Proposed tax breaks for three development projects draw questions, criticism at Riverhead IDA hearings

Three applications for benefits from the Riverhead Industrial Development Agency drew sharp criticism from residents during public hearings before the IDA board yesterday. At the conclusion of the hearings, the board tabled decisions on all three applications to allow for further deliberation and discussion.

Browning Hotel Properties is seeking additional sales and compensating use tax exemptions totaling more than $200,000 in connection with the construction of the Marriott Residence Inn on the Route 58 site where the company already operates a Hilton Garden Inn hotel.The IDA in April 2015 granted Browning Hotel Properties tax abatements and exemptions totaling more than $1.6 million, including real property tax abatements of an estimated $579,162 over 10 years.

Developer Lee Browning told the board an improved economy, the addition of some amenities and a new signaled intersection account for a nearly $6 million increase in project costs. The cost increased from $26,849,775 to $32,681,960, Browning said. It will mean a sales tax increase of about $214,000.

Larry Simms of South Jamesport urged the board to deny Browning’s request.

“I’m glad the economy is good. I understand it can make it more challenging. I fail to see how that is on the taxpayer,” Simms said. “It is not our problem.”

After going through the list of increased costs supplied to the IDA by the developer, Simms, who said he’s “made a living in commercial construction for a long time” told the board, “What we’re looking at is either incomplete or irresponsible budgeting. This is offensive to the taxpayers of Riverhead.”

Simms returned to the podium to criticize the applications of Peconic Management Group, which is planning to build a medical office building on Ostrander Avenue north of Route 58, and Georgica Green Ventures, which is looking to build a 116-unit mixed-use apartment building on East Main Street and McDermott Avenue.

In both of those hearings, Simms reiterated his complaints about the amount of information made available to the public prior to the hearing and the amount of time allowed for information about the applications to be reviewed.

He was joined in the criticism by others who objected to the IDA granting “incentives” in the form of partial property tax abatements and exemptions from sales and mortgage recording taxes.

“How is it that we find ourselves considering incentivizing health care, medical practices?” asked former IDA board member Angela DeVito of South Jamesport, referring to the Peconic Management Group application. “Is is health care in such dire straits that we now have to incentivize it? I don’t think so.”

Ian Lyons of Riverhead, director of Clinical Care Solutions at 30 West Main Street, said downtown parking problems will be so exacerbated by the residential developments being proposed, including Georgica Green’s plan, that business owners like him will be forced to leave the downtown district.

“Local business that have served the Riverhead community for years will be gone,” Lyons said. The project will “eliminate small businesses” and “make downtown a ghost town.”

Georgica Green Ventures proposes to build 116 residential units and 58 parking spaces — the site is within the downtown Riverhead parking district and as such is not required under current code to provide on-site parking. (The town board has discussed amending to code to require on-site parking or payments in lieu of parking for new residential development in the parking district.)

The developer is seeking a 30-year partial property tax abatement — rather than the standard 10-year abatement— in addition to sales and compensating use tax exemptions and mortgage recording tax exemptions.

Georgica Green Ventures principal David Gallo told the IDA board yesterday that the 30-year New York State-backed bonds providing the bulk of the financing for the project require an IDA pilot agreement that lasts as long as the financing period.

Gallo said he has pulled together “roughly $52 million in sources of funds” to build the project, including redevelopment money for sites damaged by Superstorm Sandy.

Simms had sharp words for the IDA’s review and consideration of the Georgica Green project, which he said he did not oppose in principle. Again, he objected to the agency not conducting an “real cost-benefit analysis.”

Simms, as he has in the past, argued that the IDA doles out tax breaks to developers who ask for them.

“You don’t have a tax exemption policy,” Simms told board members. “You have a tax exemption habit.”

Simms said there was a “$5 million discrepancy” between the value of the property tax abatement over 30 years estimated by the applicant’s attorney and the estimated value indicated by the town assessors — $5,286,000 versus $10,516,000.

“I’d like to see justification for the amount of the pilot payments,” Simms said.

IDA counsel Richard Ehlers said the difference was due to the applicant’s attorney calculating the taxes under a section of New York State Real Property Tax Law that allows taxes to be calculated based on the property’s actual net operating income. Assessment in that manner is allowed by state law for subsidized housing, Ehlers said. The property owner seeking taxes to be calculated based on that valuation method must apply to the assessors annually, he said.

Laura Jens-Smith of Laurel said the 30-year abatement burdens other residents of the town. Riverhead has the lowest median income in the county, she said. Jens-Smith, the Democratic candidate for town supervisor, also asked whether the apartments would remain affordable after the 30-year period ends. She also asked whether the first-floor commercial space should be granted any tax abatement.

Former councilwoman Barbara Blass of Jamesport asked whether the IDA could act before the town board completes its review of the project under the State Environmental Quality Review Act. A draft environmental impact statement, which is posted on the town’s website, is subject to public comment through July 20, she said.

“Is this board in a position to act until the SEQRA process is actually completed?” she asked. “There may be project modifications.”

Ehlers agreed that the IDA cannot act on the application until the town board closes the SEQRA process. Georgica Green’s IDA application will remain tabled at least until that process is finished, he said.