Don’t Hold Your Breath On Hamister Hotel Project: IDA Grants Extension

You read it here first, folks.

Back in 2013, when Niagara Falls Mayor Paul Dyster and Buffalo developer Mark Hamister announced that a resort style luxury hotel would be built on city owned Rainbow Boulevard property, the Niagara Falls Reporter smelled a rat.

The plan was vague, Hamister was evasive when asked whether he had the money for the project, and the deal had to be done immediately, so construction could begin, they said.

The high pressure sales tactics combined with an utter lack of specifics about the deal reminded us of the sort of practices one sees at a seedy used car lot that does not have the endorsement of the Better Business Bureau.

And Dyster’s lack of business acumen, demonstrated time and time again during his years in office, provided all the more reason to doubt the deal.

We launched our own investigation into the matter in the summer of 2013.

Construction was to have begun in the spring of 2014, then the summer of 2014, then the spring to 2015, then – oddly enough – in the fall of 2015.

All of those dates came and went. Now, in the spring of 2016, those close to the situation are saying nothing will be done until 2017, at the earliest.

In other words, if ever.

On Wednesday the Niagara County Industrial Development Agency extended tax breaks for the project for six months. Those incentives were given to Hamister last year, and were going to expire by March 31.

The extension will prevent any other developer from taking over the project during that time, and guarantee that construction of the new hotel will not likely get underway until 2017 at the earliest.

After three years, Hamister is still looking for outside funding for the project.

The project, which was originally planned to break ground in 2013, remains in limbo.

“It doesn’t seem to be moving forward,” said IDA Board Member Gerald Wolfgang. “It just seems like a very big negative.”

Hamister, who has never built a hotel before, originally painted a lavish picture of the “resort destination” he planned to build on the choice real estate, which lies about 300 feet from the main entrance to the Niagara Falls State Park.

A news release issued in 2013 described a 100,000-square-foot establishment with 100 plus upscale rooms and 24 trendy permanent apartments. On the ground floor, 8,000 feet would be devoted high end boutiques for the discerning shopper.

The project would create between 200 and 300 jobs during the construction phase, and catering to the needs of the moneyed patrons who would flock to the premier destination would require the services of 70 full time employees once construction was completed.

It was touted as a centerpiece for downtown tourism by a bevy of local, county and state officials.

The hotel project would be “transformational,” a once in a lifetime opportunity that would provide the “tipping point” that would once and forever serve to revitalize the city’s languishing tourist district, Niagara Falls Mayor Paul Dyster gushed.

In 2013, when former city councilman Sam Fruscione questioned whether Hamister had the money to do the project, Gov. Andrew Cuomo and U.S. Senators Charles Schumer and Kristen Gillibrand branded him as an “obstructionist” and threw their considerable weight behind Hamister.

Fruscione lost his Council seat in the Democratic primary that year.

“The Hamister deal was never meant to happen. It was a campaign stunt to do two things: put me out of office and put [Council members Charles] Walker, [Kristen] Grandinetti, and [Andrew] Touma into office,” Fruscione says today. “So here the city sits, close to three years later, and still no hotel. Not so much as a shovelful of dirt turned over. The project should be looked at from top to bottom. The residents deserve an answer to the entire affair.”

Last year, when Hamister finally had to submit papers to the county Industrial Development Authority to apply for millions in tax breaks, he admitted that there would be no upscale residential apartments, no trendy boutiques and that the hotel wouldn’t be a Hilton at all, but a mid-scale, 128-room Hyatt Place – indistinguishable from those found near truck stops in Nebraska and Arkansas – instead.

And, rather than 70 full time jobs, just six full time and about 39 part time jobs were listed on the developer’s IDA application, which is sworn to under penalty of perjury.

But despite all the downgrades, the cost of the project ballooned. The project, as approved by the IDA last year, carried a $35.7 million price tag, up from the $22.4 million he said the Hilton would cost.

Under the terms of his agreement with the state, Hamister is to receive $1 in state aid for every $9 he sinks into the project.

This aspect of the deal stinks with potential fraud since no 128 room Hyatt Place hotel would cost $36 million. This appears to be a case where the developer is artificially inflating the price in order to secure more taxpayer subsidies.

While Hamister is politically connected and may be able to get away with it, if you or I tried such a stunt we would not escape prosecution.

The USA Niagara Development Corporation, a subsidiary of Empire State Development, agreed to up Hamister’s financial assistance last year to $3.85 million, a proportional increase from the project’s original $2.2 million allotment that accompanied its initial price tag.

To top it all off, Dyster gifted the shifty developer with the lot at 310 Rainbow Boulevard for a price of just $100,000, far below its appraised value of $1.5 million.

In August, Dyster [coincidentally during his reelection campaign] also paid John Guido, who leased the property from the city for use as a private parking lot, $45,000 to vacate early because, Dyster claimed, construction was imminent.

It wasn’t.

“We’ve been told they have worked out some financing arrangement,” City Planner Tom DeSantis told the Niagara Gazette last week. “They’re as close as they can be. What it takes to make that official, I don’t know.”

IDA Chairman Henry M. Sloma said he found the whole situation puzzling.

“We have a couple (of projects) that can’t get the financing, and I’m surprised they didn’t have it in the first place,” he said. “Sixty percent of the time, there’s no one walking the streets of the City of Niagara Falls. Finance people notice that.”

Finance people have also told the Reporter that at Hamister’s inflated price he cannot obtain financing. Finance people use standard financing tools including appraisals to determine the accurate construction costs of projects. Hyatt Place hotels cost about $135,000 per room, not the $280,000 per room Hamister is claiming.

Critics have charged that the actual cost of the hotel will be around $18 million, since a virtually identical Hyatt Place was built in Amherst last year for that amount, and successful Canadian hotel developer Michael DiCienzo has offered repeatedly to take over the Niagara Falls project and deliver the hotel for that amount.

Last week’s decision by the IDA will keep DiCienzo – and any other potential developer – out of the game until October at least, the end of the 2016 construction season.

It is a boondoggle some saw coming from many miles away.