Developer of proposed propane facility on Kroemer Ave withdraws IDA application after failure to capture enhanced benefits

The developer of a proposed wholesale propane facility and industrial office building on Kroemer Avenue has withdrawn its Riverhead Industrial Development Agency application for financial assistance and will likely downsize its project, after the IDA declined to grant the developer’s requested 10-year, 100% enhanced real property tax abatement.

The IDA was set to act at its August meeting on a resolution granting a 50% real property tax abatement to the developer of 48 Kroemer Avenue, but postponed the vote after the developer’s representatives said the company may reconsider what it builds on the property if it didn’t receive the enhanced abatement.

The representatives asked the IDA board to reconsider its decision. 

At the IDA board’s meeting in August, Executive Director Tracy Stark-James announced the withdrawal of the application at the IDA’s board meeting last week.

“We received correspondence from 48 Kromer LLC notifying the agency that it will be withdrawing its application, stating that the project will not move forward as proposed to the agency in terms of size of investment,” Stark-James said. “Upon review of the proposed pilot, they intend to scale back the project significantly.”

Since the public hearing on the application in July, board members have not discussed in a public meeting whether to grant the enhanced abatement, nor have they discussed it publicly since the vote on the resolution was postponed.

IDA board members did not comment on the statement during the meeting.

In an email to RiverheadLOCAL, Stark-James said the IDA told the applicant it would consider the request for a 100% real property tax abatement — technically known as a “double” 485-b abatement — if the agency received “additional information in support of the greater abatement.”

“When the agency followed up seeking the additional information, the applicant’s response was to withdraw its application without any submission of further information,” Stark-James wrote. “Consequently there was no consideration of a 100% abatement.”

The Fisher Organization, the company owned by Frank Fisher and the applicant for the benefits, has proposed building six 30,000-gallon propane tanks and a 38,472-square-foot industrial building consisting of two stories and basement storage on the four-acre site. The developer has already received required site plan approvals for the development from the Planning Board and a special permit to allow the propane tanks from the Town Board.

Offices for Fisher Organization businesses and additional offices for “small business entrepreneurial space” were planned for the industrial building, according to the now-withdrawn application. At the August meeting, Ray Dickhoff, a manager for the Fisher Organization, said only granting the 50% abatement would make it difficult for small businesses and start-ups to rent space in the building, since the property taxes are passed on to the tenants. 

The cost for the industrial building is estimated around $10 million, while the propane distribution facility is estimated to cost around $5 million.

In addition to the tax abatements, the developer also sought from the IDA exemptions from state sales tax in the approximate amount of $848,000 and from the mortgage recording tax in the approximate amount of $75,000. 

Tax abatements give a percentage-based tax reduction to all improvements on property over a period of time; the exemption declines every year until the abatement period ends.

Dickhoff, when reached by phone for comment, said he would call the reporter back but did not return the call before publication. Christine Kempner, a consultant on the project, did not return a call seeking comment. 

During the public hearing on the application for benefits in July, Riverhead attorney Jonathan Brown, representing the Riverhead Fire District, voiced the district’s opposition to the 100% tax abatement. Brown said equipping the fire department to respond to the site will cost the fire district, and that it is important that the taxes from the improvement of the site cover that cost.

The Riverhead Fire District, citing fire safety concerns, previously objected to the location of the new propane plant next to an existing one adjacent to the proposed site because of the volume of liquid propane that would be stored in a concentrated area. The area is also in the proximity of high density residential and retail uses.

The objection led to the project’s original site plan application failing to receive Planning Board approval last year, prompting the developer to file a lawsuit against the town. The action was settled when the developer revised the site plan to reduce the number of 30,000-gallon propane tanks.