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Fight the taxes

Niagara Falls Repoerter

June 22, 2010

By Frank Parlato Jr.

It's no secret.

I am in a property tax dispute with Niagara Falls. The lawyers have their own legal theories. Mine is practical.

The city cannot do everything in its power to improperly close us down, wrongly assert to the public that we cannot be occupied for business, and then tax us as if we are a new, fully occupied property.

The property is One Niagara, a nine-story, all-glass building adjacent to the Niagara Falls State Park.

As readers may recall, it was built in 1981 by the Occidental Chemical Company and was known as the Flash Cube. After becoming largely vacant by 1989, it was sold in 1999 to David Ho of Hong Kong, who said he planned to build an underground aquarium on its grounds.

The AquaFalls aquarium project secured tax-free status from the Niagara County Industrial Agency (IDA) based on its plan to create jobs. After securing tax benefits and millions from investors, Ho blasted into bedrock an acre-wide, 35-foot deep hole. Then he put a fence around the hole and added a sign: "AquaFalls coming soon."

And that, for five years, was the extent of the development: a giant hole. The Buffalo News called AquaFalls "Niagara Falls' signature eyesore." The Niagara Gazette called it "the infamous, outdoor stain on the city's image." WBEN radio described it as "a blight that greeted people as they entered the city from the Rainbow Bridge."

Not everyone was unhappy with this.

Since fewer tourists ventured out of the park to wander around the enormous hole with its protruding metal fences and broken sidewalks, park vendors got more business.

In the meantime, there was one tenant remaining in the building: the Small Business Administration (SBA). Three hundred people with federal jobs worked there, occupying two floors.

In spite of collecting millions in rent from the SBA, Ho did not pay his bills. Niagara Mohawk cut off power to the building, and turned it back on only after the SBA took responsibility for electric bills. The SBA complained that Ho failed to make repairs. On the eve of my purchasing the property, the Buffalo News announced that the SBA would "relocate from Niagara Falls ... bringing 300 new workers to downtown (Buffalo)."

Meanwhile, after five years of missed PILOT payments, the IDA revoked AquaFalls' tax-exempt status. Ironic: Ho had avoided $2 million in property taxes based on his promise to create jobs. Through his mismanagement of the SBA lease, Ho actually lost Niagara County 300 jobs.

In November 2004, the city took AquaFalls to court for "endangering the safety of pedestrians and traffic." Judge Angelo J. Morinello fined them $192,500. Ho never paid the fine.

By late 2004, the property was being foreclosed on by Larry Reger for $3.5 million. Ho had never paid back the man who lent him the money to dig the hole.

I bought Reger's mortgage, stopped the foreclosure and made a deal with Ho. The operating agreement Ho signed gave me exclusive right to manage the property.

I started filling the hole on May 10, 2005.

With little prospect of finding office tenants, I opened a number of small tourism businesses.

My tax payment of more than $200,000 in 2006 was the first taxes paid on the property since 1998.

In 2005, I was cited by city inspectors for cracked city sidewalks caused by the original blasting of the hole. Before it went to court, I put in new sidewalks, but the case continued anyway, because they weren't fixed at the time I was charged.

The sidewalk case was assigned to City Court Judge Mark Violante. Unfortunately, the court clerk neglected to inform the judge that the trial date had been adjourned with the court's consent. Violante issued a bench warrant for my arrest for not showing up.

On May 1, 2006, I was arrested and, for the first time in my life, locked in jail, until a panicked court clerk recognized the error and had me released.

Not being able to get an apology for being arrested in front of family and employees, I filed a notice of intent to sue.

In late July 2006, I went to trial on the original sidewalk charges. Violante recused himself. Later, the ridiculous sidewalk case was dismissed. An investigation by the New York State Office of Court Administration did result in a letter of apology for my false arrest.

After the sidewalk case was dismissed, the city had the final laugh. They placed broken, unpainted bollards on the new sidewalks, making it difficult for pedestrians to pass.

In April 2006, I signed an agreement with the city that I would expedite filling the AquaFalls hole in return for approval to operate a tourist center on the first floor in time for the 2006 tourist season. The other eight floors were to remain closed until I was ready to develop them.

After I filled the hole, the city, naturally, tried to close me down again, saying the deal they signed was technically invalid.

