Culinary school owner owes town and school district more than $320,000 in outstanding ‘PILOT’ payments

An administrative mixup has shorted Riverhead Town and the Riverhead Central School District hundreds of thousands of dollars.

Outstanding property tax payments due on Suffolk County Community College Culinary Arts building on Main Street total more than $320,000. The outstanding amounts are technically payments in lieu of taxes due under a 2007 agreement between the Suffolk County Industrial Development Agency and an LLC owned by Ronkonkoma developer Ronald Parr, which built the facility for the college with financing by the Suffolk IDA.

The Riverhead Town Board last week authorized legal proceedings to attempt to collect the past-due amounts. The action came after negotiations with Parr, the Suffolk IDA and the college produced no result, Riverhead town attorney Robert Kozakiewicz said.

“The total due to the town was in excess of $100,000 and the RCSD was owed more than $221,000” as of the current tax year, Kozakiewicz said.

The missed payments did not “come to light” until last summer, Kozakiewicz said, and at that point the town began to attempt collection.

Because the payments are due under a “payment in lieu of tax” (PILOT) agreement, the town tax receiver’s office does not generate a tax bill for them. Properties subject to PILOT agreements with the Riverhead Industrial Development Agency are billed for PILOT payments by the Riverhead IDA, Kozakiewicz said.

“They [the Riverhead IDA] handle the billing. They collect the money. But the county [IDA] doesn’t generate an invoice or do a calculation for the PILOT payments,” Kozakiewicz said. The Suffolk IDA told Riverhead that in other municipalities, the towns handle the billing. PILOT payment billing for the culinary project never took place.

The culinary arts center at 20 East Main Street is the only Suffolk County IDA project in the Town of Riverhead, Kozakiewicz said. Riverhead, unlike most towns in Suffolk, has a local Industrial Development Agency whose directors are appointed by the town board.

The Suffolk IDA holds title to the property under a November 2007 sale and lease-back deal with Culinary Arts Riverhead LLC. As a condition of financing the development, Parr conveyed title to the property to the Suffolk IDA and the agency leased it back to the company, which developed the site for Suffolk County Community College. Culinary Arts LLC sub-leases the property to the college.

The Suffolk IDA is by state law exempt from real property taxes and assessments. The Suffolk IDA in November 2007 entered into “payment in lieu of tax” (PILOT) agreement with Parr’s company under which the company was responsible for payments in lieu of taxes of all real estate taxes and assessments on the property, phased in under an abatement schedule set forth in the PILOT agreement.

The PILOT agreement between the Suffolk IDA and the developer, a copy of which was obtained by RiverheadLOCAL, granted the developer a 100-percent property tax abatement on all improvements to the site for the first six years of the agreement. PILOT payments for the first six years of the agreement would be limited to an amount equal to the tax on vacant land.

Under the agreement, the developer’s obligation to make any PILOT payments commenced in “the first fiscal tax year following the first taxable status date after the issuance of a certificate of occupancy” by the town. The culinary school opened its doors in 2008. The PILOT payments — for land-only taxes — should have begun in either the 2009/2010 tax year or 2010/2011 tax year, depending on the date the certificate of occupancy was issued for the building.

PILOT payments based on the land-only tax assessment were due for years one through six. In year seven, the PILOT payment would be the amount due for taxes on the land plus 25 percent of the tax on the improvements. In year eight, the PILOT payment would be the amount due for taxes on the land plus 50 percent of the tax on the improvements. In year nine, the PILOT payment would be the amount due for taxes on the land plus 75 percent of the tax on the improvements. And in year 10 and after, the PILOT payment would be the amount due for taxes on the land plus 100 percent of the tax on the improvements.

The Suffolk IDA has issued a default notice to Parr’s limited liability company, Kozakiewicz said.

Suffolk IDA executive director Anthony Catapano was not available and did not return a phone call seeking comment yesterday.

Culinary Arts Riverhead LLC subleases the property to Suffolk County Community College, which operates its culinary arts and hospitality center there.

Developer Parr said in a phone interview yesterday “the matter has been settled.”

The lease with the college makes the college obligated for the PILOT payments, Parr said.

“It’s being settled between myself and the culinary school. The payment will be made. We met today and it’s being settled,” Parr said.

A spokesperson for Suffolk County Community College denied the college’s responsibility for the PILOT payments.

“The agreement Ron Parr has with the college is he signed an agreement with Suffolk IDA in which he is responsible for the PILOTs, the college is responsible for the taxes,” said SCCC spokesperson Drew Biondo. “So he has to pay the PILOTs and the college has to pay the taxes and has been paying the taxes.”

Kozakiewicz said the town was not party to or aware of any meeting yesterday.

“I know of no settlement,” he said. “We had previous discussions. They made an offer, we counter-offered and we never heard back.”

Kozakiewicz said unlike tax assessments, the PILOT amounts do not become a lien against the real property that the town can foreclose on. The town must bring a lawsuit to compel payment and obtain a judgment against the property owner, which in this case is the Suffolk IDA.

Litigating the matter promises to be a complex and lengthy process, he said.

But everything in the history of this particular site has been complex and lengthy. In the 1990s, the town assembled four properties on Main Street and Roanoke Avenue to convey to Swezey’s for a new downtown department store. The town conveyed the site to Swezey’s for $1 in 1997, with a deed clause that said title would revert back to the town if construction was not completed by November 2000.

After several deadline extensions passed, Swezey’s Department Stores announced it was going out of business. Swezey’s disputed its obligation to convey title back to the town and the town commenced a lawsuit to compel the conveyance.

The town and Swezey’s settled the lawsuit in 2005. The settlement required Swezey-Riverhead Holdings LLC to sell the site to Long Island Properties Corporation, a Parr company, for the purpose of constructing a 29,000 square foot building to be leased to the Suffolk County Community College for use as a culinary arts school. Culinary Arts Riverhead LLC is a successor to Long Island Properties Corporation.

Editor’s note:  This story has been updated since its original publication to reflect the comments of a spokesperson for Suffolk County Community College.