An objective look at the Riverhead IDA –
Part 3: Legal Footnote

This is the third of three essays on the Riverhead Industrial Development Agency, by an agency watchdog and former member. Read the first essay here and the second essay here.

When I relocated to Pittsburgh in 2018, I was fully prepared to continue my IDA service and travel for the monthly meetings (the current Board Chair attended the recent EPCAL hearing virtually, but this was pre-pandemic and we weren’t all Zooming yet).  Certain parties objected, and the agency had attorney Ehlers write an opinion letter explaining why that wasn’t allowed.

The legal argument was that an IDA Board member is a “public officer,” and all local public officers must be “…a resident of the political subdivision or municipal corporation…within which the electors electing him or her reside, or within which his or her official functions are required to be exercised….”  

Though residency requirements are spelled out in the governing documents of some Riverhead boards and agencies, the IDA by-laws are silent on this;  I hadn’t been aware that a general state law applied.

I immediately understood this “home rule” regulation, and agreed fully that decisions impacting taxes on voters must be made by representatives residing in that district.  However, I noted that the same “home rule” technicality meant all other IDA Board members (and the Chair) were likewise in violation.

As I pointed out to attorney Ehlers and Chair Cruso, the intent of the rule is that every public officer must be domiciled in the district within which they are appointed, or within which their electors reside, because the business they conduct and the decisions they make directly impact taxpayers in that area.  NYS Comptroller DeNapoli conveyed the importance perfectly in his 2016 Annual Performance Report on NY IDAs:

“Although IDAs do not impose taxes, their activities can nonetheless affect taxpayers in their communities. In particular, property tax exemptions can temporarily reduce a local government or school district’s property tax base, which may then increase other residents’ property tax bills.”

As observed in Part 1, school taxes comprise more than half of most residents’ tax bills.  Southampton and Brookhaven together account for 1/3 of RCSD students—and 1/3 of district taxes.  Every time the Riverhead IDA awards relief from school taxes, a large number of taxpayers who have no IDA representation must help make up the abated tax.  This is unconstitutional (“no taxation without representation”), and directly violates the Public Officers Law cited by attorney Ehlers.

The same problem occurs in Manorville, because their Fire Dept. is included in Riverhead’s taxing district.  The Manorville F.D. has actively lobbied to be removed from this district to be shielded from IDA actions. 

They were particularly concerned about the prospect of extensive EPCAL development, and with good cause: they may be required to provide firefighting services for a huge real estate project, and CAT/Triple Five had pledged to seek “all available tax relief.”  The combined impact on their budget of a massive increase in the built environment they must protect, coupled with proportionately huge tax abatements, could be enormous…and this may hold for whatever development ultimately happens on that property.

With every decision the Riverhead IDA makes, and every tax abatement granted, the town reaches beyond its “corporate limits” and operates in areas technically outside the IDA’s intended purview.  As I told attorney Ehlers and Chair Cruso:  “This seems a far more egregious offense than a director—sworn to faithfully execute his duties—residing elsewhere.”

I suggested legislative change was needed (possibly to add IDA Board representatives from Brookhaven, Southampton and Manorville), and noted that taxpayers from those communities might conceivably have standing to challenge and reverse past IDA abatement decisions.

Neither Dick nor Tom responded to these expressed concerns.  

As for my role, I wrote to Supervisor Jens-Smith and Deputy Supervisor Hubbard, who had encouraged me to apply for the post.  I shared a copy of my letter to Ehlers and Cruso, and expressed profound concerns about the composition of the agency with regard to the residency/representation rule.  I added: 

“I’m ready and able to continue as an IDA director, and am even more confident than when I interviewed that my perspective and expertise can make a constructive difference, and be beneficial to Riverhead taxpayers.

That said, I serve at the pleasure of the Town Board.  Beyond this, I made personal commitments to you both when you each asked me to apply.  If you’d like me to continue service while the issues raised here are sorted out and any problems rectified, I’ll gladly do so.  If you’d prefer that I step aside, I’ll do that immediately, on your request, with no need for a town board vote.”

Facing strong political winds, they accepted my resignation and thanked me for my service. 

To my knowledge, the taxing issues and inequities described above have not been addressed or resolved.

Larry Simms, a former South Jamesport resident, served on the board of directors of the Riverhead Industrial Development Agency in 2018, after several years as a frequent critic of the agency’s operations. He lives in Pittsburgh, Pennsylvania.