“We’re hurting our children,” Evan Philcox of Wading River told the Riverhead Industrial Agency board of directors yesterday evening during a public information session at Riverhead Town Hall.
The agency, which is reviewing the application of Calverton Aviation & Technology for financial assistance, called the meeting to discuss the financial structure of CAT, an affiliate of Triple Five Group that’s owned by Triple Five Vice Chairman Justin Ghermezian, who is also the son of the chairman, Nader Ghermezian.
Philcox, “a taxpaying resident of the Town of Riverhead,” the father of two school-age children and a mathematics teacher at Riverhead High School, said he was representing the Riverhead Central Faculty Association when he took the podium during the IDA meeting.
“We need space,” Philcox said, speaking to the same point that school district officials and the district’s legal counsel have been making at hearings held by the Riverhead Industrial Agency, at meetings of the Riverhead Planning Board and of the Riverhead Town Board: The school district’s buildings are out of space.
“That money should be going to it,” Philcox said, referring to the tax exemptions granted by the Riverhead Industrial Development Agency.
Net school property tax exemptions in Riverhead reached almost $2.7 million in 2022, over $15 million in a decade
According to data reported by RIDA to the Office of the State Comptroller, net school property tax exemptions granted by RIDA in the decade from 2013 to 2022 totaled more than $15 million.
Looking back to 2010, net school tax exemptions totaled $17.28 million through 2022.
Net school property tax exemptions granted annually by RIDA nearly tripled during that time, jumping from $958,191 in 2013 to more than $2.66 million in 2022.
Net property tax exemptions are calculated by subtracting payments in lieu of taxes (PILOT) payments from the total exemption amount, according to the state comptroller’s office.
School officials’ growing alarm about tax exemption impacts
“What we would like to see is a thorough and accurate assessment of the impacts of these tax exemptions and projects on the school district as we face increasing demands with respect to enrollment, space, and need,” Riverhead School Superintendent Augustine Tornatore told RiverheadLOCAL last month.
“We would also like to see a shorter time span for a qualified project to reach 100% tax generation than the 15 to 20 years often given by the IDA,” Tornatore said.
“We would also like to see the criteria tightened for approving the IDA incentives, so that only those projects that would not be feasible economically without IDA assistance receive those tax abatements,” he said.
The superintendent also said the district also wants to see exemptions clawed back “if a project does not achieve the job creation it guarantees as part of its qualifying for IDA incentives.”
Jobs created and/or retained, one of the things an IDA is required to look at when evaluating an applicant’s proposed project, are not guaranteed by the applicant. They are estimated. And the company’s annual report of jobs created or retained — the numbers are self-reported to the IDA and then reported by the IDA to the state comptroller — is not audited by the IDA or any other government agency. There is no law requiring it.
One of the school district’s attorneys has attended several Town Hall meetings in recent months, asking town officials to be aware of the overcrowded conditions at Roanoke Avenue Elementary School, which will receive all K-4 students from any of the residential housing developments in the downtown area, including any students living in the downtown apartment buildings that have received IDA tax exemptions.
According to school district records, as of January, there were 34 K-12 students in Riverhead schools living in five of the recently developed apartment buildings along Main Street, all of which received tax exemptions from the Riverhead IDA.
A 37-unit apartment building currently under construction at 205 Osborn Avenue was also granted property tax exemptions.
RIDA’s project agreements with developers approved for tax benefits, including the completed project application forms, and the terms and conditions under which financial assistance is granted, could not be found on the IDA’s website. State regulations governing industrial development agency public disclosures requires the agreements to be “conspicuously posted” on the IDA’s website.
Riverhead IDA Executive Director Tracy Stark-James did not respond to an Aug. 9 email request for information about whether the required agreements were posted on the RIDA website and where they could be located.
There are two downtown apartment developments with pending IDA applications: the 165-unit apartment building proposed for 203-213 East Main Street and a 45-unit apartment building at 103-105 East Main Street. Other downtown apartment building projects are either approved by the Town Board or are currently under review and may soon file applications for IDA assistance: Georgica Green Ventures/West Main Street (133 units), Suffolk Theater (28 units), Zenith Building (9 units). In addition, the town’s designated master developer for its transit-oriented development project near the Riverhead train station has proposed building a 243-unit building opposite the station and a 36-unit building on Griffing Avenue at the corner of Railroad Avenue. No site plan applications are currently pending for either of those developments. Altogether, these projects “in the pipeline” would add another 659 apartments.
When town and fire district property taxes are factored in, net property tax exemptions from 2013 through 2022 add up to just under $23.1 million.
RIDA officials say the long-term increase of assessed value of properties receiving financial assistance from the agency is a net benefit to the town’s assessed value and property tax revenues.
But Ashley Pope, a partner in the law firm of Guercio & Guercio, attorneys for the Riverhead Central School District, told the Riverhead Town Board that any long-term overall increase to assessed valuation does not help the district educate students that live in the new apartment buildings.
Speaking at a hearing on the draft environmental impact statement for the 203-213 East Main Street development, Pope said the current cost per year to educate a student in Riverhead is a little more than $19,000.
