Schenectady

The developers of the $450 million Rivers Casino and Resort at Mohawk Harbor won the coveted recommendation for a New York state gaming license in part on the promises of millions of dollars in new tax revenue that will flow into the struggling city.

But Rotterdam-based developer Galesi Group pays little in taxes on nine properties that make up the former American Locomotive plant because they've all been classified as tax-exempt through the Schenectady County Metroplex Development Authority, according to property records.

And when Galesi purchased the roughly 53 acres of land that borders the Mohawk River in April 2010 from a private company, it paid $500,000 — when the land was assessed at $11.3 million, according to a Times Union analysis of the data. An undated economic analysis report Metroplex did on the ALCO site estimated that it would cost $8 million to buy the property.

It's one of the many government incentives Schenectady County's most prominent and politically active developer has received in recent years, including millions of dollars in tax breaks on other projects supported by Metroplex and government grants to help cover demolition and construction costs.

David Buicko, Galesi Group's Chief Operating Officer, said he understands it looks like he got a great deal on the property. ALCO had already been gifted $4 million for cleanup before the Galesi purchase as well. But Buicko said his company has sunk more than $10 million into the site, which includes remediation of 150 years worth of industrial contamination, as well as removing old railroad lines and antiquated water and sewer systems.

"This ranks up there with the top of projects — in terms of complexity, in terms of cost, in terms of scope — that we've ever experienced," Buicko said. "The reason we did it is because of our commitment to the Capital Region and our commitment to Schenectady."

Galesi does make a $40,000 payment in lieu of taxes each year since taking over the former ALCO properties in 2010. The deal has been listed in Metroplex's yearly round up of PILOTS as "Alco site in Schenectady. Vacant land brownfield remediation." But it's been a largely quiet deal, which is typical for PILOT agreements as the authority doesn't need an official vote from the city or school district to negotiate such terms.

"The problem is it's public funds they're using and I don't see any accountability for it," said Schenectady City Councilman Vincent Riggi, one of the few non-Democrats elected to city or county government.

According to a review of Metroplex meeting minutes, the PILOT was renewed in 2012 for two years, in 2014 for one year, and again for another year recently. In the city's assessment records, the term year on the exemption is listed as "0" meaning there is no limit to when the exemption ends.

"Although the site is much improved following demolition of blighted structures, it generates no income to the developer," according to the Metroplex resolution renewing the PILOT in March 2014.

Metroplex Chairman Ray Gillen said the PILOT amount was based on what taxes would be due if the property was assessed at $1 million. "The buildings were empty and not producing anything," he said. "It was a good way to treat the property."

Galesi had planned to construct housing, office and retail on the site, but changed course after a statewide vote approved a constitutional amendment allowing casino gambling in 2013. Now, Galesi is proposing to build a casino that would include a marina, two hotels and 300 apartments.

More Information Casino property facts 2010 property assessment: $11.3 million 2010 purchase price: $500,000 Back taxes paid at sale: $1.2 million Assessment after sale: $3 million Government grants for clean-up and development: $9.3 million Source: Times Union research Galesi PILOTs* • Former ALCO property • Golub headquarters • 409 State St. • 845 Broadway • Center City • 401 State St. • Bow-Tie Cinema • DEC office, Rotterdam Corporate Park • 487 Nott St., former county DSS building • Former Scotia Naval Depot *Payment in lieu of taxes agreements. All sites in Schenectady County. Source: state Authorities Budget Office, Schenectady Metroplex Development Authority See More Collapse

Five years ago, the properties still held 800,000 square feet of warehouses and other industrial space that were available for rent from a limited liability company called Schenectady Industrial Corporation (SIC). The property was used by the American Locomotive Company from 1849 to 1969, and was one of the largest train manufacturers in the country.

The SIC was created in 1945 by county business leaders to encourage more industrial development similar to ALCO and General Electric Co. In fact, GE leased many of the buildings from 1971 to 2002, according to a 2009 Metroplex report on the property.

But as industry left Schenectady, so too did interest in leasing the former locomotive buildings. Louis Buhrmaster, chairman of board of directors at First National Bank of Scotia, was part of the Schenectady Industrial Corporation because his father, Kenneth Buhrmaster, was one of the limited liability company's founders.

Buhrmaster said the former Schenectady Economic Development Corporation handled the property in the early 2000s before handing it back over to SIC. By then, renters had dwindled and property taxes, and water and sewer bills, were mounting, Buhrmaster said. He said he filed tax certiorari claims in state Supreme Court fighting the city's assessed valuation of the properties, which translated into hundreds of thousands of dollars in property tax bills each year.

"Had I been relieved of the taxes, I could have filled (the buildings) up and kept it going," Buhrmaster said.

Many of the tax liens on the ALCO properties were later sold to a private entity called American Tax Funding (ATF), which paid the city of Schenectady millions of dollars in the 2000s in exchange for being the collector on delinquent tax bills. So before the ALCO land changed hands, the city helped broker a deal in which Galesi paid ATF about $1.2 million to release the liens, Buicko said, in addition to the $500,000 for the property.

After Galesi's purchase, the total assessed valuation of the exempt properties fell from $11.3 million in 2011 to $3 million in 2012. Assessment records indicate the change happened because all the structures were demolished. The largest parcel of 37 acres went from $5.7 million in assessed valuation in 2011, to $388,500 in 2012.

Galesi recently bought a building at 405 Front St. that is used for rented office space. The developer plans to tear down that building soon — and then that parcel, which is currently assessed at $1.8 million, will likely become tax exempt, too. STS Steel on Erie Boulevard is the only industrial use left on the ALCO site. That company owns its own building — although its owners have acknowledged they would like to move.

Galesi has been the recipient of other monetary benefits connected to the property as well.

Buicko serves as a representative on the state's Capital Region Economic Development Council. In December 2013, the ALCO site was awarded $5 million in round three of the Development Council's awards. Buicko said he recused himself from the vote on the project.

Galesi also received a $4 million Restore-NY grant, which the city of Schenectady applied for and received in 2009 for demolition on the ALCO site. Buicko said he's used $1.8 million of it so far. Metroplex also provided Galesi with a total of $375,562, mostly in 2010, according to authority audits.

Brownfield Cleanup Program tax credits will also be available to Galesi. A state Department of Environmental Conservation spokesman said the specifications for the cleanup are still being worked out, so no tax credits have been issued. However, on the nearby College Park site — a former ALCO property where Galesi built the Golub headquarters — the developer received $6.8 million in state tax credits, said Travis Proulx, a spokesman for Environmental Advocates of New York, which released a report last week criticizing the Brownfield program statewide for being wasteful. The actual cost of clean-up, however, was $4.25 million, Proulx said.

Galesi and Chicago-based Rush Street Gaming's application to the state Gaming Location Board indicated that a casino will generate an estimated $6.7 million in local tax revenues. But it's unknown what the real dollar amount will be. Buicko said the casino will be assessed and have property tax paid on it accordingly. As far as how the other buildings on the site will be taxed, "we'll deal with new stuff on a case-by-case basis," Buicko said.

It will still be at least two years before the casino is built. More immediately, Galesi is expected to present a site plan for the casino development to the city's Planning Commission on March 31.

lstanforth@timesunion.com • 518-454-5697