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Riverhead Industrial Development Agency approves tax benefits for hotel and medical office along Route 58 corridor

The Residence Inn is under construction on Route 58. Photo: Peter Blasl

Despite sharp criticism by community members, the Riverhead Industrial Development Agency Monday granted applications for tax benefits to the new 131-room Marriott Residence Inn going up on Route 58 and a new medical office planned for vacant land on Ostrander Avenue just north of Route 58.

Developer Lee Browning will now save almost $1 million in sales and compensating use taxes on purchases associated with the development of the Residence Inn, located on the same seven-acre site across from Tanger Outlets at the terminus of the L.I. Expressway, where he previously built a 114-room Hilton Garden Inn hotel. The IDA granted his application for an additional sales tax exemption of almost $215,000 — an increase from the previously granted $759,622 exemption to $974,449.

The IDA in April 2015 had already approved a 10-year real property tax abatement worth an estimated $579,162 over 10 years and a mortgage recording tax exemption, in addition to the state and county sales tax exemption increased at Monday’s meeting. an estimated in savings.

At a public hearing on his application last month, Browning told the IDA board his costs for the project had increased from about $26.9 million to $32.7 million due to the addition of amenities and upgrades to the hotel, as well as a new signaled intersection and an improved economy.

South Jamesport resident Larry Simms, who has been an outspoken opponent of IDA tax abatements and exemptions, said in a statement that “a hotel owner who decides to build a bigger pool and a fancier bar …and who budgeted badly, doesn’t deserve yet another $215,000 in taxpayer help.”

IDA Executive Director Tracy Stark-James said that the additional sales tax exemption granted means that “they are eligible to use that amount, but it doesn’t mean that they will.”

Simms didn’t agree, stating that the latest IDA subsidies are “completely unjustified and have become routine” for the agency.

Simms argued that the IDA is giving money to businesses that are already committed to Riverhead and that “they never demonstrate payback to the town.”

“How is a bigger swimming pool for the hotel helping the residents of Riverhead?” he asked.

Simms also said that additional costs due to a new signaled intersection — required by regulators — were not unexpected or unforeseen. He said that Browning did not properly anticipate construction costs and should have checked with the State Department of Transportation beforehand in regards to the exits for the hotel since it’s so close to the Long Island Expressway exit 73.

Nevertheless, yesterday the IDA board voted unanimously in favor of the additional sales tax exemption for the developer.

Tax benefits for new medical office approved

The board also approved tax incentives for a new medical office that Peconic Management Group is proposing to build on Ostrander Avenue, across from the now-vacant former Suffolk County National Bank branch.

The new office will be dedicated exclusively to pulmonary rehabilitation and will specifically treat cystic fibrosis patients, according to Dr Paayal Mehta of Peconic Management Group.

Mehta said at a public hearing last month this kind of center is not available in the area, requiring people to travel great distances for treatment.

This new office is considered phase three of Peconic Management Group’s project. The group already has two buildings on Roanoke Avenue dedicated to wellness and bariatric services, physical therapy and sleep disorder treatments.

Each of the two now-functioning centers were granted a five-year property tax abatements by the IDA in the past. The IDA approved another five-year abatement for the new development, not the 10-year abatement sought by the developer. The abatement granted — 50-percent in the first year declining to 10 percent in the fifth and final year — applies to property taxes resulting from increased assessed value associated with the construction. It does not apply to taxes already assessed on the vacant land.

Simms, who also opposed the Peconic Management Group application, said the “doctors that are running two profitable office suites, knowing the market will support still more, hardly need a third set of tax breaks to expand.”

The application was approved by a 4 to 1 vote.

No action taken on Georgica Green application

The board took no action on the application of Georgica Green Ventures LLC, which also had a public hearing last month. The developer, who is proposing to build a five-story mixed use building with 116 apartments, two restaurants and retail shops on East Main Street and McDermott Avenue, is seeking an unusual 30-year real property tax abatement; the standard abatement is 10 years.

Georgica Green managing member David Gallo at last month’s hearing said 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 finance 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.

Georgica Green offered to pay $42,000 in annual payments under a proposed PILOT (payment in lieu of taxes) agreement between the IDA and the developer, according to Stark-James. The annual PILOT is split among the town, county, school and fire districts. There would be a 20 percent increase every 5 years, up to 30 years, Stark-James said. Current property taxes on the site total about $35,000 annually and would not be affected by the PILOT.

A number of residents voiced strong opposition to the 30-year tax abatement. Laura Jens-Smith of Laurel said during last month’s hearing that the abatement burdens other residents of the town, which has the lowest median income in the county. Jens-Smith 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.

Chairman Thomas Cruso said Monday the IDA is still “investigating” many issues and had not reached a decision on the project. In addition, he said the IDA board cannot act on the application until the town board completes its review of the project under the State Environmental Quality Review Act.

“We are looking at the tip of the iceberg with this one,” said Simms, who has said in the past that although he is not opposed to the project, he does oppose the IDA’s reasoning when dealing with applications and subsequent approvals for abatement and exemptions.

Maria Piedrabuena
María, a multimedia reporter, graduated from Stony Brook University with degrees in journalism and women and gender studies. She has worked for several news outlets including News12 and Fortune Magazine. A native of Spain, she loves to read, write and travel. She lives in Manorville. Email Maria