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Last February, the Riverhead Town Board announced a “new approach” to finalizing its $40 million EPCAL land deal that put the Riverhead Industrial Development Agency smack in the middle of it.

We’re revisiting that “new approach” now for a few reasons, starting with persisting public confusion about what the town did and why.

Here’s how it is supposed to work, according to town officials and attorneys.

  • The Riverhead Community Development Agency, which holds title to the land and is the seller in the 2018 contract with Calverton Aviation and Technology (CAT), would apply jointly with CAT to the Riverhead IDA for financial assistance to CAT in the redevelopment of the EPCAL site.
  • The Riverhead IDA would then thoroughly examine CAT’s development plans to determine feasibility and it would also thoroughly examine the company’s financial wherewithal to determine if CAT is capable of successfully developing the site according to its plans.
  • Should the IDA determine CAT is good to go, and that the company’s proposed plans would benefit the community, the IDA would approve an “inducement” resolution granting financial assistance to the company in the form of exemptions on real property taxes, sales taxes and mortgage recording taxes.
  • If the IDA approves that resolution, the town will transfer title to all of its remaining land holdings inside the Calverton Enterprise Park site (EPCAL) to the IDA. The IDA would then lease to CAT the 1,644 acres (including the two runways) that are the subject of the $40 million contract of sale signed in November 2018. The IDA would also lease the rest of the town-owned property back to the town.
  • Then CAT would pay the balance of the $40 million purchase price — a long-awaited payday for Riverhead — and it would pursue approval of a land subdivision that will eventually create legal, separate lots that can be transferred from the IDA to CAT and the town.
  • If the IDA does not approve an “inducement” resolution, then the town has the right to declare its 2018 contract of sale with CAT “null and void” and return the contract down payment to CAT.

If this sounds like a very tangled web full of land mines, it’s only because that’s exactly what it is. Which brings us to the “why” of the matter.

In a nutshell, the town was unable to perform what it agreed to do in the 2018 contract of sale. It was unable to get final approval of the land subdivision needed to convey the 1,644 acres to CAT, as the contract requires. It was unable to do that because the State Department of Environmental Conservation stood in the way. (Long story — one of many — worthy of a separate analysis.)

The “new approach” was designed as a way for the town to collect the balance of the $40 million sale price from CAT without actually being able to sell the land — because legally, it’s all one big 2,100-acre parcel. Portions of that 2,100-acre lot, by the way, have town facilities on them, such as Veterans Memorial Park, Grumman Memorial Park, the Henry Pfeiffer Community Center, the Calverton Sewer District wastewater treatment facility, etc.

Under the “new approach,” CAT would have to deal with the DEC and get the land subdivision finalized, if the IDA approves its application for financial assistance.

And, the “new approach,” in addition to providing the town with a long-awaited big payday at EPCAL, will allow the town to finally “solve” its EPCAL problem — a problem that dates back to 1994 when Congress approved the “gift” of 2,900 acres of Navy-owned land to the Riverhead Community Development Agency for “economic development” after Navy contractor Northrop-Grumman vacated the site. The transfer to the town took place in September 1998.

That “gift” was the beginning of a very long saga, which we documented in this three-part 2018 series:

Part One: ‘What’s past is prologue’: Understanding the Calverton Enterprise Park saga

Part Two: Pine Barrens, politics and the plan that launched a thousand schemes

Part Three: EPCAL’s (would-be) ‘greatest hits’

We published this series before the ‘CAT’ contract was signed. Seems like it’s time for Part Four.

What could possibly go wrong?

So many things, actually. Things we can already predict. And things that we can’t even yet imagine — but we’re all smart enough to know are lurking out there, based on past performances and the track records of all the parties involved.

Let’s start with the Riverhead IDA.

Vetting business plans and scrutinizing an applicant’s finances are the IDA’s bailiwick, after all. It’s what the IDA does on every application it receives, right?

