILOTs into an infrastructure fund for improvements to city infrastructure in the immediate vicinity of their properties. PILOTs are not easily tracked in public data, though they effectively increase the tax rates of some of the developers named below

485-a property tax exemption

Some developers are paying low tax rates as a result of the 485-a property tax exemption, the New York State law that cuts taxes on commercial properties converted to a mix of residential and commercial. There have been significant abuses associated with the program, including what has been called the “Benderson loophole” – the addition of just one apartment to an otherwise non-residential building in order to qualify for the tax break (which Benderson Development did at its 125 Main/One Canalside building in order to obtain nearly $6 million in tax breaks). Some of these abuses have prompted corrective action by the New York State legislature. 

The table below shows 2023 assessments, city tax payments, and effective rates for major developers in the city of Buffalo for nonhomestead properties in their portfolios. PILOTs are not included (the city does not publish data on PILOTs made by specific property owners)

Note: Developers often own property through a number of different LLCs, which complicates the task of identifying which properties are actually in their portfolios. A combination of owner name and owner mailing address, drawn from the city’s assessment roll, was used to identify properties in their portfolios. Additionally, inclusion in the developer’s portfolio does not necessarily mean that they own the property – they may own a portion of it or manage it on behalf of other owners

Grow Your Vision

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Though the tax revenue discussed in this report has already been lost, the city can take steps to address these issues and capture much needed revenue from wealthy homeowners and landlords in the future.

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