There was a lawsuit. I won.

Over four years, One Niagara grew from a single restaurant to 12, from one store to seven, and other tenants came, offering an array of tourist services and employing many people.

Mayor Paul Dyster, far from encouraging this venture, consistently refused to meet with me. He provoked a lawsuit over the use of a trifling few feet of parking space on my property. Then there was another spate of inspections ordered. They found two extension cords that ran to outdoor signs, technically a violation of the New York state building code. City Hall threatened to cut off my power and condemn us. I removed them. Yet there are extension cords all over the city -- including City Hall.

They tried to take down my signs on the premise that the state park might not like them. I fought that in court and won. One of the city's lawyers, supposedly drunk one night, actually came over and kicked down one of the signs. In 2008, One Niagara paid $438,000 in property taxes, raised partly from its parking lot and businesses. A month later, Dyster and Senior Planner Tom DeSantis tried to persuade Guy Bax, commissioner of Inspections, to close the building because there wasn't enough shrubbery planted. DeSantis then canceled the 2007 site plan approval because there were not enough shrubs.

"I'll plant shrubs," I said.

"You have to start the site plan approval process all over again," DeSantis replied.

"Meantime, close the building," he added.

"But 200 people will be out of a job," I said.

But you can't close a building because of shrubs. Bax refused.

Bax was afterward put on forced leave by the mayor, ostensibly for another reason, but I believe it had much to do with his refusal to illegally close One Niagara.

By 2009, I planned to open a ninth-floor observatory. When I tried to submit engineered drawings, the city Inspections Department refused to accept them.

On Jan. 12, 2009, city attorney Chris Mazur wrote to the Building Inspections Department, "Your department should not accept and review any engineered design drawings regarding the One Niagara property. Since 2005, One Niagara has done nothing other than frustrating the planning, inspections and law departments."

I sued. The city was acting in an "arbitrary and capricious" manner in denying me the right to develop my property. An injunction, issued by State Supreme Court Justice Richard Kloch on July 2, 2009, ordered that I could open the ninth floor and submit a new site plan that should not be arbitrarily and capriciously denied.

The ninth floor opened on July 4, 2009. Over the winter I designed a museum and exhibits that would make the observation area a world-class attraction. In spring I received a letter from the city informing me they were going to appeal Kloch's decision. They ordered the ninth floor closed again. In most places, they would want something like this open.

I sued and won an injunction on April 13 preventing the city from interfering with my use of the property until the appeal was decided. The ninth floor remains open, but with its future uncertain, I cannot risk a large investment on exhibits, which would have employed another dozen people.

In May 2010, DeSantis told us that if we wanted to get our site plan approved, we had to eliminate 25 percent of our parking lot to make a large green garden in front of our building. There are parking lots that service competing businesses. None have green space. Parking is critical to the success of our business. If there is no place to park, people drive elsewhere.

A few days later, DeSantis piled on, demanding that we plant 1,000 shrubs to hide the parking lot from public view. He also wanted a fence to protect the shrubs. People would have to jump over bushes and fences to get to our building. His plan would reduce a 200-car parking lot to a 100-car parking lot, ensuring our businesses would fail.

Dyster also wanted all One Niagara signs "permanently removed" until we got approval from various agencies for scaled-down signs, a process that would take a year or more.

We were in a Catch-22 situation. Other floors had to be developed. One or two floors cannot pay the bills. But the city would not issue permits. In what might be contempt of Kloch's order, the city wants us to eliminate half the parking lot and hide what is left behind shrubs and fences. And they want us to remove all signs -- if we want site plan approval, which in turn allows us to get permits to develop other floors.

They criticized me for being behind in my taxes, but I made a deal to fill the hole. After I did, they tried to close the building. For years they tried to stop development on the property that would help earn money to pay taxes. They have harassed on big and little things. Refused to meet. Had me arrested, falsely.

Lately I learned there are documents at City Hall and in the probable possession of other authorities that purportedly reveal that Dyster, with at least one of his campaign contributors, worked in concert to harm One Niagara by keeping it closed.

It appears I must sue again.

The city says One Niagara owes tax money.

My idea is that the city of Niagara Falls may owe One Niagara for everything they have done to harm it.



  Copyright © 2008 Frank Parlato Jr.