Stavatti Air loses tax breaks

(Editor’s note: The following was written by Jonathan Epstein in the Buffalo News.)

Stavatti Aerospace has run out of time for its ambitious plan to build military and commercial jets at a vacant military hangar in Niagara Falls.

Three and a half years after approving tax breaks for the plan, the Niagara County Industrial Development Agency on Wednesday refused to extend the subsidies for Stavatti Aerospace Ltd., after concluding the project just wasn’t getting off the ground.

The rare move by a local IDA came after the project had already received multiple extensions since winning its first approval in October 2020.

It also came despite executives saying they had just received a $600 million letter of intent from an unnamed “U.S. ally” for Stavatti to retrofit 16 older Soviet-era airplanes with updated U.S. parts – the latest similar claim by a company that has yet to actually produce a plane. The March 20 letter is not a formal or binding purchase contract.

The agency’s board members indicated they had run out of patience with a project that had shown little progress.

“What’s important here is setting a precedent or not setting a precedent,” said board member Clifford Scott. “Other organizations will follow, if we provide an extension.”

Two board members toured the facility in recent weeks and met with Stavatti executive John Simon – a former NCIDA executive director – but came away with mixed reactions.

“Frankly, there was little activity going on in the building. However, it looked like they were poised to make some changes to that in the near future,” said NCIDA First Vice Chairman Jason Krempa. But, he added, “the fact that there hasn’t been any progress in three years is concerning.”

Stavatti, led by founder Christopher Robin Beskar, had pledged to invest $26 million to renovate the 150,000-square-foot former U.S. Army Reserve Station complex into a research, design and production facility for its prototype planes, promising more than 360 new jobs. In exchange, the NCIDA in October 2020 granted $2.15 million in tax breaks over 15 years.

Beskar paid $1.2 million in cash in November 2020 for the 19.8-acre property on Porter Road, adjacent to the Niagara Falls International Airport, and Simon said the company has spent another $1.3 million to $1.5 million on improvements.

But Stavatti had used only $4,000 of its sales tax breaks to date, which meant it had spent just $50,000 on eligible expenses, according to NCIDA counsel Mark Gabriele.

And while between 20 and 40 people work at the site near the Niagara Falls International Airport, Gabriele added, none are employed by Stavatti but rather by unrelated entities that rent space from the company.

Stavatti asked for an extra two years on its sales and property tax breaks but NCIDA policy limits the agency to one-year extensions anyway, and board members talked of even shorter time frames, even just 60 days.

But they ultimately balked at even short extensions, because they did not believe the project would be that much closer to completion in that time. And they said the nature of the project had clearly changed, with a focus on retrofits and upgrades of older planes.

“They’ve had a long time to do this,” Chairman Mark Onesi said. “It didn’t look like it was going anywhere. And what they’re bringing in is something outside of their plans.”

However, the denial does not bar Stavatti from coming back with a new application, which would restart a three-year timeline. And Simon said they planned to do that.

“I full understand their reasoning to terminate, because we were unable to perform with the employment numbers and the investment numbers, “ Simon said.

In particular, he said, the company needs to upgrade an electrical substation that would be a critical part of turning the hangar and related property into a modern manufacturing facility. That alone would cost about $1 million, he said. "The substation really needs work. That's a lot of money, and the tax benefits on that would be very helpful," Simon said. "We need to get that improved."

That will allow the company to proceed with retrofitting the 16 existing military planes that would be flown into Niagara Falls, if a contract is signed. Simon did not identify the client or the type of plane, but said they would be reconfigured into Stavatti's SM-29E Super Fulcrum. According to the company's website, that means they're MiG-29 Fulcrum jets, which would get updated engines, sensors, avionics, radar, display and other cockpit upgrades.

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