Photo: Denise Civiletti

The Riverhead Industrial Development Agency last week declined to accept an application from the owner of the Doctors Path apartments for a 30-year extension of a Payment in Lieu of Taxes (PILOT) agreement that dates back to 1982.

The existing PILOT agreement, approved by the Town Board in 1982, was extended for two years and amended by the IDA in 2021. It currently provides the property owner with a real property tax reduction of about 45%, according to statements by the owner’s attorney, Dan Deegan, during a presentation to the IDA board last Monday.

“The PILOT we’ve been under is about $72,000 per year,” Deegan said. Full taxes on the property would be $130,000 per year, he said. Before the 2021 extension the PILOT payment was $30,000 per year.

The IDA extended the 1982 PILOT agreement for two years at the owner’s request in December 2021, so that the PILOT agreement term would align with the owner’s contract with the Department of Housing and Urban Development, which administers the rent subsidy program. The 2021 extension raised the PILOT payment from the “historical PILOT” payment of $30,000 per year to $72,000 per year, Riverhead IDA Chairperson James Farley said at the Dec. 14, 2021 meeting, when the board voted to approve the extension.

The owner returned to the IDA this year to request a 30-year extension of the PILOT ahead of the March 1 taxable status date, in order to avoid having the property put back on the town tax roll for the 2023-2024 tax year.

D&F Development of Levittown, the owner of the 40-unit apartment complex, purchased the site in the early 2000s, Deegan said. The owner is seeking a new 30-year PILOT because, Deegan said, a subsidized rental complex isn’t “sustainable” without the tax reduction.

The Doctors Path apartment complex was built in 1982 as federally subsidized rental housing. Rents for each of the 750-square-foot units are subsidized by the Department of Housing and Urban Development. Tenants pay a maximum of 30% of their monthly adjusted income. HUD pays the balance of a predetermined “reasonable” rent to the property owner.

The property owner would like to make improvements to the site, including the installation of new heating and air-conditioning units, new siding, fencing, gates and landscaping, Deegan said. The improvements will cost about $1 million and would be financed, with debt service running about $78,000 per year.

Rents are limited by regulatory agreement, Deegan said. The rental income cannot carry the new debt and full taxes on the property.

“If we don’t get an extension of the of PILOT we won’t have cash flow to do these improvements,” Deegan said. “We’re looking for the IDA to help us maintain the status quo” in tax payments, he said.

IDA Vice Chairperson Lori Ann Pipczynski said the 40—year PILOT agreement is longer than any other the Riverhead IDA has ever seen. The 1982 agreement authorized by the Town Board “said that was it — the end,” Pipczynski said. The current owners knew that when they bought the property, she said.

“I’m certainly sympathetic but I don’t believe that vinyl siding and landscaping are worthy of a 30-year pilot,” IDA Treasurer Lee Mendelson said. “What’s the benefit? What are the benefits to the other residents — jobs, or other economic benefits?”

“Zero,” answered Deegan. “But this is a different kind of project.”

“What you’re asking for amounts to a 72-year PILOT and I’m not sure the benefit outweighs the harm for the residents of Riverhead, with a school district that’s bursting at the seams and things of that nature, and infrastructure concerns,” Mendelson said.

Deegan said the property tax reduction should be “a permanent thing” for affordable housing developments.

Pipczynski said the governance committee recommended a sales tax exemption only — no further property tax reduction.

“Without the PILOT there are no improvements, so no sales tax exemption is necessary,” Deegan said.

Farley made a motion to accept the application and schedule a public hearing. Member Anthony Baressi seconded the motion. The board then voted unanimously to reject it.

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