Riverhead IDA provides update on vetting process of purchaser in $40 million Calverton land deal

The public on Monday got a glimpse of what’s been taking place behind the scenes as the Riverhead Industrial Development Agency begins vetting Calverton Aviation & Technology, the Triple Five affiliate in a $40 million land deal with the Town of Riverhead.

According to committee reports presented at Monday’s RIDA meeting, Calverton Aviation & Technology has deposited $150,000 with the RIDA to fund the agency’s due diligence expenses, including fees due to the agency’s attorneys and consultants that will be hired to vet the applicant and its plans. Consultants will include subject matter experts: an accounting firm, a mortgage broker or banker, a construction firm and a commercial leasing broker. An economic impact study will also be completed.

RIDA Vice Chairperson Lori Pipczynski, who chairs the agency’s governance committee, gave reports of the committee meetings of Jan. 27 and March 20, answering some of the questions recently raised by community members about the status of the RIDA’s vetting process. CAT and the Riverhead Community Development Agency, the town entity that owns the undeveloped land at the Calverton Enterprise Park, submitted a joint application to the IDA for financial assistance last year in an attempt to bring the land deal to fruition.

The agency has apparently signed a “preliminary agreement” with CAT and the Riverhead CDA. Pipczynski did not say so directly, but CAT in February deposited $150,000 with the agency, according to a separate treasurer’s report also read at Monday’s meeting by agency treasurer Lee Mendelson. The deposit “for due diligence expenses,” was to be made upon signing the preliminary agreement, Pipczynski said. As of the Jan. 27 committee meeting the agreement had been signed by the RIDA and the Riverhead Community Development Agency, but had not yet been signed by CAT, Pipczynski reported. The deadline for signing the agreement and making the deposit was Feb. 6, she said.

While Pipczynski did not describe the contents of the preliminary agreement at the meeting, but the agency’s Sept. 21 resolution accepting CAT’s application requires CAT, the CDA and the agency to enter into a preliminary agreement “for the purpose of binding [CAT] to indemnify” RIDA and the CDA and “to pay all costs, expenses, and fees” of the RIDA, its lawyers, consultants and third-party consultants conducting the agency’s due-diligence review of the application.

RIDA’s project counsel Phillips Lytle told the committee during its January meeting that the firm had “reached out to two top-10 accounting firms to vet CAT’s financial capabilities” and expected to receive proposals “in the next several weeks,” Pipczynski reported.

“The committee stressed [the importance of] vetting conflicts of interest with the firms,” she said.

“A representative of the accounting firm will be made available at the agency’s request should questions arise from their ultimate findings,” she said, continuing to read from the written report.

There was no discussion at Monday’s full board meeting about whether an accounting firm had since been hired.

Also during the January committee meeting, Phillips Lytle’s State Environmental Quality Review Act expert discussed “the town’s processes related to SEQRA and zoning applicable to the site,” Pipczynski reported.

“It was explained that the IDA can rely on the SEQRA work that has already been completed,” she said. That work was done in connection with the town’s prior plan to subdivide the site into 50 lots, which was abandoned after the town entered into a letter of intent with Luminati Aerospace in April 2017, which led to the town board approving the contract of sale with CAT that December.

“But once the developer commits to a definite course of action,” Pipczynski said Monday, reading from her report, “the IDA will need to make a findings statement as part of its own SEQRA process to ensure the developers plans are consistent with the work of the town thus far. Any consistency analysis will be coordinated with the town,” Pipczynski said.

“Committee members expressed the importance of maintaining communications with the planning department, the Planning Board and the Town Board in this regard, but the RIDA will be taking an independent hard look at the environmental impact of the project for the benefit of the agency and the public,” Pipczynski said.

Pipczynski read a list of tasks Phillips Lytle would undertake, as discussed in the January meeting, including drafting a memo regarding the approval process, which was presented to the RIDA board at its Feb. 6 meeting by Phillips Lytle attorney Milan Tyler. The memo, titled “Tentative Approval Process” was subsequently posted on the IDA’s website.

Phillips Lytle would follow up with CAT regarding the preliminary agreement after the January meeting, according to the committee report.

The firm would “move forward with selecting a financial consultant, talk with CAT and the town attorney about their SEQRA as they seek town approvals to build, reach out to the assessor to engage her in a discussion of assessed valuation… They will also retain a firm to conduct an economic impact study once the [deposit] account is established.”

At the March 20 meeting, “committee members were updated on the status of the CAT project by the executive director and counsel, who both met with company and CDA representatives and their attorneys,” Pipczynski reported.

“The discussion covered the development plan, CAT’s ability to implement the project, their equity position, borrowing and business plans and the items that remain outstanding from a due diligence request sent on March 1,” she said. Pipczynski did not provide any details about outstanding items sought by the agency.