“It’s not easy, fast or cheap to add capacity to schools,” Pope said. “That $19,000 and change … is just to educate the students in the space you already have. That is not to add the capacity to actually put those students in a building and have the space for them. Again, this district is that capacity,” she said.
Pope went on to point out that the developer of the 165-unit building at 203-213 East Main Street proposed a 25-year PILOT agreement.
“With 25 years, the district wouldn’t be looking at full taxes until the kids who move in the first day this apartment is built … are already graduated from college and working,” Pope said.
Report: NY schools lost $1.8 billion to corporate tax abatements in 2021
“Schools in New York State lost at least $1.8 billion in fiscal year 2021 to corporate tax abatements,” according to the Washington, D.C.-based watchdog organization Good Jobs First. The nonprofit issued a policy report in February recommending that New York State eliminate IDAs “for their lack of accountability” — or at least prohibit IDAs from abating school tax revenues.
Depriving schools of tax revenues is “disinvesting the state’s foundational workforce development system” and doing that to subsidize corporations “makes no sense at a time of skilled labor shortages and very low unemployment,” Good Jobs First said. Decades of evidence show that IDAs have failed to deliver a better economy upstate, the report said.
On the heels of publication of the Good Jobs First report, the chairmen of the economic development committees in the State Senate and Assembly introduced legislation to prevent IDAs from exempting taxes that would otherwise be received by school districts.
The bills did not move out of committee in 2023, but both Assembly Member Harry Bronson, chairman of the Assembly’s economic development committee, and Senator Sean Ryan, chairman of the Senate’s economic development committee, consider passage of the bills a priority in 2024. The legislature reconvenes in January.
The legislation they introduced will make school districts a full partner in the tax agreements negotiated between developers and IDAs, Bronson said in a statement Aug. 16.
“When IDAs promise to waive a corporation’s property taxes, they are stealing money meant for school districts and exacerbating budget gaps,” Ryan said in a statement Aug. 10. “This forces us to increase school funding to close those gaps and sticks taxpayers with the bill,” he said.
“Prohibiting IDAs from waiving school taxes will support education, lower New Yorkers’ tax bills, and prevent corporations like Amazon from playing IDAs around the state against one another to get the best deal,” Ryan said.
Stark-James did not respond to an emailed request for comment on the Bronson-Ryan bills.
Palumbo: Business incentives must not come at the expense of schools
Sen. Anthony Palumbo (R-New Suffolk) said he will support Ryan’s bill when it gets to the floor of the Senate for a vote.
Palumbo said he did not realize that PILOT agreements between IDAs and companies receiving IDA financial assistance do not cover the full amount of school taxes exempted.
“We want to make sure the school district is made whole. Let’s start with that — period,” Palumbo said in an Aug. 16 phone interview. “End of discussion. Hard stop, so to speak,” he said. “If you are going to provide this exemption then the municipality needs to make sure that the school district school is fully covered. The school districts, particularly Riverhead, they really do need every penny they can get,” Palumbo said.
Palumbo said the state shouldn’t do away with economic development incentives, but “there’s got to be a balance.”
“Doing this at the expense of our schools is absolutely not appropriate. Those PILOT payments have to cover it,” Palumbo said.
Planner: Business subsidies are good politics
But requiring PILOT payments to cover school tax exemptions or prohibiting IDAs from exempting school taxes is not enough, says Elizabeth Marcello, a doctoral lecturer in the department of urban policy and planning at Hunter College.
Marcello, who has worked as a research analyst studying the effectiveness of tax exemptions and credits by economic development agencies in New York, said the state would be better off if it didn’t have IDAs.
“I think they don’t do anything useful for us,” Marcello said.
“Business subsidies don’t work. There’s substantial economic literature showing that they just don’t work,” said Marcello.
As a senior research analyst at Reinvent Albany, Marcello was the lead author of a report on increasing the transparency and accountability of Empire State Development.
Business subsidies “are handed out because they’re good politics,” she said. “They create this narrative that government is helping businesses and getting stuff done. That’s the only reason they’re used,” Marcello said.
Business decisions to locate in particular locations are market-driven, Marcello said. They locate near where they have customers or near an educated workforce, she said.
IDAs actually have “no objective quantifiable way… to assess whether the marginal incentive needed to retain or bring a business to a place,” Marcello said. “There’s no way for them to test that. They’re not at the business. They’re relying on businesses to disclose things, to check a box that says it needs a subsidy. But there’s no real way for an IDA to actually know that. So the whole system is just totally flawed,” she said.
Riverhead IDA officials strongly disagree. During Monday evening’s meeting, IDA Chairperson James Farley encouraged residents to view the video of a presentation given by Stark-James to the Town Board at a work session in December 2018.
The IDA executive director complained that the agency was “villainized” by many in the community.
“How lucky Riverhead is to have such an agency,” Stark-James said. “But for the IDA it would be a lot more difficult for us to incentivize investment and economic development. There is stiff competition both in and out of state,” she said.
“Embrace your IDA,” Stark-James said.
The IDA presentation came near the end of the first year of former Supervisor Laura Jens-Smith’s term, several months after the supervisor called for the dissolution of the agency, which she criticized for doling out “tax breaks” unnecessarily and unfairly placing “all of the onus for Riverhead’s future on the backs of our homeowners.”
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