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The City of Buffalo returned the Market Arcade building to the tax rolls by selling it in 2014 to developer Nick Sinatra, who refurbished its interior and filled it with tenants.
But his company owes $154,430 in city property taxes and fees on the historic Main Street building, according to city and county records.
That's not the only property his companies are behind paying taxes on in the Buffalo area.
Thirty-nine properties owned by limited liability companies controlled by Sinatra & Co. Real Estate are behind on taxes, according to city and county records.
In total, the companies owe $822,716 in back taxes to the City of Buffalo and Erie County, roughly 87 percent from 2017. They owe the city $445,182 for 39 properties and the county $377,534 for 38 properties.
City and county officials said they have taken the first steps toward commencing foreclosure by issuing notices on 28 of the properties – 12 in Buffalo and 16 in Erie County outside Buffalo.
Sinatra has emerged in recent years as a leading Buffalo developer and landlord with projects across the area. In addition to the Market Arcade, where he moved his business headquarters, Sinatra's projects include the Phoenix Brewery Apartments, Fenton Village apartments and the former School 56. He is also vying to redevelop McCarley Gardens, and is engaged in several projects with David Pawlik of CSS Construction on Jefferson Avenue. He is also working with William Paladino's Ellicott Development Co. on the $100 million redevelopment of the eight-acre former Women and Children's Hospital of Buffalo site in the Elmwood Village neighborhood.
Sinatra said not paying the taxes is no accident or mistake but a deliberate part of his business strategy as he challenges assessments and tax levies he believes are excessively high.
"We pay our property taxes and we pay a lot of them," he said. "But strategically we've challenged certain assessments, like all landowners do, and we waited to see what the new land assessment was going to be before we paid the taxes."
Sinatra also cited occasional business disputes and protests against a municipal government as a reason for not paying.
The Market Arcade has three levels of shops and offices topped by a skylight. (Mark Mulville/Buffalo News)
The Public Accountability Initiative, a Buffalo-based research group focused on corporate and government accountability, prepared a report revealing the back taxes and shared it with The Buffalo News. The News independently verified the back taxes and did additional reporting and analysis.
In response to questions about the back taxes, Sinatra said this week that his companies will pay them "in the coming days."
'Incorrect narrative'
Sinatra flatly rejected what he called an "incorrect narrative that I don’t pay taxes," citing over $10 million in tax payments in the last few years on hundreds of other properties.
So far, he has filed about a dozen formal tax challenges in Tonawanda, Amherst, Grand Island and other towns, according to attorney Peter Allen Weinmann, who is handling some of the cases for Sinatra.
"We create jobs. We invest millions of dollars in these neighborhoods," Sinatra said. "Every property I've purchased, we've improved over time. We stand behind our record."
Sinatra said all the back taxes will be paid "in the coming days" to "clear the air" and prevent the issue from becoming a bigger problem.
"We are not going to be foreclosed on any of these properties," he said. "We're immediately taking action to pay them because I don't want to put a doubt in anyone's mind. It was a business decision, and the minute it looked like it was going to be used as a wedge issue, we're paying it."
Pursuing foreclosures
County Executive Mark C. Poloncarz and Joseph Maciejewski, director of the county's Department of Real Property Tax Services, say they are unaware of challenges for taxes owed by Sinatra in 2016, 2017 and 2018.
"We have sent at least seven delinquency notices to Sinatra's business office, and no one from there has spoken to our Department of Real Property Services," Poloncarz said. "It's disappointing. I don't know the reason, but we are moving ahead and will be pursing foreclosures on properties that remain unpaid."
Challenging tax assessments does not give a property owner the leeway to not pay taxes on time, Poloncarz said.
"When you challenge an assessment, you are required to pay your taxes," Poloncarz said. "If the assessment is wrong, we are required to pay it back."
Of Sinatra's 37 Buffalo properties that owe taxes, 36 owe city taxes and one owes county taxes. Sinatra said some of those debts are due to confusion, as he alleged that city officials didn't realize he was using private garbage collection services, and the developer didn't think he had to pay the user fees.
A small portion of what's owed to the county – about $14,000 – dates back to 2016 or before, according to county records. Another $96,127.24 is for 2018 county taxes, which were due Feb. 15.