“Discussions focused on the desire to identify four consultants to undertake a thorough review by subject matter experts including an accountant, mortgage broker or banker, a construction firm and a commercial leasing broker,” Pipczynski said.

“Committee members once again expressed their desire for CAT to make a presentation to the public to discuss their development plans and timeline, with an opportunity for a question-and-answer session, which would be separate and distinct from the agency’s official public hearing on the application for assistance,” Pipczynski reported.

The community group EPCAL Watch on March 13 sent the RIDA board a letter asking it to hold an “interactive public forum as soon as possible to collect and exchange information, and to promote awareness, understanding and transparency of the process.”

The board did not discuss the letter at Monday’s meeting, which was attended by EPCAL Watch member John McAuliff of Riverhead.

EPCAL Watch coordinator Rex Farr said in a phone interview this morning that RIDA Executive Director Tracy Stark called him a few days after her sent the letter. “She said that they were going to dot all the i’s and cross all the t’s,” and that the RIDA would have the type of public meeting the group requested, Farr said.

Pipczynski concluded her report of the March 20 meeting by advising the board that the committee went into executive session for the purposes of discussing unspecified contracts with their attorney from Phillips Lytle.

According to the joint application, CAT plans to build three “flex” buildings totaling 400,000 square feet, eight 50-foot-tall logistics or distribution buildings totaling 9.24 million square feet, one 400,000-square-foot rail distribution building and two two-level parking structures each providing 4,320 parking spaces. The developer’s plans include the construction of new taxiways and aprons adjacent to both runways and adjoining the proposed logistics and distribution buildings to accommodate aircraft using the facility. The plan will be built out in phases. The company is currently applying to RIDA for financial assistance for its first phase of development, consisting of 1 million square feet (three “flex” buildings totaling 400,000 square feet and two 300,000-square-foot logistics buildings.

SEE: CAT’s development plans

The application to the RIDA seeks real property tax abatements and mortgage tax and sales tax exemptions, assistance that CAT says is needed to move forward with its proposed $245 million phase-one development at the former Grumman site. It is a joint application with the Riverhead Community Development Agency, which has held legal title to the site since it was conveyed to the town by the U.S. Navy in 1998.

SEE: Calverton Aviation & Technology Application to the IDA

The joint application was accepted by the RIDA at its Sept. 21 meeting, following a presentation by CAT’s attorneys, engineers and architects. Watch video of the presentation on the Town of Riverhead website.

MORE COVERAGE: Air cargo logistics hub in Calverton planned by Triple Five affiliate to enhance package delivery services on Long Island

The Riverhead CDA since November 2018 has been in contract with CAT to sell 1,644 acres of vacant industrially zoned land, including the two runways, for $40 million. The contract was signed after the Town Board in a split vote determined CAT to be a “qualified and eligible sponsor” in 2018 to purchase and develop the site, as required by the State Urban Renewal Law.

The CDA cannot complete a land subdivision that is required in order to convey the property CAT is purchasing, which is part of a larger parcel owned by the CDA.

The subdivision is being held up over public water supply issues by the State Department of Environmental Conservation. The town is required to obtain DEC permits under state laws governing the protection of wetlands and the Peconic River, and the DEC has refused to accept the town’s applications as complete without resolution of the water supply issue.

MORE COVERAGE: State DEC: Riverhead’s EPCAL subdivision application still incomplete

In an effort to break the regulatory logjam, the CDA and CAT agreed to jointly apply for RIDA financial assistance to CAT, with the intention of entering into special agreements with the RIDA that will allow CAT to lease the land and pursue the subdivision itself.

If the RIDA approves the application for financial assistance, the CDA will convey title to its entire holdings at the enterprise park to RIDA. CAT will pay the CDA the balance of the contract purchase price. RIDA will lease the acreage comprising the three lots to be conveyed to CAT under the November 2018 contract of sale with the CDA. RIDA will also lease the rest of the CDA-owned land back to the CDA. The actual conveyance of title will occur at a later date, after CAT obtains final subdivision approval.

MORE COVERAGE: Riverhead unveils a new path forward to close EPCAL land deal with Triple Five

The Riverhead CDA was established by state law in 1982 and functions as the economic development agency for the Town of Riverhead. The town supervisor and four council members serve as the governing body of the CDA.

The Riverhead IDA was established by state law in 1980. It is an independent agency, possessing powers set forth in state law, which also states industrial development agency members are appointed by the governing body of the municipality — in the Town of Riverhead, the Town Board — and serve at the pleasure of the governing body.

Editor’s note: This article has been amended to correct a misstatement about the EPCAL Watch group’s letter to the IDA. The board chairman acknowledged receiving the letter but the board did not discuss its contents.