The IDA’s mission is “to attract new businesses to Riverhead and to help existing Riverhead businesses expand their operations and remain in Riverhead” as it “seeks to advance the job opportunities, health, general prosperity and economic welfare of the people of the Town of Riverhead and to improve their standard of living,” according to the agency’s website.

That’s why the Riverhead IDA was created by an act of the State Legislature in 1980.

Is the IDA fulfilling its mission? We think that’s a matter of fair debate.

Riverhead IDA Executive Director Tracy Stark-James maintains that the public doesn’t understand what the IDA does or how it does it. Specifically, she says that the public misunderstands how the IDA exempts (or as they say, “abates” taxes.) The public mistakenly believes, she says, that the IDA exempts taxes that are already being paid on property, when in fact it actually only exempts (or “abates”) taxes on new improvements. The theory is the new improvement wouldn’t be happening without the IDA exemption — and the applicant has to testify to that at the IDA’s public hearing on the application.

In fact, this public misunderstanding is so widespread — and so total — according to Stark-James, that at the IDA’s most recent meeting, she referred to it as the agency’s “albatross.”

We suggest that if Stark-James sincerely wants to help the public understand what it does and how it operates, she could stop complaining about the public’s lack of understanding and do something to improve it.

Start with fixing the agency’s website, which is nothing less than an embarrassment to the Town of Riverhead.

Visitors to the site are greeted by a prominent banner across the top of the home page announcing that responses to the “Railroad Street TOD Redevelopment RFQ” are “due Friday, May 12, 2021 no later than 2:00PM.”

The homepage banner currently on the Riverhead IDA’s website.

The site’s design, and much of its content, hasn’t been updated since at least Sept. 4, 2011. We know that by checking the Internet Archive’s “wayback machine.” You can see that archived content here. You can see the “current version” here, on the IDA’s present website.

Visiting this website is like opening a time capsule.

Almost all of the homepage content is exactly as is appeared on Sept. 4, 2011 — with the exception of three new links at the bottom left. One is a link titled “An Invitation to Do Business in Riverhead,” a letter that, among other things, refers to a “historic Main Street theater…”being renovated.” The historic Suffolk reopened in 2013. No mention of the $10 million state downtown revitalization grant or the federal opportunity zone or the development of multifamily housing. That all took root long after this “invitation” was written. Another link titled “How Your IDA works in TOR,” which links to a presentation given by Stark-James to the Riverhead Town Board in December 2018, after then-Supervisor Laura Jens-Smith called for the IDA to be dissolved. The third link goes to the IDA board of directors meeting schedule — which actually displays the 2023 meeting schedule, indicating that it is, indeed, possible to update the content.

The website interior pages have lots of very stale content — just click on those 12-year-old featured links on the homepage to see for yourself.

The Enterprise Park (EPCAL) link, for example, takes the visitor to a page that makes reference to the site’s “pending developments at two additional sites (a 300 acre industrial park and a 755 acre commercial-recreational project).” The Town of Riverhead abandoned those plans in January 2011, when it hired the consulting firm VHB to create a new land-use plan for the site and pursue a 50-lot industrial subdivision of the 1,600-plus acres. (The town then abandoned those plans, too, so it could sell almost all the EPCAL land to the magical Daniel Preston, a con man who apparently cast a spell on former Supervisor Sean Walter and locked in the deal with no money down, then fled town in disgrace, leaving a trail of broken promises and debts behind — essentially handing his super-good land deal with the Town of Riverhead off to Triple Five. And here we are.)

On the EPCAL page, there’s a link to a page about the long-defunct Suffolk County/Town of Riverhead “Economic Development Zone.” The Economic Development Zone Program was created by the state in 1986 to aid economically distressed areas. It was expanded in 2000, when its name was changed to “Empire Zone,” and rules were changed to make it easier for developers to qualify for benefits. The Suffolk County/Riverhead Empire Zone included over 1,000 acres at EPCAL, offering developers a combination of real property tax abatements, sales tax refunds and a host of tax credits — a program that “enables The Suffolk County/ Riverhead Empire Zone to virtually be a tax-free zone in ‘best-case’ scenarios,” according to the IDA website. (Kind of begs the question, “best case” for whom exactly?)