Sinatra has received $1.47 million in mortgage and sales tax breaks for five projects from the Erie County Industrial Development Agency. The largest subsidy was for $615,000 awarded on Oct. 25, 2017, despite a policy enacted in 2015 that does not allow tax breaks to developers who are behind on their taxes.
'Very worrisome'
The issue of Sinatra's back taxes was raised in a public hearing Monday at the Buffalo Planning Board. Sinatra and Paladino, as part of their plan to redevelop the former Women and Children's Hospital, want to gain approval for the site's first project, a proposed six-story building at the northeast corner of Elmwood Avenue and Bryant Street.
The developers have said they intend to seek public subsidies for the project, part of the larger Elmwood Crossing. Ownership of the former hospital site was transferred to Ellicott Development and Sinatra & Co. in November 2017 after Kaleida Health selected them as designated developers of the site.
Niagara Council Member David Rivera said Sinatra should not be allowed to be a developer on the project unless his back taxes are paid in full.
"Before anybody moves forward on any projects in the City of Buffalo, if there are any outstanding bills owed to the city, they should be paid," Rivera said.
The council member said he contacted Sinatra after hearing he owed back taxes and was reassured they would soon be paid.
Poloncarz also said Sinatra should not be allowed to move forward with new projects before paying what's owed.
"The vast majority of Erie County residents pay their taxes on time, including myself," Poloncarz said. "For those that don't, we have a process in which we can potentially assist them in coming up with payment plans. We don't foreclose on families if we can help it.
"For businesses, it's a different story. If they own multiple properties and there is one that is delinquent, we will work with them. But when you see a significant amount of properties and the delinquencies are growing, it sends a bad message about what I would say is the commitment to the general public.
"I don't know Sinatra's situation, and if he is in financial difficulty, but it is very, very worrisome. But in the end we don't give special treatment to developers."
A city spokesman didn't express concern over Sinatra's overdue taxes.
"The city is aware of the situation and confident that full payment will be made quickly," spokesman Michael DeGeorge said. "Nick Sinatra has been a community-minded developer who has invested heavily in the city."
Wealthy benefactors
Sinatra said there's no financial difficulty with his business. Since he returned to Buffalo several years ago – after earning a business degree from the Wharton School at the University of Pennsylvania following stints with the administrations of Gov. George E. Pataki and President George W. Bush – he has been the beneficiary of significant investments.
His largest financial backers have been Karen Pritzker, billionaire heiress to the Pritzker fortune from Hyatt Hotels Corp. and other business ventures, and her husband, Michael Vlock. While working for Bush, Sinatra met Vlock, a leading philanthropist and longtime Republican donor, who died last October.
Sinatra's buying spree of properties in Buffalo received a boost when Vlock provided $25 million in additional capital in April 2017, according to the Public Accountability Initiative.
Nick Sinatra redeveloped this building at Main and Ferry streets in Buffalo, pictured in 2014. (News file photo)
A 2014 loan application to the Buffalo Urban Development Corp. showed the family owns a 75 percent stake in Sinatra & Co. through KLP Enterprises, held by various trusts within the Pritzker-Vlock family, the group said. But Sinatra said the Pritzkers actually own 50 percent.
Sinatra said he still has "the full support of the Pritzker Family Office," citing a "proof of funds" letter he received that indicates the family wants to continue investing, even after Vlock's death.
"During the past seven years, KLP Enterprises LLC has provided approximately $60 million for real estate acquisitions by the partnerships in Western New York, northern Illinois and southern California," wrote Andrew Wingate, manager of KLP Enterprises, referring to Sinatra & Co. Real Estate and a second company he owns, American Residential Partners.
"We look forward to a very long and productive relationship with Nick," Wingate wrote.
Pride in his property
A Closer Look: The Market Arcade
The Public Accountability Initiative report identified 79 properties owned by limited liability companies controlled by Sinatra & Co. The extent of its holdings in Western New York remains unclear, because Sinatra uses many different limited liability companies that are difficult to identify and track.
Sinatra said he has no intention of losing any of his properties to foreclosure, especially the Market Arcade.
"The Market Arcade is our headquarters," Sinatra said. "It's our pride and joy. I walk into it every day. I'm never going to let this thing go into foreclosure.
"But I bought a building that, when we bought it, it was losing money and half-empty, and the assessment that was put on it was egregious. We're in the process of working through that with them."
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