IDA action on Triple Five request for tax breaks without firm development plan is ‘improper,’ ‘inappropriate’ & ‘irresponsible,’ senators say

It’s been a year since the Riverhead Industrial Development Agency accepted the joint application for financial assistance from Calverton Aviation & Technology and the Town of Riverhead, and the IDA hasn’t held a public hearing on the application or given any public indication of the status of its review. 

At this point, though, it’s not even clear what the subject of the application is. 

CAT and Riverhead Town are asking the IDA to approve financial assistance in the form of property, sales and mortgage tax exemptions worth millions of dollars for the $245 million first phase of a 10-million-square-foot industrial development at the Calverton Enterprise Park. About 80% of the development described in the application consists of massive logistics and distribution buildings to be built along the two runways at the Calverton Enterprise Park. The plans unveiled last year included plans to improve the two runways, reactivate the currently inactive 7,000-foot runway, relocate the taxiways to the outside of the runways and build aprons to connect the new taxiways to the logistics-distribution buildings to accommodate airplanes.

MORE COVERAGE: Air cargo logistics hub in Calverton planned by Triple Five affiliate to enhance package delivery services on Long Island (Sept. 22, 2022)

After public backlash to its initial presentation focused on air cargo uses at the site, CAT walked it back. In recent months, CAT representatives have given assurances that there will be no air cargo uses at the site. They have also stated that they do not yet have solid plans for development of the site — though their plans were in fact described in detail in CAT’s application documents filed with the IDA last year.

MORE COVERAGE: EPCAL buyers work to distance themselves from air cargo hub plan, but residents remain skeptical

Most recently, CAT’s principal and attorneys have said the company will develop plans that meet the town’s vision for the site as well as market demand. CAT will “work with the town to create a plan for a project that is consistent with the town’s vision for EPCAL,” CEO Justin Ghermezian wrote in a July 11 guest column published by RiverheadLOCAL. Triple Five executive: ‘No cargo jetport for Calverton’

This lack of certainty is a major problem, according to State Senator James Skoufis, chairperson of the State Senate’s Committee on Investigations and Government Operations and an advocate of industrial development agency reforms. Skoufis has authored several bills aimed at reforming IDAs. The agencies, first established in New York in the 1960s, have “too much latitude,” Skoufis says.

“I can’t speak to the legality of the circumstance that you’re facing right now in Riverhead,” Skoufis said in a phone interview last week. “At a minimum, though, it’s improper. It’s  irresponsible.” 

State Sen. Anthony Palumbo, who represents the First Senate District that takes in the entire East End and northeastern Suffolk county, agreed. 

“It seems completely inappropriate,” Palumbo said in an interview yesterday. 

“When you’re dealing with exempting people from taxes, you’re basically spending taxpayer money,” Palumbo said. “This is a situation where we definitely do need to pump the brakes.” 

“Let them submit the actual application and get some clarity as to what they’re looking for,” Palumbo said. But “the jetport’s a nonstarter,” he said. If that’s what they’re planning, “it isn’t just a Riverhead issue. It’s a regional issue,” he said. “All the towns have to be involved.”

Palumbo is also a member of the Senate’s Committee on Investigations and Government Operations. 

The committee issued a report in July detailing findings of its investigation into “how industrial development agencies manage, vet and potentially award…subsidies to both applicants claiming financial assistance is necessary to accomplish a project and applicants stating their projects could be achieved with such incentives.”

The committee found IDAs often give “little scrutiny of an applicant’s answers” on applications for assistance, particularly with respect to statements about “job growth” and “job retention.” According to the report, the investigation found that IDAs it surveyed “did not appear to conduct a meaningful or diligent analysis of the claims made by applicants seeking benefits.”

Skoufis sponsored legislation, adopted by the State Legislature and signed into law, to appoint a state monitor for the Orange County IDA for lack of that “meaningful or diligent analysis of the claims made by applicants seeking benefits.” The monitor is empowered to review and advise and, if necessary, disapprove the Orange County IDA’s tax exemption policy, proposed contracts and financial assistance agreements for violations of law, deviations from policy or conflicts of interest. The Orange County IDA is required to provide quarterly and annual operational reports to the monitor and the state inspector general. 