The Empire Zone Program ended on June 30, 2010 — after which no new applications were accepted — because the program turned out to be a boondoggle for developers that cost the state an estimated $3 billion or so — “unsustainable levels,” according to Empire State Development, which ran the program.

Stark-James was the Suffolk County/Riverhead Empire Zone coordinator before being hired by the Riverhead IDA in 2011.

Local zone administrators (here, the Town of Riverhead) continued to handle administration of the program until the last of the tax credits expired in 2020, when the troubled state program was officially laid to rest. The town outsourced this responsibility to the IDA.

The pages on the IDA website describing this zone, which closed for new business almost 13 years ago, contain nothing but long outdated, obsolete information. Yet nobody cares enough to even take them down. Is anyone on the IDA board even paying attention? How about Town Hall?

Apparently the Town Board is so impressed with the IDA’s marketing capabilities and performance — fulfilling its mission of attracting new businesses and creating job opportunities to benefit the “health, general prosperity and economic welfare” of Riverhead residents — that in December 2021 it authorized a “marketing agreement” with the IDA and last year paid the IDA $50,000 for its efforts.

But it’s not just that the IDA website is populated with a ton of outdated information, or that its web pages often take an eternity to load, sometimes timing out, none of which is a good look for the town. The biggest problem — both for the public as well as the aggrieved Stark-James, who faults the public for being so woefully uninformed about the IDA’s good work — is all the content that’s NOT on the IDA website.

What’s not on the website? The best way to know what’s not there is to look at other IDA websites.

After examining a number of them, we’ve concluded that the majority are not only user-friendly and informative, but they also provide comprehensive details about the agencies’ initiatives.

Many agencies publish a dedicated “projects” section that offers a clear overview of ongoing and completed projects. These sections provide access to crucial documents such as project applications, lease and project agreements, payment schedules for payments in lieu of taxes, IDA resolutions approving assistance, and more. Other agencies also use their websites to publish meeting minutes, operation reports and other important documents that contribute to transparency and public understanding of the agencies’ activities.

We recognize that the Riverhead IDA is a smaller agency with a smaller staff than, say, the industrial development agencies for Brookhaven Town or Suffolk County. In order to establish a more accurate benchmark for comparison, we reviewed data from the State Comptroller’s Office to find an IDA with a comparable budget and number of open projects to Riverhead.

This led us to the Town of Hamburg. Located on Lake Erie in Erie County, Hamburg has a population of about 60,000 people.

According to data published by the state comptroller, in 2020 the Hamburg IDA had a smaller operating budget than the Riverhead IDA (about $160,000 to RIDA’s $240,000) and had 47 open projects to the RIDA’s 32. The Hamburg IDA granted net exemptions of $1.7 million in 2020, according to the comptroller’s report, compared to net exemptions of $3 million granted by the Riverhead IDA in 2020. (Net exemptions are total exemptions minus payments in lieu of taxes, i.e. PILOTs.)

According to its 2020 annual report to the Public Authorities Budget Office (known as the “PARIS report” as in “Public Authorities Public Information Reporting System”) Hamburg has two staff members: a full-time executive director who was paid a total of $90,676 in 2020 and a part-time executive assistant who was paid a total of $27,788.

Hamburg’s PARIS report is easy to find on the agency’s website. Riverhead IDA’s PARIS reports are nowhere to be found on its website.

These reports are available on the New York State Budget Authorities website, however, and the Riverhead IDA’s PARIS report for 2020 discloses the agency had one staff member, its full-time executive director Stark-James, who received total compensation in 2020 of $140,620.

Stark-James says, as the only RIDA staff member, she is doing the best she possibly can under the circumstances to update the agency’s website with current information and documents. And that, as they say, is that.

