Scott’s Pointe operator in danger of losing tax benefits for building go-kart track, failing to deliver promised jobs

Island Water Park, operator of Scott’s Pointe, is in danger of losing its tax exemptions from the Riverhead Industrial Development Agency for allegedly violating Riverhead Town law and failing to maintain the nearly 300 full-time employees it promised under its agreement with the agency.

Those infractions violate the terms of the Calverton amusement park’s lease agreement with the IDA and give the economic development agency the power to cancel its financial assistance to the company, according to a June 28 letter from IDA Executive Director Tracy Stark-James to Eric Scott, the company’s president. 

Scott is required to attend a compliance hearing at the IDA’s meeting tonight at Town Hall, where he will have to confirm that he has cured the contract violations, or explain plans to cure the violations, according to the letter. The letter and other correspondence between the IDA and Island Water Park representatives were obtained by RiverheadLOCAL through a Freedom of Information Law request.

The IDA will determine after the hearing whether the company should pay the agency back all the tax benefits it has been provided so far — known in the contract as “recapturing” the benefits — and declare a default on the property, the letter says. The IDA granted the business real property tax reductions for 10 years, and sales tax and mortgage recording tax exemptions, in November 2021. 

Scott did not return a phone call this morning requesting comment for this article.

The violations stem from the company’s illegal construction of a go-kart track on the property, for which the company was issued tickets by Riverhead Town, according to the June 28 letter from the IDA. The letter also states that the agency’s approval included a spa and fitness center that has been built out as an event space instead. Therefore, the facility “deviates substantially” from the project approved by the IDA and presented in its application, the letter says.

In an undated letter, Scott wrote to Stark-James that Scott’s Pointe had “a huge demand for parties to be held” in the space previously expected to be a spa and fitness center. “Thank you for your understanding,” Scott wrote, without an apology.

According to the Stark-James’ letter, the company also failed to employ at least 283.5 full-time employees — as required in the company’s agreement with the IDA. The company’s annual 2023 compliance report to the agency said it had a total of only 10 full-time employees. Scott’s Pointe officials said in a June 21 letter that it had only 89 full-time employees. 

In a letter to the IDA on June 21, Eric Scott said the employment numbers were below projections at the end of 2023 “due to the fact that we were in the soft opening phase of our business cycle” and limited to operating “mostly weekends” for the first few months. 

“We have hired 89 employees since our end of year reporting and we anticipate hiring 240 employees as we continue to enter our busy season,” Scott’s wrote. Scott said that he is “optimistic” that the park’s employment numbers will “begin to match or exceed” the projected numbers by mid-July.

Scott did not address the construction of the go-kart track, which was built without site plan approvals or permits. Town officials issued tickets to Island Water Park Corp., which operates Scott’s Pointe, on June 3 for code violations and sued the company in Suffolk County Supreme Court last month seeking an injunction to prevent Scott’s Pointe from operating until the property gets in compliance with town law. The town also asked the court to order the removal of the go-kart track and pickleball courts — restoring the property to “pre-violation status” — and to impose a financial penalty of at least $100,000 on the company.

Island Water Park filed a site plan application to legalize its asphalt go-kart track and pickleball courts with the Town of Riverhead late in June. That application was submitted incomplete, Riverhead Senior Planner Greg Bergman said on July 12. The company, which was charged double the regular fee because work on the site had begun prior to town approvals, paid $26,293 to file the site plan application. Bergman did not immediately return a phone call requesting information on the status of the application before this article was published.

At the time of the letter, Island Water Park also failed to make payments in lieu of taxes, late payment penalties and interest, and unpaid annual compliance fees owed to the IDA — a total of $76,468 — according to invoices attached to the letter. Stark-James said in an email today that the payments have since been made by the company to the IDA. Failing to make the payments also constitutes a violation of the agreement.

The IDA’s agreement with the company requires it to make payments in lieu of property taxes consisting of a “base” assessed value of $159,300 plus a percentage of the increased property tax assessment as a result of the development of the site as proposed in its IDA application. The percentage increase starts at 10% of the increase of assessed value in the 2023/2024 tax year and rises 10% each year thereafter until the property owner is paying taxes on 100% of the increase in assessed value in the 2032/2033 tax year. 

The IDA’s reprimand is the latest in a series of legal woes for Scott’s Pointe, which was also cited by the State Department of Environmental Conservation. The go-kart track’s construction violated the company’s mined land permit plan, according to a notice of violation issued to Scott’s Pointe by the DEC on June 26. The DEC said the company is also not allowed to use the man-made lake at the site for recreation while the mining permit is active, something it has done since the start of the summer. The DEC issued tickets to the business and Scott on July 3 for “failing to follow the permitted mined land use plan.” 

The Riverhead Industrial Development Agency approved Island Water Park Corp.’s application for financial assistance on Nov. 8, 2021, granting the business a 10-year real property tax abatement and full exemptions of state and county sales taxes and mortgage recording tax.

The total project cost was estimated at the time to be $25 million. The company sought a 20-year real property tax abatement but the IDA cut that in half, granting a 10-year property tax abatement instead.

RIDA’s real property tax abatements apply to town, school district, county and library taxes, but not to special district taxes: ambulance, fire districts, street lighting and water district taxes. The total amount of those taxes for the current tax year (2023/2024) is $27,818.86. The full amount remained unpaid and outstanding as of the May 31 deadline for payment, according to the Riverhead Town tax receiver’s office. The amount became delinquent after that date and any payments must be made to the Suffolk County Comptroller, a staff member in the tax receiver’s office said today. The delinquent amount remains unpaid, according to the comptroller’s office. All delinquent taxes are subject to a 5% penalty and interest at the rate of 1% per month, calculated from Feb. 1, according to the comptroller’s website.

In a letter to Stark-James on July 23, Island Water Park Corp’s attorney said the company “will be in a position to pay all monies owed and due” to the IDA by the end of that week. 

“Due to the extensive delays in the approval process, my client was recently compelled to liquidate other investment properties in order to acquire the capital necessary for operating expenses and to complete certain improvements at the Premises,” wrote Brendan DeRiggi, of the Hauppauge law firm Certilman Balin Alder & Hyman LLP. 

“IWP projections for the number of employees has not changed,” DeRiggi wrote. “But again, due to extensive delays beyond my client’s control, IWP has only been able to operate on a very limited basis. The recent transmittal of misinformation in local publications has also stifled business and has unfortunately resulted in the cancellation of many previously scheduled events at the premises.” 

“IWP has been and is committed to this project for twenty (20) years and will continue working with all town officials to clear any and all violations at the Premises and will make every effort to comply with the terms of its IDA leases going forward,” DeRiggi wrote.

-With Denise Civiletti