“The Committee enthusiastically supports these initiatives, which will also provide notice to other flawed IDAs across the state that unjustified corporate welfare will not be tolerated,” the report states.

Skoufis reiterated that sentiment during the phone interview.

“The monitor is something every IDA in the state should be aware of and mindful of.  This is a real model, and it’s going to be replicated,” Skoufis said. “And IDAs that have maybe been operating as a wild west of sorts should really get their act together because before they know it they too could be facing a monitor watching over their shoulder if they don’t get their act together,” Skoufis said. “It should really be a warning signal to all of these IDAs around the state.”

The Riverhead IDA did not respond to RiverheadLOCAL’s request for comment for this article, asking whether the IDA would continue to review and act on an application for a project — an air cargo facility — that the applicant has since publicly disavowed. The request also sought the IDA’s response to Skoufis’ comments.

Riverhead Supervisor Yvette Aguiar wrote to the IDA board earlier this month, asking the IDA not to hold any additional public information sessions but to hold a public hearing on the application and make a decision. Aguiar said in the email to the IDA that she understands CAT provided “financial documents” to the IDA more than a month ago. Aguiar’s email was obtained through a Freedom of Information Act request filed by Northville resident Kathy McGraw and provided to RiverheadLOCAL.

“I am asking you, the IDA Board, to please hold the public hearing and/or make a determination on the qualified and eligible status through a resolution,” Aguiar said. She was referring to a “qualified and eligible sponsor” determination required by General Municipal Law before a municipality can lease or transfer land in an urban renewal area. The Town Board made that determination in a split vote in November 2018. 

While a “qualified and eligible” determination is not before the Riverhead IDA, Aguiar and other town officials, when they announced in February 2022 their intention to file a joint application with CAT for IDA assistance, said the IDA, in the course of its application review process, would examine CAT’s finances to determine if the company, a “single-purpose entity” formed by the Triple Five Group to buy and develop the enterprise park site with Luminati Aerospace, has the financial wherewithal to complete the project. 

At an Aug. 23 IDA meeting, CAT attorney Peter Curry said the IDA’s approval process would be a two-step process. Currently, the IDA is working to determine whether CAT is financially qualified. He said the agency’s current inquiry is “a whole separate process” from its review to determine whether to provide financial assistance to CAT to develop the site. The latter process “requires SEQRA findings, requires that the Town Board proceed with what it has to do,” Curry said, referring to site plan approvals and other permits CAT does not yet have — and has not yet even applied for.

MORE COVERAGE: New objections, questions from town supervisor and community raised about town’s chosen ‘path forward’ on $40 million Calverton land deal (Aug. 30, 2023)

CAT currently has no application before the IDA seeking any sort of financial certification. The application now pending is seeking tax exemptions to assist it in building phase one of the project it describes: the first million square feet of the total 10 million-square-foot buildout, consisting of 400,000 square feet of “flex space” and 600,000 square feet of logistics-distribution buildings along the eastern runway. 

The EPCAL Watch Coalition, in a letter sent to the IDA board today, said the two-step process advocated by Curry at last month’s meeting — the first time any two-step process was publicly mentioned — is “an aberration of your normal process and certainly unprecedented.” McGraw and John McAuliff, members of the group’s coordinating committee and authors of the letter, called Curry’s statement that the decision on economic assistance is not yet before the agency “hogwash.”

At an IDA meeting last month, CAT attorney Chris Kent said the company’s plans for the property are flexible. “We will follow what the market bears,” he said. “If the market tells us do not put in warehouse distribution logistics centers, we might convert that use to something else, which would only be a benefit, because we believe that the least financially or economically impactful use of the property would be warehouse and logistics,” Kent said. “So if we could get a better use, we will definitely go for the better deals, but it’s going to be dependent upon the market.”