The IDA’s adopted 2023 budget includes exactly zero dollars for website development, despite its board and executive director acknowledging three years ago that the site needs updating — the agency even got estimates for the job.

Accepting that Stark-James is stretched to the max as the agency’s only employee, we now must look at more closely at IDA finances to answer the question why the IDA can’t afford to upgrade its website — or even, apparently, hire a part-timer or freelancer to upload important documents to the site (documents that could clear up some of that public confusion Stark-James complains about.)

Fact is, the Riverhead IDA is enduring some difficult financial times. Its independent auditors have, for three consecutive years, raised a “going concern” question in the agency’s audited financial statement. The agency is facing “substantial doubt” about its “ability to continue as a going concern,” the auditors said in their audit reports for 2022, 2021 and 2020.

Riverhead IDA management responded to the auditor’s “going concern” comments and in the end, the issue did not prevent the auditors from issuing a “clean” audit report. But still, this news is reason to give every Riverhead taxpayer cause for their own concern.

SEE: Audit reveals Riverhead IDA anticipates October closing with Calverton Aviation & Technology, for major boost to agency’s sagging bottom line

The Riverhead IDA depends almost exclusively on administrative fees for operating revenue — revenue that pays the salary and benefits of its sole staff member.

Sure, the town taxpayers may supplement that with an occasional 50 grand here and there, like we did in 2022.

But for the most part, no new projects means no new fees.

And that’s the big dilemma for the IDA — and its executive director.

That’s concerning enough. But then consider this: Just about every new commercial/industrial project being reviewed by the town right now is heading to the IDA for “benefits” — financial assistance in the form of real property, sales tax and mortgage recording tax exemptions. The real property tax exemptions for each will continue for a period of 10 years (for a “standard” exemption.) The exemption amount declines over the exemption period.

Now, to be clear, the real property tax exemptions are on the improvements only. The IDA doesn’t grant property tax exemptions on existing improvements or vacant land. Also, the company will make payments in lieu of taxes to the county, town and school district, pursuant to a written agreement with the IDA — copies of which are not available for public inspection on the Riverhead IDA website, by the way. The company will also pay special district taxes during the exemption period. Special district taxes are water district, sewer district, lighting district and ambulance district. So, it’s not the “free ride” a lot of people think it is.

What will be the impact of the property tax exemptions on the horizon — large industrial projects like HK Ventures and NorthPoint, for example? Or the big magilla, the Triple Five development at EPCAL? And how about the apartment building proposals totaling hundreds of units collectively?

The sites may be vacant land right now — so by the IDA’s logic, any increase in development there is an improvement.

But that’s not necessarily the case if the impacts of the project exceed the tax revenue (or PILOT payments) the town will see after they are built and occupied.

Impacts to local roads and traffic. Impacts to schools. Increased demand on the Riverhead Police Department. Not to mention impacts to the environment and residents’ quality of life, which no tax dollars can compensate for in any case.

And then there’s that nagging question in the minds of most residents: Are these “incentives” really necessary? When out-of-town developers come to Riverhead and drop millions into acquiring land, engineering and legal fees, site plans and impact studies, then go to the IDA and say, “we can’t do this without tax exemptions for 10 or 20 years,” are they to be believed?

This is the lens through which hard-working taxpayers, working two (or more) jobs to pay their mortgages and their own taxes, feed their families and make ends meet, look at the developer incentives and inducements. Can you really blame them, Ms. Stark-James?

Obviously, there’s a lot to think about and the IDA’s due diligence, if well done, ought to take it all into consideration. But will it? The IDA needs the fees, after all, to stay in business. It allayed its auditors’ concerns about its financial condition with a statement that it anticipates closing on the CAT deal in October — even before it completed (maybe before it even started?) its vetting of the applicant.

In making decisions on these applications, will the IDA put its own financial condition above the “health, general prosperity and economic welfare” and the “standard of living” of the people of the Town of Riverhead?

That’s a very fair question, whether the IDA likes it or not.

Editor’s note: This article has been edited for clarity.

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